Global Overview of Payments for

Watershed Services

Global Overview of Payments for

Watershed Services

Mark S. KieserSenior ScientistKalamazoo, MI

USA

Mark S. KieserSenior ScientistKalamazoo, MI

USAEnvironmentalTrading NetworkEnvironmentalTrading Network

Challenges for effectively taking PWS to a sustainable scaleChallenges for effectively taking Challenges for effectively taking PWS to a sustainable scalePWS to a sustainable scale

Disconnected, small-scale pilot projectsLacking information/capacity to design and manage PWS deals Lacking institutional support limiting scale upWater supply and hydropower conflictsWater quality impacts Technical uncertainty with cause & effectPoverty alleviationSame challenges exist for voluntary ANDregulatory market schemes around PWS

Disconnected, smallDisconnected, small--scale pilot projectsscale pilot projectsLacking information/capacity to design Lacking information/capacity to design and manage PWS deals and manage PWS deals Lacking institutional support limiting Lacking institutional support limiting scale upscale upWater supply and hydropower conflictsWater supply and hydropower conflictsWater quality impacts Water quality impacts Technical uncertainty with cause & effectTechnical uncertainty with cause & effectPoverty alleviationPoverty alleviationSame challenges exist for voluntary Same challenges exist for voluntary ANDANDregulatory market schemes around PWSregulatory market schemes around PWS

Ecosystem market frameworkEcosystem market frameworkEcosystem market framework

• Sustainable Use

• Hydrological Unit

• Economic Impacts

• Social Impacts

• Environmental Impacts

PWS SchemesPWS SchemesGoalGoal

MarketMarketSchemeScheme

SettingSetting

RegulatedRegulated

VoluntaryVoluntary

Regulatory – Direct cost implications of compliance options

Voluntary – Recognizing a resource need and issue that affects short-term and long-term profits, sustainability or customer needs

Regulatory Regulatory –– Direct cost implications Direct cost implications of compliance optionsof compliance options

Voluntary Voluntary –– Recognizing a resource Recognizing a resource need and issue that affects shortneed and issue that affects short--term term and longand long--term profits, sustainability or term profits, sustainability or customer needscustomer needs

• Quality• Quantity• Habitat• Riparian &Wetlands

• Government• Development• Property Rights

• Offsets• Cap & trade• PWS• Subsidies • Sustainable

• Equitable• Direct partic.• 3rd parties• Economic, social& environmentalbenefits

Programs by Country GDP

0%10%20%30%40%50%60%70%80%90%

100%

$0-$10 $10-$20 $20-$30 $30-$40 $40-$50

GDP Per Capita of Host Country (In Thousands of USD)

Perc

enta

ge o

f Pro

gram

s

VoluntaryRegulated

Program type is often associated with the wealth of host country. Voluntary programs more prevalent in poorer countries while programs with regulatory drivers occur more in wealthy countries (150 programs examined via WWF Water

Footprint Group)

Program type is often associated with the wealth of host countryProgram type is often associated with the wealth of host country. Voluntary . Voluntary programs more prevalent in poorer countries while programs with programs more prevalent in poorer countries while programs with regulatory regulatory drivers occur more in wealthy countries drivers occur more in wealthy countries (150 programs examined via WWF Water (150 programs examined via WWF Water

Footprint Group)Footprint Group)

Voluntary vs. regulatoryVoluntary vs. regulatoryVoluntary vs. regulatory

Cross-cut program analysisCrossCross--cut program analysiscut program analysisProgram nameDescriptionGeographic locationProgram type (quality, quantity, habitat,

streams/wetland restoration)RegulationTrading activityTrading unitsGeographic scalePolitical and social acceptabilityHydrological impactScientific credibilityPotential for growthMarket participants/shapersDeveloping world impactEconomic feasibility of implementation

Program nameProgram nameDescriptionDescriptionGeographic locationGeographic locationProgram type Program type (quality, quantity, habitat, (quality, quantity, habitat,

streams/wetland restoration)streams/wetland restoration)RegulationRegulationTrading activityTrading activityTrading unitsTrading unitsGeographic scaleGeographic scalePolitical and social acceptabilityPolitical and social acceptabilityHydrological impactHydrological impactScientific credibilityScientific credibilityPotential for growthPotential for growthMarket participants/shapersMarket participants/shapersDeveloping world impactDeveloping world impactEconomic feasibility of implementationEconomic feasibility of implementation

Regulated program examplesRegulated program examples

Program Name Description Program TypeTrading Activity

Trading Units Scale

Political & Social

Acceptab.Hydrological

ImpactScientific Credibility

North Carolina Ecosystems Ehancement Program (USA)

NC public entity serves as a clearinghouse for buying/selling wetlands, stream/buffer mitigation and function credits as in-lieu fee program. NCDOT buys credits in marketplace or creates new wetlands.

Mitigation: Wetlands, Conservation, Streambanks High

acres of habitat, linear feet (streambank), functional assessment State High Medium High

Eco-Tax (Columbia)

Industrial water users pay an "Eco-tax" to landowners implementing water conservation BMPs

Water Quantity, Water Quality Unknown Unknown National Unknown Unknown Unknown

Southern Minnesota Beet Sugar Cooperative (USA)

Point-Nonpoint phosphorus trading scheme in Minnesota River. Co-op growers implement cover crops for P credits sold to food processor. Water Quality High P (lbs/yr) Watershed Medium High Medium

Great Miami River Watershed Trading Pilot, Ohio (USA)

Point Source/Non-point phosphorus and nitrogen trading scheme. Seven wastewater treatment plants buy P and N credits created by agricultural BMPs. Reverse autions by watershed district clearing house keep credit prices low. Water Quality High P & N (lbs/yr) Watershed High High Medium

NC EEP

Eco-Tax

SugarBeetCo-opGreatMiamiWQT

Voluntary program examplesVoluntary program examples

Program Name Description Program TypeTrading Activity

Trading Units Scale

Political & Social

Acceptab.Hydrological

ImpactScientific Credibility

ICMS Ecologico (Brazil)

Fiscal incentive for biodiversity conservation pilot program. Municipal governments compensated for loss of potential tax revenue from the designation of protected areas.

Biodiversity, Conservation High

Acres, Hectares

State by State within Brazil Medium Unknown Medium

WWF Southeast Rivers & Streams (USA)

$20 Million Coca Cola grant to WWF for restoration efforts on rivers/streams in southeast U.S.

Water Quality, Biodiversity None (non-market) Regional High High High

Florida Ranchland Environmental Services Pilot Project (USA)

5-year PES pilot collaboration between South Florida cattle ranchers, state agencies, USDA-NRCS, researchers and environmental groups. Program will allow ranchers to compete to provide environmental services of water storage, P retention and wetland habitat enhancement in the Northern Everglades ecosystem.

Water Quantity, Water Quality None Gallons, lbs P Watershed Medium Medium High

ICMS

WWF

FloridaRange-lands

Program Name Description Program TypeTrading Activity

Trading Units Scale

Political & Social

Acceptab.Hydrological

ImpactScientific Credibility

Working for Water (South Africa)

Poor are hired to eliminate invasive alien species which use about 7% of S. Africa's reservoir water each year. Service is mostly paid by government, but private users such as landowners, farmers, and foresters have also begun paying. Since 1995, program considered a social and environment. Water Quantity High Unknown National High High Medium

Working for Wetlands (South Africa)

Program works to restore wetlands in South Africa and create jobs through government funded programs. Program funded by the South African Government and Companies required to offset wetlands degradation. (Part of Working for Water program)

Water Quantity, Water Quality, Mitigation: Wetlands High National High High Unknown

Rewarding Upland Poor for Environmental Services (RUPES) (Asia)

PES system for poor areas adapted to rural Asia. Program researches buyers and sellers of ecosystem services. Organization connects service providers to buyers in developing countries (e.g., hydroelectric companies paying for watershed services up stream). Goal is to alleviate poverty through PES schemes. Water Quality High

Ecosystem Benefits Continent High Medium Medium

Voluntary program examplesVoluntary program examples ((concon’’tt.).)

WorkingforWater

WorkingforWetlands

RUPES

Voluntary program examples Voluntary program examples (concluded)(concluded)

Program Name Description Program TypeTrading Activity

Trading Units Scale

Political & Social

Acceptab.Hydrological

ImpactScientific Credibility

PDAM (Indonesia)

State-owned water supply company provides in-kind services to local landowners in exchange for practices that sustain clean water.

Water Quantity, Water Quality Unknown Unknown Watershed Unknown Unknown Unknown

Water Loss Initiative (Canada)

Nonprofit group creates water quantity offsets by repairing leaks and increasing efficiency in small municipal water systems. Funded by donations and companies wishing to offset their water use. Program acts as broker of water offsets, connecting companies to needy municipalities and providing training and hiring contractors to create offsets. Water Quantity High Liters National High High Unknown

PASOLAC (Central America: Nicaragua, El Salvador, Honduras)

"Programme for Sustainable Agriculture on the Hillsides of Central America" pays landowners for soil and water conservation practices. Currently funded by government and driven by NGOs. Focus is on downstream water consumers. Goal is to decrease water scarcity.

Water Quantity, Water Quality High Hectares Continental Medium Unknown Low

PDAM

WaterLossInit.

PASO-LAC

PWS program tendencies:PWS program tendencies:Markets (particularly water) are local (watershed-based)Local buyers/sellersLocal baselines match local requirements and desiresShared liability/responsibilityLocal discounting for fate & transport/equivalency/uncertaintyAdaptive management

Markets (particularly water) are Markets (particularly water) are local (watershedlocal (watershed--based)based)Local buyers/sellersLocal buyers/sellersLocal baselines match local Local baselines match local requirements and desiresrequirements and desiresShared liability/responsibilityShared liability/responsibilityLocal discounting for fate & Local discounting for fate & transport/equivalency/uncertaintytransport/equivalency/uncertaintyAdaptive managementAdaptive management

Compliance flexibilityNew monitoring and innovationsNew sources of fundingEducation

Compliance flexibilityCompliance flexibilityNew monitoring and innovationsNew monitoring and innovationsNew sources of fundingNew sources of fundingEducationEducation

Program benefits:Program benefits:

Program considerations:Program considerations:Ease of participationAccounting for multiple ecological services Co-ops and aggregatorsCredit stability (value remains the same over time)

Ease of participationEase of participationAccounting for multiple ecological Accounting for multiple ecological services services CoCo--ops and aggregatorsops and aggregatorsCredit stability (value remains the Credit stability (value remains the same over time)same over time)

Identifying demandNational/regional protocols for

certificationAccounting (national registry)Uniform/standardized exchange

ratios at scaleA marketplaceSustainability = demand

Identifying demandIdentifying demandNational/regional protocols for National/regional protocols for

certificationcertificationAccounting (national registry)Accounting (national registry)Uniform/standardized exchange Uniform/standardized exchange

ratios at scaleratios at scaleA marketplaceA marketplaceSustainability = demandSustainability = demand

Future needs to scale up:Future needs to scale up: