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1 Water Funds Latin American Water Funds Partnership Experiences from Scaling Up Watershed Conservation Fernando Veiga Rebecca Tharme The Nature Conservancy

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Page 1: Water Funds

1

Water FundsLatin American Water Funds Partnership

Experiences from

Scaling Up Watershed Conservation

Fernando Veiga

Rebecca Tharme

The Nature Conservancy

Page 2: Water Funds

2

Investing in

Green Infrastructure

Ecosystems provide services to society

Growing evidence that the conservation and restoration of ecosystems are

key to guarantee water security for human needs, and in many cases

represent the most cost-effective solutions

Water funds rely on concept of ecosystem services

e.g. erosion abatement; sediment reduction; nutrient filtration;

flow regulation; flood control - clean reliable water sources

Water Funds invest in conserving watersheds to improve or maintain water-

related benefits and regulate water-related risks

Page 3: Water Funds

3

Users Providers

Quito Ecuador

Population 2 million

Condor Bioreserve

& Surrounding farmlands

$

WATER

SERVICES

$Financial

Fund

Water Funds

Board

Water Fund

ECOSYSTEM SERVICES MODEL

WF is a conservation trust fund that finances watershed protection

Page 4: Water Funds

Water Funds are effective

tools for watershed

conservation because they:

• Connect suppliers of ecosystem

services with beneficiaries,

providing direct benefits

downstream and improved

livelihoods upstream (efficient)

• Mitigate water scarcity and pollution

problems at the source rather than

end-of-pipe treatments (effective)

• Provide a sustained funding

mechanism with a flexible

governance structure to allow for

adaptive management of risks and

opportunities (sustainable)

Page 5: Water Funds

5

• Most important water supply area in

Brasil - 50% of São Paulo

metropolitan area, 9 Mill people

• Poor land-use practices in sensitive

areas undermining system capacity

to serve growing demand

• Invest models estimated mean

erosion rates and sediment loads –

14 300 ha of priority areas (3% of

total area) for water fund

investments

= 50% of sediments abated

= 600 000 tons per year

• US$ 4.9 million/year of potential

reduction in water treatment and

drainage costs (excl. other potential

benefits e.g. contaminants

reduction)

Business case

São Paulo, Brasil

Page 6: Water Funds

6

0

3

6

9

12

15

18

2006 2007 2008 2009 2010 Promedio

Producción de Caña 5 Riegos Producción de Caña 4 Riegos

Sugar cane harvest (million tons)

Source: Sugar Cane Research Centre - Cenicaña – estimations Asocaña

8.7% decrease in productivity

Loss of $33 million / year

Loss of $250 / ha / year

Sugar cane mills are main funders

- for water supply assurance

Production with 5 cycles Production with 4 cycles

Business case

Cauca Valley, Colombia

- Most important sugar cane production area in country (200 000 ha)

- Increased pressure on water resources - potential future reduction from

5 to 4 irrigation cycles with current degradation trends

Page 7: Water Funds

7

0.0

10.0

20.0

30.0

40.0

50.0

Conservado Uso actual (con política ambiental)

Uso fuera parque (sin política ambiental)

m3/h

a/a

ño

tonela

das/h

a/a

ño

Cantidad agua

Cantidad de sedimentos

Sources: CIAT 2007, Bogota Water Fund

Water quantity

Quantity of sediments (Component of Quality)

Conserved

Area

Uses inside

Protected Area

Outside

Protected Area

m3/h

a/y

ea

r

To

n/h

a/y

ea

r Regulation significant but not quantified

10:1

Reducing sediment loads

by 2 Million tons

Projected savings

USD 3.5 M per year in

treatment costs

Feasibility Study Economic Rationale

Bogotá, Colombia

Page 8: Water Funds

8

Proof of Concept

Quito Water Fund

Importance

• 2 million residents

• Condor Bioreserve: 2.5 million acres, exceptional

biodiversity, inc. 760 bird spp.; 28 rivers

Partners

• EMPAAQ (Quito’s Water Agency); Quito Electric Company;

USAID; Swiss Development Corporation; Cerveceria National

(beer company); Tesalia Springs Co. (water bottling company)

Fund Progress

• 2000: $21 000 start-up 2013: ~ $13 000 000

• Since 2006, 2% of the water utility revenues

• Annual investments of nearly $2-3 million (leverage)

• Páramo and forest as biodiverse natural water tower

• 80% of water for the city of Quito, Ecuador, from three protected

areas and their buffer zones

• Conversion with land pressures reducing ability to provide services

Page 9: Water Funds

9

Proof of Concept

Quito Water Fund

Benefits to People

• Permanent support through various programs to

communities close to the water sources

• Enrolled 30 500 children in environmental education

programs

• Over 200 families engaged in community development

projects in rural basins

Conservation

Progress

• 85 000 ha of public lands protected

• 19 000 ha of private lands restored and/or

under Best Management Practices

Page 10: Water Funds

10

Steps to establish

a Water Fund

Pre-

feasibili

ty and

Evaluati

on

Which

ecosyste

m

services?

Where is

the area

of

influenc

Design

Feasibility

studies:

Environme

ntal

Socio-

economic

Institution

al

and legal

Negotiat

ion

Instituti

onal

arrange

ment

Partner

s’

commit

ment

(financi

al and

technica

Maturity

Financial

sustainab

ility

Consolid

ation of

field

activities

and

monitori

ng

Operatio

n

Contracts

with

local

stakehol

ders

Field

activities

Fund-

raising

Monitori

ng

Page 11: Water Funds

11

Science-based approachContribution

to aquifers

Contribution

to flows

Sediments Coverage

Highest priority areas for conservation

Biodiversity connectivity

Sistema

Área ronda del río

(250 mts cada lado)

(Has)

Área en cobertura

natural para

conservación (Has)

%

Área intervenida

para restauración

(Has)

%

Río Amaime 7.126 3.135 44 3.991 56

Río Bolo 2.210 1.414 64 796 36

Río Desbaratado 1.016 772 76 244 24

Río Fraile 2.792 2.345 84 447 16

Río Nima 1.642 1.133 69 509 31

Río Tuluá 13.234 5.426 41 7.808 59

TOTAL 28.020 14.226 13.794Water for life and sustainability

Page 12: Water Funds

Investment Portfolio

Page 13: Water Funds

13

Investments

Private and communal lands1. Conservation agreements

2. Best agricultural and cattle ranching practices (silvopastoral systems)

3. Riparian forests

4. Reforestation and restoration

5. Income generation

6. Environmental education

Public areas1. Implementation of management plans

2. Park guards

Page 14: Water Funds

14

Peru

Ecuador

Colombia

Brasil

Page 15: Water Funds

15

WATER MONITORING

Water Monitoring Sites

Precipitation

• 3 sites

Flow

• 3 sites

Quality

• 9 sites

• 9 parameters

Parâmetro AnalíticoPHTurbidezDBOCorColiformes TermotolerantesOxigênio dissolvidoNitrogênio amoniacalFósforo TotalTemperatura

Community

Engagement

Page 16: Water Funds

16

Biodiversity Monitoring

• Importance of riparian areas

•Terrestrial monitoring

of páramos and forests also showing first

encouraging results

(e.g. forest bird species in restoration areas)

Paulo Petry

Page 17: Water Funds

Community monitoring

4218 families benefited upstream in watershed

Page 18: Water Funds

Monitoring of multiple

water funds ongoing

Page 19: Water Funds

TNC, FEMSA Foundation, IDB

and GEF Launched in 2011

Page 20: Water Funds

20

The vision

Over the next 5 years $27 million in Seed Capital will

support direct investment of $143 million

in 32 Water Funds, leveraging additionally $500 million

providing long-term payments for environmental services

to rural communities, and securing

clean and sufficient water and

effectively conserving 7 million acres

for 50 million people in Latin America

Page 21: Water Funds

1. Support the establishment and strengthening of the WFs

2. Identify and share best practices

3. Development of regional projects

4. Support monitoring initiatives

5. Keep developing the business cases

6. Raise awareness (Where Does Your Water Come From?)

7. Support the green infrastructure approach in water sector

loans (IDB and CAF)

8. Partner with water regulators with the aim of including the

watershed conservation costs in water tariffs (ADERASA –

PE, CR, BR)

Goals

Page 22: Water Funds

Status

15 in evaluation

14 in design

13 operating

1 mature

Opportunities

• Exchange lessons learned

• Regional players (public

and private) – reduction of

transaction costs

• Diversity and cooperation

• Upscale (implementation

channel)

• Expand to new

geographies (Africa, USA)

Water Funds as at June 2013

Page 23: Water Funds

23

Thanks

www.fondosdeagua.org