Payments for watershed services - A driver of climate compatible development

Payments for watershed services - A driver of climate compatible development

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Date: 30th December 2013
Author: CDKN Global
Type: Feature
Tags: climate finance

In Bolivia, a CDKN-supported scheme to compensate upland residents for sound management practices is reaping rewards. Mairi Dupar of CDKN speaks to Fundación Natura Bolivia to find out more.

In Bolivia, deforestation in upper river basins has caused a host of environmental problems – from soil erosion to declining water quality. That’s not to mention the greenhouse gases emitted, when the timber is cut faster than it can grow back.

A project by Rare Conservation and Fundación Natura Bolivia , supported by CDKN, has helped landholders from upstream areas to receive payments for conserving forest lands. Although their work as environmental stewards is having positive impacts on the global climate, it’s the downstream water users in the river basin who are compensating the landholders directly – because their eco-friendly practices have localised benefits, too: they are leading to improved water quality downstream.

In the increasingly water-stressed Department of Santa Cruz, Bolivia, Reciprocal Water Arrangements (or ‘ARA’, as they are known in Spanish: Acuerdos Recíprocos por Agua) have taken off. ARA are private contracts between the members of water cooperatives and landholders in priority catchment areas. Landholders sign contracts that bind them to strict rules of land management: they must conserve the forest, avoid polluting livestock practices and enhance the biodiversity and forest carbon of their land. In exchange, they receive in-kind compensation that boosts their incomes and livelihood prospects.

Nigel Asquith of Fundación Natura Bolivia explained how it works in Los Negros municipality, as follows: “Every US$20 invested by donors in a local water fund has been matched locally with US$30, which purchases a beehive to compensate for conservation of 2 hectares (ha) of water-sustaining forest for 5 years. Honey revenue per ha of forest conserved is US$5 per year, so within 5 years the landowner has not only used the US$20 of donor funds to conserve 2 ha of forests but has also sold US$50 worth of honey,” he said.

Although further scientific research is needed to establish the precise interactions among forest conservation and water benefits at a large watershed level, the positive correlation between forest conservation and hydrological services are well known, Mr Asquith added, and the ARA scheme is a “no regret” investment for the water cooperatives involved.

The legal architecture of the initiative is simple. A tripartite contract is formed among the water provider, the municipality concerned, and the local non-governmental organisation Fundación Natura Bolivia. The downstream water provider opens a separate bank account, into which revenues from a new “environmental services” tariff are channelled. The local government purchases beehives, fruit tree seedlings, irrigation pipes or other development tools, to be given in compensation for upstream forest conservation. Fundación Natura Bolivia provides technical support to get the scheme up and running and RARE published an ARA Guide to Reciprocal Water Agreements for People and Nature, an user-guide to support community leaders to negotiate reciprocal water agreements locally from the bottom-up.

Since the first Bolivian ARA was developed in Los Negros, more than 30 municipal governments and water cooperatives across the Andes have joined the movement, and more than 40,000 downstream users are now compensating 2,000 upstream families for protecting 70,000 ha of forested Water Factories. In the last two years, more than US$350,000 worth of local and donor funds have compensated landowners’ conservation efforts with barbed wire, cement, fruit tree seedlings (such as apples and plums), bee boxes, bee-keeping equipment, plastic piping, water tanks, and roofing materials. The ARA schemes are thus unlocking vital resources for upland farmers who were otherwise becoming increasingly marginalised by their lack of capital.

If owned by the local institutions, these schemes will foster a more sustainable form of development. “The ARA model does not focus on paying the opportunity cost for conservation, which can be very expensive, but on changing social norms” said Maria Teresa Vargas of Fundación Natura Bolivia. “New perceptions about the value of forests for society can convince upstream landowners to conserve in return for projects that may not match their full opportunity cost, but which provide them with a livelihood alternative”.

Keep up to date with this CDKN-supported project on the project page.

Image courtesy SPDA.

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