Market Segment for WATERSHED SERVICES: Keeping taps open and supplies clean
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WATERSHED is an area of land which feeds water into a river or a lake: watersheds can be large or small.
Every stream, tributary and river has an associated watershed which then feeds into a larger watershed. A variety of ecosys- tems can make up a watershed, including various bodies of water, wetlands, grasslands, forests and cultivated areas.
Watersheds provide a wide range of goods and services which support human welfare. Tey supply water for drinking and irrigation and regulate hydrological flows as well as sediments important for agricultural and aquaculture activities. Healthy watersheds provide food and habitats for wildlife (MA 2005a).
Watersheds also have aesthetic value and can promote and foster cultural identity (Smith et al. 2006).
Watersheds connect people upstream and downstream. Te well-being of those living downstream is intimately tied to the activities of people in upstream areas. For example, if large numbers of trees are felled in an upstream area, water run- off will increase, entailing the risk of flooding downstream. Good watershed management benefits both upstream and downstream dwellers.
A key way of encouraging better watershed management is by evaluating and paying for various environmental services in relevant areas. Payment for watershed services (PWS) can act as a big incentive to improve watershed management and change land-use practices which might otherwise damage the overall health of the area concerned.
Gaining recognition for the value of these services and estab- lishing their monetary value are the first steps in the process of PWS implementation. A market then needs to be designed and implemented in which buyers and sellers of the various
44 VITAL GRAPHICS ON PAYMENT FOR ECOSYSTEM SERVICES
services can operate: intermediaries – usually government agencies, NGOs or commercial brokers – oſten play an im- portant role in bringing parties together. Property, access and use rights for both seller and buyer, provider and beneficiary, may also need to be established (Smith et al. 2006).
In many cases governments themselves or NGOs pay sellers for carrying out certain environmental activities (Stanton et al. 2010). Tese might be designed, for example, to reduce or alter patterns of fertilizer and manure use by farmers on lands. Payments could also involve reforestation activities or measures to enforce protected areas. Benefits of such actions include maintaining and improving ecosystems’ flood reduc- tion capability and provision of clean water to downstream areas.
Pricing for watershed services has varied widely – from US$0.1 to US$7 500 per hectare per year (Stanton et al. 2010). Prices are mostly negotiated between stakeholders or set administratively, rather than through competitive markets (Bond and Mayers 2010).
An assessment examining watershed payment programmes around the world has identified a total of 216 schemes: of these 113 were active in 2008. PWS transactions up to 2008 amounted to a total value of US$50 billion, covering the pro- tection of 32 million square kilometres of watershed areas worldwide (Stanton et al. 2010).
China contributed most to programmes both in terms of number and in terms of finance committed. Historically Latin America has been the most important region for PWS activi- ties and still is the most innovative area. Tough trends indi- cate continued growth in PWS, the market for the exchange of such services is still considered as under-performing (Stanton et al. 2010), with many projects considered too small to pro- vide meaningful environmental protection on an appropriate scale.
Greater government involvement is required to stimulate de- mand for environmental services and promote PWS markets. Comprehensive regulatory frameworks need to be established (Stanton et al. 2010). Meanwhile private sector initiatives have contributed significantly to a greater understanding of watershed services and have generated associated payment schemes. Governments, NGOs and the private sector can now combine their respective strengths in order to address the growing challenges involved in the protection of water- shed services.