By Marcela Quintero and Abby Waldorf
This blog is part of the Agriculture and Ecosystems Blog’s month-long series on Ecosystem Services.
Latin America has been known to foster some of the worst wealth inequality in the world - and it will take some serious creative thinking to solve a problem this large. In response, the Peruvian government is looking to improve the distribution of economic benefits in coastal river basins by harnessing the value of ecosystem services they provide and avoiding potential water-related conflicts.
The Cañete River Basin has been internationally recognized for its importance in regulating water flow and conserving biological diversity. Communities throughout the basin depend on its water for their livelihoods, but inequality in the distribution of benefits from the basin has motivated the Peruvian government to consider methods to improve equity.
Read this post in Spanish on InfoAndina.
Rewards for ecosystem services
The Challenge Program on Water and Food through the International Center for Tropical Agriculture (CIAT) is supporting the Peruvian Ministry for the Environment (MINAM) to develop a rewards for hydro-ecosystem services scheme (RHES). The upper watershed region in the Cañete basin provides two main ecosystem services, known as hydro-ecosystem services (HESs): water yield, i.e. a sufficient amount of available runoff water for downstream users, and year-round availability of water.
The HESs from the upper watershed region sustain the economy and livelihoods of communities in the central and lower basin in a number of different sectors including: agriculture, drinking water, mining, hydroelectricity, shrimp farming, tourism and recreation.
As communities conserve ecosystems in the upper basin, consumers in the central and lower part of the basin benefit from having reliable and abundant water to engage in profitable activities such as hydropower development, agriculture, and tourism. But if upstream communities do not conserve these ecosystems, water quality and availability to those in the lower basin could be compromised.
The RHES scheme focuses on rewarding communities in the upper basin, which are recognizably poorer than communities downstream, for the conservation services that they are currently providing – giving these communities rewards and incentive to continue conserving the upper watershed region.
It is important here to distinguish that rewards and payments for ecosystem services are different - rewards schemes do not involve markets or the commodification of ecosystem services - they simply reward communities for the support that they already provide to ecosystem services.
But are communities downstream willing to pay for HES?
Researchers in the Cañete Basin looked to different sectors to determine the value of the HES in the Cañete’s upper basin to its inhabitants downstream.
Agriculture is by far the biggest consumer of water, demanding on average 96.8% of water from the basin’s water resources. If water availability is reduced, farmers will incur crop yield losses and, consequently, reduced incomes. For example, in the lower basin region, researchers found that in maize crops, farmers would lose $0.0017 to $0.0417 per m3. It was also found that the average economic value of water increased as the percentage of water availability decreased – demonstrating the importance of water for agriculture and the need to maintain current flows, especially during drier months.
The second biggest consumption of water in the basin is for drinking water. The basin’s population uses 3.2% of the watershed’s water for drinking water and demand is growing. The good news is consumers recognize the value of conserving this resource, with 86% of those using water for domestic and commercial purposes willing to contribute to a fund to conserve the upper watershed.
The values reported are higher than users currently pay for access to water and support for the management of the watersheds. Users downstream who engage in activities recognize the benefits they are receiving from a reliable supply of water, dependent on the preservation of ecosystems in the upper basin. But researchers found that while this value is recognized, there was no institutional platform for redistributing benefits enjoyed by lower basin communities to the upper basin communities.
The Cañete is the official pilot site of the Peruvian government for RHES schemes. Experiences and lessons learnt from this project will be highly influential to policies developed by the government. “There is huge replicability potential,” says Marcela Quintero from CIAT. “This basin is representative of all 53 basins along the Peruvian coast, so if this RHES scheme works, it can be applicable to any of those watersheds.”
But putting in place an RHES scheme is institutionally and legally challenging. Due to the lack of an organized structure to manage and make decisions on the water resources of the watershed and the legal inability of collecting and transferring public funds to an eventual RHES Trust Fund, MINAM and CIAT have explored viable options for implementation.
With the recent collaboration of IFAD, these challenges may soon be overcome. IFAD has agreed to initiate a trust fund and contribute the start up capital and operation expenses of running the fund. The fund will provide users in the lower basin with the opportunity to voluntarily contribute to re-invest in the poorer upper watershed region. The communities in the upper basin will be able to apply for funding from the Trust Fund for specific projects that will: restore the landscape, continue to conserve the landscape, or promote farm business.
Challenges to overcome
Certain challenges do persist. A method for giving rewards for land management alternatives needs to be determined, e.g. for areas where restoration is needed or where better management of grasslands needs to be implemented.
Second, information on land ownership and control needs to be gathered due to the lack of land titles in some areas. This will allow the government to monitor movements by people within the region to areas outside the region when certain land use constraints are imposed. It also monitors potential crowding which will occur when people move into the watershed region to capitalize on the rewards program.
This project is particularly exciting because of its potential to influence policy in the region. Researchers are working with the Peruvian government on the creation of a new law for promoting reward schemes in Peru. So lessons learnt from the Cañete Basin scheme will be incorporated into the development of the new law.
If successful, the scheme will be an important mechanism to re-distribute benefits across a number of different sectors to regions where people are much poorer, within the same basin and landscape. Peru may be one step closer to closing the wealth inequality gap, while sustaining important environmental services for the continued economic development of the region.
Marcela Quintero presented on this topic during Session 34 at the 6th Annual Ecosystem Services Partnership Conference in Bali, Indonesia on August 27, 2013.
For more information:
CPWF in the Andes
About the Authors:
Marcela Quintero is the leader of the Ecosystem Services Group in the Decision and Policy Analysis Research Area of the International Centre for Tropical Agriculture (CIAT). Abby Waldorf is a Communications Consultant for the CGIAR Research Program on Water, Land and Ecosystems.