Markets for Watershed Services

1. Markets for Watershed Services • Background • Where • How • Duration • Partners

2. Markets for Watershed Services • Lessons • Hydrology • Economic • Social • Engaging with private sector • Pro-poor?

4. Copies will be available in English, Spanish, Bahasa Use as a teaching / training aid Feedback welcome Further ideas of how to use the material Website with case studies

5. Making Payments for Watershed Services Work for People and Nature For KATOOMBA Group, Uganda 2005

6. Programme Goal Payments for watershed services are supporting sustainable natural resource management, improved livelihoods and social justice for the rural poor Potential support from DGIS (Netherlands) and DANIDA (Denmark)

7. Programme Outcomes • Financial transfer mechanisms that enable regular contingent payments between buyers and sellers of watershed services are established in 10 sites • Organizations involved in payments for watershed services have been established and strengthened (buyers, sellers, intermediaries, facilitators) • Local governments promote and facilitate the development of payments for watershed services • Methodologies and tools for facilitating and monitoring pro-poor payments for watershed services have been identified and developed

8. Programme Outcomes • Action learning mechanisms have enabled the sharing of information, experiences and skills within the 6 countries; between these countries and other initiatives; and with other national and international agencies • CARE, WWF, IIED and other partners are formally engaged in payments for watershed policy processes that support pro-poor payments for watershed services at local, national, and international levels

9. Justification • Severe development and environmental problems have been identified in each of the sites • In each of the 6 countries, payments for watershed services show much promise • Pro-poor payments for watershed services can contribute to poverty reduction and sustainable natural resource management • Payments for environmental services are recent innovations – benefits from sharing knowledge & methodologies with others and between development and environmental organizations like WWF, CARE and IIED

10. Sites of Intervention • Philippines: Cantingas watershed & Mt. Isarog watershed • Indonesia: Ujung Kulon national park & Nunukan district • Peru: Jequetepeque river & Piura river • Guatemala/Honduras: Sierra de las Minas & Orica Creek • Tanzania: South Nguru mountains & Ulguru mountains

11. Can PWS be pro-poor? • Point of substantial discussion over last 5 years • Developed as a tool for financing natural resource management • Old wine in new skins • Limited evidence from Costa Rica – is it replicable?

12. Programme phasing • Agreed with donors to split the programme into two discrete phases. • PHASE ONE: Developing compelling business cases for 10 sites (18 months, starting in January 2006) • PHASE TWO: Implementation of viable sites (potential 3.5 to 4 years)

13. Phase One Activities • Supporting activities • Understand legal and policy options for payments for watershed services. • Networking with potential buyers and sellers of services • Facilitating learning within country sites, between country sites and from other organizations and sites. • Core problem analysis and quantification • Identify core problem at each of the sites • Conduct robust hydrological analysis • Understand landuse and livelihood strategies of sellers • Develop options to address core problems • Develop cost:benefit analysis from both buyers and seller perspectives • Compelling business case • Synthesise quantitative analyses into a compelling business case • Develop implementation workplans • Commit both buyers and sellers to the implementation phase in MOUs.

14. Relationship with the Katoomba Group • Katoomba is a pool of skilled people with diverse experiences • Phase One of the programme is very mechanistic with an emphasis on showing that there is a viable business case • Need: • to review the experience with similar approaches from other sectors • Skills (consultants) to assist with developing a common methodological approach that will be a useful tool for working with private sector buyers

15. Underestimating the challenge • PWS mechanisms require a fundamental “mind-shift” • PWS mechanisms are not simple • PWS mechanisms are a tool for both land management and poverty reduction – not a “silver bullet”

16. Example Business Case Template • Introduction & buyers profiles •   Core problem statement: problem to the potential buyers & costs of the problem to the buyers • Defining the geographical target area • Quantified hydrological analysis & land use change options to ensure a sustainable flow of watershed services • Legal & policy review (local and national government) • Financial cost-benefit analysis of watershed services (costs and benefits for company X) • Sellers: • Organization” profile • Livelihoods analysis (focused, including land use change options) • Institutions profile, including tenure and property rights • Cost-benefit analysis of provisioning watershed services to sellers • Funding and bridging mechanisms • Risk analysis scenarios • Validation mechanisms - monitoring plan • Conclusion: Business opportunities in paying for watershed services