Tag Archives: Environmental economics


The Year Ahead: Ecosystem Marketplace

State of Watershed Payments Then and Now

Charting New Waters ScreenshotThe beginning of 2013 saw the publication of Charting New Waters: The State of Watershed Payments 2012, the flagship water market publication by Ecosystem Marketplace and Forest Trends.  The report, which was launched at the World Bank in January, gained media coverage across the country and the world. The State of series is the most comprehensive effort globally to track the size, scope, and direction of investments in watershed services (IWS), as well as the ecological infrastructure from which they flow.

Through a painstaking process of data collection from 205 active programs worldwide, Charting New Waters outlines the major trends in watershed investment across the world, from the massive state-sponsored eco-compensation programs in China to the rise of the Latin American water fund to the growing interest in stacking and bundling of payments for multiple ecosystem services in both the United States and the developing world.


Launch SlideLater in the year, we released an Executive Summary of the report that reviewed findings of specific-relevance to private sector decision-makers in order to provide a benchmark for business investments in nature-based solutions to the water crisis.  Findings for the private sector included the importance of beverage, manufacturing, and utilities sectors for IWS projects; evidence of policy shifts within countries to promote investments in natural systems; and the potential for public-private partnerships to drive project development and to reduce investment- and implementation-related risks.

State of Watershed Payments: Part Three

As we move into 2014, work has already begun on the next installment in the series.  A planned launch at World Water Week in Sweden means that data collection, analysis, and writing will be ramping up considerably in the spring and summer.

What’s New?

Hurricane Sandy created massive destruction in the Northeast, yet natural infrastructure was able to protect some areas.

The new report will focus more on outcomes of IWS projects rather than focusing on the amount of money traded within the markets. We hope to answer questions about what ecological, socio-economic, or economic outcomes the projects hope to achieve and how they are measuring these outcomes.  Another new aspect to the approach will be an examination of the way that risks shape the form investments in watershed services projects take. Are investors concerned about risk from climate change, regulation, or water scarcity? In the United States, the devastating impact of Hurricane Sandy has led to an increased awareness of the importance of natural infrastructure as a mitigation strategy – but has it led to increased investment in New York and other vulnerable areas? Incorporating these new questions into the data collection has required considerable revision of the standard survey (currently being revised and reviewed).

According to Genevieve Bennett, lead researcher on the project, the team working on the survey is also thinking in depth about what kind of data will be useful for specific audiences for watershed management projects. Much as the Executive Summary for business identifies key data and trends useful for the private sector decision-maker, the new SOWP interview will collect data that will be useful for water utility managers, infrastructure managers, and city officials.  As part of the survey development process, the EM team has been reaching out to leaders within these areas, working to identify what kind of information these leaders would need to convince their stakeholders to consider investing in natural infrastructure. Part of the focus group for this revision process has been the Water Initiative’s pilot projects.  In thinking about the survey language and questions, the team is trying to work closely with the demonstration projects, include them as project highlights, and also to understand what kind of information will be useful to our partners on the ground in scaling up models for IWS further.

The State of series lets us integrate this on-the-ground project work with a very high-level, global aggregation of projects and data.  This combination enables us to accelerate our learning about IWS and how we are going to scale it up within our own projects. – Genevieve Bennett

Predictions for the New Report

Although it’s way too early to make predictions about the changes that have occurred over the past year in watershed payments, a few trends can be expected:

  • Water funds will show continued growth in both Latin America and North America;

  • A number of new projects focused on maintaining water quality will have become active within the next year;

  • As the watershed market space continues to develop and mature, more complicated and sophisticated financing and payment mechanisms will be put in place; and

  • The bulk of investment in this space will continue to come from China.

Related Resources:

  • Link to the recording of the launch of Charting New Waters here.
  • View the slide presentation from the launch here.
  • A review of the launch, as well as links to news coverage, is available here.

Literature Review on Social and Gender Impacts of IWS

Michael Richards’ literature review on the social and gender impacts of IWS is now available on the Forest Trends site.  A companion piece to Initial Recommendations for the Social Impact Assessment (SIA) in Investments in Watershed Services Programs, the literature review provides a comprehensive look at whether social impacts have been monitored or tracked in IWS projects.  It also contains an assessment of the tracking of gender impacts in PES and water resources management projects more broadly.

Key recommendations from the review are:

  • Instigate credible monitoring of gender and other social variables, so that it is possible to start a learning process about gender effects, and to feed the information back into the program design and adaptive management processes;
  • The wider literature on gender and water management implies that a more gender-nuanced strategy would have a significant pay-off for both environmental and social outcomes. There is considerable guidance on how to conduct gender analysis;
  • Programs should investigate promotion of local management arrangements that facilitate adaptation and innovation, for example, in enabling the participation of marginalized groups, or for dealing with local tenure problems;
  • It is best not to have poverty reduction as a major direct goal of IWS programs since this is likely to result in trade-offs, but to aim to design payment mechanisms in such a way that the poor and women can participate, for example, by supporting resource poor land users in the adoption of desired land use practices through technical assistance and access to credit (Pagiola et al. 2005);
  • It is normally better to strengthen existing institutions rather than attempt to create new ones;
  • Payments in kind rather than in cash or a combination of in kind and cash payments may be better for poverty reduction and gender benefits in view of the tendency for cash to go straight to men;
  • Aggregation of service providers is an important strategy for minimizing transactions costs which are an important barrier to participation by the poor (Asquith & Wunder 2008).

Read the whole literature review here.