Abstract
Watershed management is critical for the sustainable supply of clean water to urban centers, particularly in areas of developing countries where large-scale infrastructure projects are costly to implement. In this paper, we discuss the potential for financing improvements in watershed services in the foothills of the Himalayas through Payments for Ecosystem Services. Through the use of a choice experiment to disentangle household preferences, we show that downstream water users are interested in improvements in water quality through source water protection. Households in Dharan municipality are willing to finance watershed management to the extent of USD 118,000 per year. These payments can be used to incentivize upstream households to decrease domestic livestock grazing, change agricultural practices and reduce open defecation to improve the drinking water quality and quantity in downstream areas. The estimated cost of these activities is less than $50,000 per year. Through discussions with local stakeholders, we propose a tri-partite institutional structure to facilitate transactions between downstream and upstream communities and to improve watershed services.
Highlights
Local watershed management can be critical for supplying clean water, in regions of the world where large water and sanitation infrastructure is costly to develop and maintain
This is especially true in the foothills of the Himalayas where water availability is affected by upstream diversions for irrigation and hydroelectricity, and water quality is influenced by land erosion from road-building, human settlements, agricultural practices and forest cover loss [1,2,3]
Upstream areas are dominated by farmers—some 56% of surveyed upstream households indicated that agriculture is their main source of income, while only 3% of municipal households said as much
Summary
Local watershed management can be critical for supplying clean water, in regions of the world where large water and sanitation infrastructure is costly to develop and maintain. Over the last decade or so, Payments for Ecosystem Services (PES) has emerged as an innovative, market-based mechanism to motivate communities to better manage local natural resources [5], and to internalize environmental externalities [6]. This policy instrument requires consumers of ecosystem services, such as water users, to pay service providers (for example, upstream farmers) to carry out environmental friendly activities that maintain these services [7]. PES can enhance the welfare of transacting parties by creating win-win trades and improving natural resource management [8,9]
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