Payments For Watershed Services Research Articles

The effect of PWS arrangements on M&A activities

This paper investigates the effect of Payments for Watershed Services (PWS) on firms' mergers and acquisitions activities (M&A) in China. We find that PWS results in more M&A activities of firms. We attribute this to firms' increased operating risks following PWS by providing evidence that: (1) PWS increases firm-level environmental penalties in upstream areas; (2) PWS's positive effect on M&A is more pronounced in firms with more sewage discharge and environmental penalties; (3) The targets of increased M&A are more likely to be in non-polluting industries, and areas not affected by PWS; (4) PWS only increase M&A in upstream areas, but not in downstream. Our finding provides a plausibly causal effect of Payments for Watershed Services on firms' M&A activities.

Payment for watershed services and the coordination of interests in transboundary rivers: China's Xin'an River Basin Eco-compensation pilot

Through the case of China's Xin'an River Basin Eco-compensation Pilot (XRBEP), this study mobilizes the concept of hydrosocial territories to scrutinize how the watershed conservation behavior of stakeholders in payment for watershed services (PWS) evolves in response to eco-compensation and the coordination of interests. By drawing on the extensive literature on differential games, this study opens up our view of the complex relationship between PWS and the coordination of interests. After comparing the simulated and actual results of XRBEP, this study highlights that the coordination of interests in transboundary PWS can ultimately be socially optimal by reconciling the interests of different administrative territories. Furthermore, designing incentive-compatible coordination mechanisms of interest in transboundary PWS remains challenging, depending on the reconfiguration of PWS hydrosocial territories. Finally, the horizontal eco-compensation as a PES-like application can maximize the supply of watershed services, thus becoming a suboptimal and realistic option for realizing transboundary PWS.

Societal benefits from wildfire mitigation activities through payments for watershed services: Insights from Colorado

Payments for watershed services (PWS) programs are becoming a popular governance approach in the western United States (US) to fund forest management aimed at source water protection. In this paper we conduct a cost-benefit analysis (CBA) of one of the first collaboratively funded PWS programs in the US, located in the municipal watersheds servicing Denver, Colorado. We combine wildfire modeling, sediment modeling, and primary and secondary data on economic values to quantify the impact of the program on protecting multiple values at risk. Our results show that while the program has led to diverse societal benefits, it is only economically efficient (benefit-cost ratio greater than one) when all co-benefits beyond source water protection are considered, and fuels treatments are assumed to encounter wildfire. When the probability of wildfire is accounted for, economic benefits would need to be triple what was estimated in our analysis to achieve economic efficiency. Our findings suggest that improving spatial prioritization of interventions would increase economic benefits and better data on treatment placement and costs would help facilitate future CBA of PWS programs focused on wildfire mitigation.

Quantifying inter-regional payments for watershed services on the basis of green ecological spillover value in the Yellow River Basin, China

The inter-regional payments for watershed services (PWS) is an important policy to promote environmental cooperation in the river basin management. However, existing PWS in China may overestimate the value of watershed-related ecosystem services (WES) and induce a mismatch between ecological benefits and costs of stakeholders. A equitable framework of inter-regional PWS standards is necessary for the policymakers, especially in Yellow River Basin. For this reason, the focus of current article was emphasized on green ecological spillover value through multi-regional input–output model deducting suppliers’ own watershed services consumption, then explored the influencing factors of watershed-related ecological benefits, ecological profit or loss and spatial spillover conditions within Yellow River Basin, finally designed inter-regional PWS transfer standards. The estimated results revealed that watershed-related ecological benefits within Yellow River Basin had obvious heterogeneous characteristics and spatial spillover. The implementation of economic financial power, awareness of water resources ecological functions, and inter-regional PWS policies could significantly improve watershed-related ecological benefits, and the increase in water resources protection routine power led to the loss of watershed-related ecological benefits. Based on the green ecological spillover value, we comprehensively considered factors such as water resources protection routine power, economic financial power, and awareness of water resources ecological functions to design an inter-regional PWS transfer program, which was reasonable and feasible in theory and practice. For regional ecological and environmental cooperation, it is essential to strengthen spatial spillover and improve the level of inter-regional PWS, which may pave the way for other river basins or countries.

Stability and influencing factors when designing incentive-compatible payments for watershed services: Insights from the Xin’an River Basin, China

Payments for watershed services (PWS) conceptualizes as a powerful tool with which to address the conflict interests of watershed users. This is true in China’s PWS program in the Xin’an River Basin (XRB), as it provides a lens to survey how incentive coordination shapes the behavior of multi-stakeholders to improve water qualities. To explore an incentive-compatible PWS mechanism, this study investigates the interactive behavior among providers and buyers in the PWS-XRB program, with the significant involvement of regulator planners by advancing a tripartite evolutionary game model. The evolution and steady state strategies of those stakeholders are then proposed based on replicated dynamics equations. Lastly, a case-based numerical simulation serves to demonstrate theoretical outcomes and furnish pivotal insights below: (1) the strategy selections for the different PWS-XRB stakeholders manifests in a constant dynamic interactive and optimization process; (2) high ecological transfer payments and high opportunity costs could inspire both buyers and providers’ enthusiasm to carry out the PWS-XRB program; (3) the central regulator could ensure the proper implementation of payment systems, by increasing penalties for those who are unwilling to participate in the PWS-XRB program. This study illuminates an efficient approach and insight for the design of an incentive-compatible PWS scheme to promote the improvement of watershed governance.

Measuring the incremental impact of Payments for Watershed Services on water quality in a transboundary river basin in China

This study assesses the incremental impact of the first transboundary Payments for Watershed Services (PWS) scheme on water quality in China. Due to the absence of a control situation without the PWS scheme, the synthetic control method (SCM) is applied to construct a counterfactual for the prefecture city Huangshan in Eastern China where the PWS is implemented based on the socio-economic characteristics of more than 75 other prefecture cities. The creation of such a counterfactual is crucial in view of the declining trend in water pollution observed before implementation of the PWS scheme. Despite this downward trend in water pollution, an additional effect of the PWS scheme is observed. This result is not obtained when using any of the other prefecture cities as a placebo to test the robustness of this outcome. The application of the SCM in this study is a promising new avenue for the evaluation of PWS schemes elsewhere where similar control conditions are lacking. However, as we show, its applicability depends crucially on the availability of relevant water quality monitoring data.

Can Payments for Watershed Services Help Advance Restoration of Longleaf Pine? A Critically Engaged Research Approach

Private forests in the southeastern US are critical for providing a variety of ecosystem services, including timber production and water resource protection. Restoration of longleaf pine (LLP) forests and savannas tends to enhance some ecosystem services, including water supply, over timber production. A variety of payments for watershed services (PWS) strategies have emerged to address the market failure associated with private forests and public water supply. The nature of these programs suggests that biodiversity protection may be a positive externality, or third-party benefit, to water resource protection. This paper uses a critically engaged research approach and expert interviews to investigate how PWS programs may help prevent land use change and promote LLP restoration. We also offer recommendations on how to sustain emerging efforts to implement PWS strategies while including LLP restoration objectives.

Who is Benefiting Downstream? Experimental Evidence on the Relevance of Upstream-Downstream Geographic Distance for Water Provision

One of the greatest challenges of water management in watersheds arises from the asymmetry in water appropriation: people upstream always have first access to water supplies and their decisions affect downstream users. Payments for watershed services (PWS) aim to incentivize water provision upstream by directly paying upstream land users for the water services they provide for downstream water users. Nevertheless, since people often exhibit parochial behavior, the question of how to frame who benefits from the ecosystem services provided needs to be addressed with caution. We implemented a modified dictator game in the field to study the effect of varying the geographical identity of downstream beneficiaries on 1) baseline water provision in the absence of PWS, 2) PWS effectiveness and 3) provision decisions after the payments end (‘motivation crowding’). Our experiments involved 60 rural farmers from the Colombian municipality of Junin, whose water provision decisions affected passive downstream beneficiaries in either the same municipality or the capital city of Bogota. Our findings suggest that sharing a closer place identity with downstream beneficiaries is relevant to determine baseline water provision, but does not affect PWS effectiveness or the emergence of motivation crowding effects.

Effects of payments for watershed services policy on economic growth: a case study based on the synthetic control method

Payments for watershed services (PWS) can provide financial incentives to the watershed water environment protection in upstream regions. It is necessary to understand the influence of watershed ecological protection on economic development. In this paper, taking the Xin’anjiang River basin as a case, synthetic control method was used to analyze the effects of PWS policy implemented in Huangshan City from 2012 on its per capita GDP. The results showed that the PWS policy had a negative effect on per capita GDP in Huangshan City, which was reduced by 1.73%. It indicated that the payments were not enough to offset the opportunity cost of upstream regions, proving that the conservation of the environment was at the expense of sacrificing economic growth. However, the ecosystems and society benefited from the PWS policy. Attention should be paid to balance the economy, ecology, and society in the process of development. In addition, compensation fund and market-based mechanisms could be applied to help alleviate the pressure of government finance to realize the social economy sustainable development.

Evaluating how we evaluate success: Monitoring, evaluation and adaptive management in Payments for Watershed Services programs

Payments for Watershed Services (PWS) programs have become an increasingly popular policy mechanism both in the U.S. and abroad. These programs are used to meet a variety of objectives, including improving the quality and quantity of water supplies, protecting endangered species, and advancing rural livelihoods. Monitoring, evaluation and adaptive management are important for filling fundamental knowledge gaps and improving the efficacy of PWS on the ground. However, relatively little work has evaluated how programs themselves monitor and evaluate their impacts and whether adaptive management is utilized. Here, we seek to improve understanding of the factors that contribute to the adoption of monitoring, evaluation and adaptive management practices through a literature review and a survey of PWS programs. Based on qualitative and logistic regression analyses, financial, technical and institutional capacity and leveraging broad stakeholder coalitions emerged as important factors contributing to systematic PWS monitoring, evaluation and adaptive management. This research underscores the importance of investing additional resources to support such capacity and coalition- building in PWS to ensure programs can meet their desired objectives.

Evaluating Payments for Watershed Services Programs in the United States

We review 15 forest watershed protection programs in the United States in which a local government agency or water provider collects payments from downstream service beneficiaries, such as water consumers, and pays upstream forest landowners for provision of watershed services. We describe the features of these Payments for Watershed Services (PWS) programs, focusing on funding sources, how the payment mechanisms work, and outcomes achieved. We also assess the extent to which the programs adhere to the economic principles that are associated with efficient or cost effective PWS schemes. In general, we find that payments in the programs do not closely reflect the marginal value of the service provided. Payments received by landowners mainly reflect the landowners’ opportunity costs. Fees paid by water consumers are set to yield revenue targets and/or reflect the avoided cost of additional water filtration and treatment. The programs appear to yield societal benefits, primarily through cost savings, but data from program outcomes is limited and more rigorous analysis of both the benefits and costs would be worthwhile.

Addressing knowledge gaps between stakeholders in payments for watershed services: Case of Koto Panjang hydropower plant catchment area, Sumatra, Indonesia

This study assesses the knowledge and perceptions of potential participants in a payment for watershed services (PWS) scheme in a watershed containing a reservoir and hydropower plant in Indonesia. Information was collected by interviewing watershed service providers such as upland farmers and downstream beneficiaries of services i.e. fishers, rest area operators, tourists, and the power plant manager. The study found some challenges if relying on stated preference values as a basis for a workable PWS scheme, specifically asymmetric information among stakeholders. Upland farmers did not realize their location within the upland of a watershed whose activities affect the quality of watershed services. Watershed users similarly do not know what activities their counterparts do in the upland. The study reveals market forces are a driver of livelihoods in the watershed. It concludes that prior to introducing a PWS scheme it is: 1/important to address any asymmetric information across stakeholders (e.g. through farmer extension services); and 2/consideration should be given to fluctuating commodity price subsidies so to sustain farmers’ livelihoods and ensure they maintain sustainable management practices for the uninterrupted and long term supply of watershed services. This study provides important lessons for other regions struggling with the same issues.

Guideline framework for effective targeting of payments for watershed services

Payments for Watershed Services (PWS) have become popular for the conservation of environmental services. As effectiveness is influenced by PWS design and the local contexts in which they are implemented, deficiencies in the process of targeting providers can affect the success of PWS schemes in achieving their goals. This article presents a framework based on data obtained from systematic reviews of worldwide Payments for Environmental Services (PES) schemes and the scientific literature to guide the process of targeting PWS schemes, especially in rural private areas in fragmented landscapes. The framework comprises four sets of operational guidelines for the targeting process based on the scientific literature. A table explaining the data extracted from the literature and PES schemes is provided, comprising the targeting criteria of benefits, risk, cost, socioeconomic issues, and readiness. The framework supplements current approaches that focus on biophysical criteria and is the first initiative to incorporate multidimensional aspects of PES in targeting guidelines. As it gathers empirical and scientific knowledge to promote an effective scheme design, the framework can contribute to the achievement of PWS goals.

Why do payments for watershed services emerge? A cross-country analysis of adoption contexts

Abstract Payments for watershed services (PWS) are an increasingly popular tool for watershed management, also in the Southern Hemisphere. However, the degree of PWS adoption varies across these countries: while frequently represented in Latin America, water-related payment schemes do not exist in large parts of Africa and Asia. The causes for these adoption differences have so far been little discussed. Here we address this knowledge gap with a quantitative cross-national assessment of factors influencing the decision to adopt PWS schemes across tropical countries. Based on hypotheses from the literature, we construct a logistic regression model, testing the explanatory power of various economic, institutional, and physical-geographic variables on PWS adoption. We show that especially factors associated with a country’s topography, hydrology, demographics, and institutions significantly influence the probability of PWS adoption. Our analysis of the de facto framework conditions for PWS adoption also has repercussion for where donor investments in PWS would most likely pay off.

Returns on investment in watershed conservation: Application of a best practices analytical framework to the Rio Camboriú Water Producer program, Santa Catarina, Brazil

Watershed management may have widespread potential to cost-effectively deliver hydrologic services. Mobilizing the needed investments requires credible assessments of how watershed conservation compares to conventional solutions on cost and effectiveness, utilizing an integrated analytical framework that links the bio-, litho-, hydro- and economic spheres and uses counterfactuals.We apply such a framework to a payment for watershed services (PWS) program in Camboriú, Santa Catarina State, Brazil. Using 1 m resolution satellite imagery, we assess recent land use and land cover (LULC) change and apply the Land Change Modeler tool to predict future LULC without the PWS program. We use current and predicted counterfactual LULC, site costs and a Soil and Water Assessment Tool model calibrated to the watershed to both target watershed interventions for sediment reduction and predict program impact on total suspended solids (TSS) concentrations at the municipal water intake—the principal program objective. Using local water treatment and PWS program costs, we estimate the return on investment (ROI; benefit/costs) of the program.Program ROI exceeds 1 for the municipal water utility in year 44, well within common drinking water infrastructure planning horizons. Because some program costs are borne by third parties, over that same period, for overall (social) program ROI to exceed 1 requires delivery of very modest flood and supply risk reduction and biodiversity co-benefits, making co-benefits crucial for social program justification. Transaction costs account for half of total program costs, a result of large investments in efficient targeting and program sustainability. Co-benefits justify increased cost sharing with other beneficiaries, which would increase ROI for the utility, demonstrating the sensitivity of the business case for watershed conservation to its broader social-economic case and the ability to forge institutional arrangements to internalize third-party benefits.

Payments for Watershed Services and Practices in China: Achievements and Challenges

Implementation of payments for watershed services (PWS) has been regarded as a promising approach to coordinating the interests of upstream and downstream ecosystem services stakeholders. There is growing concern about whether PWS programs have achieved their original environmental goals of improving water quality and quantity, as well as the ancillary objective of increasing the welfare of local people. We start with an overview of PWS schemes and focus on their particularity and implementation mechanisms in China. We proceed to review 62 active PWS cases and examine their environmental performance in detail. The resulting findings show that PWS schemes have been able to reduce water pollution to some extent by establishing collaborative upstream/downstream watershed management policies, thereby improving water quality and quantity, as well as by making government officials more responsible for water resource management. In addition, their continued effectiveness in light of present challenges such as water-quality data availability is discussed. Chinese PWS schemes and their implementation mechanisms also provide information useful in monitoring environmental outcomes and guiding future designs of PWS programs in other regions.

Choosing the Right Policy Tools to Encourage Watershed Stewardship through the Study of Attitude

ABSTRACTRecently, a number of “Payment for Watershed Services” programs have aimed to engage private landowners in watershed stewardship initiatives by offering financial incentives for adopting watershed best management practices. However, a growing field of research suggests that financial incentives alone may be of limited utility to encourage widespread and long-standing behavior change, and other policy tools may be required. This research examines how attitudes may influence enrollment in watershed stewardship programs to shed light the application of incentive, capacity building, and symbolic policy tools. We distributed a questionnaire to rural landowners in the Clackamas River watershed, OR, and received 281 valid responses (29% response rate). We found that attitudes associated with trust, ecological understanding, and technical capacity played more fundamental roles compared with financial considerations. We interpret these findings by evaluating the likely efficacy of various policy tools, and stress the importance of engaging landowners by building capacity and trust.

Ecosystem Service Valuation through Wildfire Risk Mitigation: Design, Governance, and Outcomes of the Flagstaff Watershed Protection Project (FWPP)

The full value of benefits rendered from healthy watersheds is difficult to estimate, and ecosystem service (ES) valuation sometimes necessarily occurs in the form of costs incurred or avoided. Along these lines, social-ecological systems including Payment for Watershed Services (PWS) are increasing in frequency and can help land management entities to bridge budget shortfalls for funding needed watershed restoration forestry treatments. The Flagstaff Watershed Protection Project (FWPP) is a bond-financed wildfire risk mitigation partnership and PWS program in Northern Arizona, the only forest management project that utilizes a municipal bond as the financial mechanism in conjunction with a partnership governance structure to invest in federal land management. The purpose of this research was to describe this new governance structure to understand the potential benefits to communities and federal land management agencies for protecting watershed services. Data were derived from document review and key informant interviews (n = 9). FWPP institutional design and governance structures were tailored to maximize community strengths and encompassed several advantages over traditional federal land management models; these advantages include increased collaboration and institutional support, financial security, and public approval. The FWPP represents an innovative PWS system that can help showcase unique community and federal forest management partnerships that benefit watershed health in western US communities.

Considering farmer land use decisions in efforts to ‘scale up’ Payments for Watershed Services

Significant effort is being devoted to the expansion of payments for watershed services (PWS) programs at national, regional, and local scales. This expansion faces logistical challenges, in particular identifying appropriate incentives and enrollment processes to provide additional ecosystem services under budget constraints. In Brazil, PWS programs have mostly occurred at the local level, using formulaic contracts to ensure landowners are compensated for provision of specific types and quantities of ecosystem services. However, it is unclear how these financial incentives will function as programs expand to new areas, as pilot programs report high recruitment costs. Using as an example the Cantareira System, an important drinking water supply for the São Paulo metropolitan area, we review PWS incentives in the context of factors that affect farmer land use decisions. We base our research on a review of policies affecting PWS in Brazil, existing PWS in the Cantareira region, and drivers affecting land use and technology adoption by cattle ranchers, drawing from the literature and interviews with farmers and agronomists in the study region. While financial incentives (payments) account for both the value of ecosystem services and opportunity costs of shifting pasture production to forest, several economic, social, political, and biophysical factors will likely affect landowners’ decisions to enroll in PWS. This suggests that, while PWS programs may lead to the provision of additional ecosystem services, the complexity of contracts and diversity of local conditions create challenges to broad deployment in the absence of significant outreach efforts.

Willingness to pay for watershed conservation: are we applying the right paradigm?

The values of watershed services from watersheds has for many years been neglected, underestimated and not factored in land use decisions for sustainable management. Sustainable management of watersheds and environmental friendly economic activities are vital for sustained water flow, steady supply of ecosystem services for societal needs and enhancement of aquatic vegetation and animal species. The problem of the failure to capture actual values of ecosystem services from watersheds and incorporate them in the national income accounting is profound in developing countries which are characterized with constrained budget for financing conservation programs. To resolve this problem attention has moved to market based instruments such as payment for watershed services (PWS). However, the approach to elicit the necessary information for PWS to kick off is still lacking. Furthermore, Ecohydrology, defined as an integrative sustainability science using the interactions between hydrology, biota and natural processes as management tools to reinforce ecosystem services on a broad range of landscapes (Zalewski, 2015) is a basis for the development and application of market-based approaches in watershed conservation. This study investigated small holder farmers’ willingness to pay (WTP) for watershed services in Pangani River Basin. A contingent valuation method was employed to elicit the willingness to pay for watershed conservation. A probit model was used to determine respondents’ response to WTP and factors conditioning the maximum amount they are WTP. Findings indicates that majority of respondents are willing to pay for watershed services. Similarly, result reveals that marital status, household size and distance from the water source positively influence smallholder farmers’ WTP and the maximum amount to be paid. Equally important occupation, household size, income from irrigation, and amount paid for irrigation were found to negatively influencing smallholder farmers’ WTP. The result also revealed that education level, total land size and yield from irrigated farm plot positively influence smallholder farmers’ WTP. These results therefore, indicate that establishment of PWS is feasible.