Payments for ecosystem services (PES) are flexible, direct and promising compensation mechanisms by which service providers are paid by service users. Our project (jointly undertaken with CARE) focuses on restoring upstream ecosystem integrity through the change from subsistence agricultural practices in poor rural communities to sustainable land use. Landscapes are restored and/or protected, poor upland communities improve their livelihood and domestic, industrial and commercial water users downstream can enjoy a reliable and continuous supply of quality water.

Business proposition
Unlike other PES schemes, our project establishes business agreements between poor rural upland communities (service providers or ‘sellers’) and downstream public and/or public corporations (service users or ‘buyers’). Thus, our approach brings public and private sectors to the negotiating table as equal partners in a mutually beneficial business proposition. Farmer and indigenous upland communities negotiate Memoranda of Understanding with downstream water user such as beverage companies, hydroelectric companies, a private association of water users, government run water utilities, etc.

The result is the restoration of symmetry between capital assets: social capital (livelihoods of upland communities) is enhanced; natural capital (ecosystems) is restored and, long-term return on financial capital is enhanced (providing a business case to companies). The permanently balanced association between capital assets is the most efficient form of assuring sustainability.

A phased strategy
Our programme — currently under implementation in Tanzania, Indonesia, Peru and Guatemala — aims at strengthening the organizational, negotiating and sustainable-productive capacities of national organizations both public (local-regional governments) and private (community based organizations; corporate business) in improving and guaranteeing the supply of quality fresh water downstream.

In dialogue with all stakeholders, the WWF-CARE consortium has designed a phased strategy. During the first 18 months, baseline studies in hydrology and community livelihoods were carried out as well as legal, institutional and economic analyses. Potential buyers (downstream commercial, industrial and domestic users) and sellers (upland communities) were identified. By the end of Phase One, buyers and sellers signed Memoranda of Understanding.

A four year Phase Two is currently underway. Land-use changes are being implemented in selected communities and a thorough process of monitoring and evaluation will measure the impact of such changes upon livelihoods and on water uses. We anticipate the mechanism of Equitable Payments for Watershed Services to be functioning by the end of December 2011.

Phase Three would tentatively start with buyers and sellers of watershed services establishing legally binding contractual agreements. At such time, local capacity will be in place to appropriate and manage the mechanism. Allowing external agents (donors and managers) to exit.

High on the COP-9 agenda is the issue of innovative finance mechanisms. Accordingly, our EPWS operationalizes in the field a unique blend of public-private partnership. Systematically drafted business accords articulate a mechanism for restoring biodiversity in degraded landscapes. Companies invest in land use change so as to assure the continuity of water services crucial for their operations. At the same time, enabling conditions are created to improve rural poor livelihoods reversing the decades-old controversy between conservation and development.

Dr. Julio C. Tresierra is Global Coordinator, WWF-NL. WWF