InnoWat Topic Sheet: [Pro-poor] Payments for watershed services

Payments for environmental services (PES) are a means of creating a market in environmental/ecosystem services. They link those who value a given service with those who can provide it. Most early PES initiatives were in Latin America, which remains the region with the most PES schemes, followed by Asia, and lastly Africa (figure 1). Payments for watershed functions seek to link upstream land use and management with downstream water use and management to realize benefits for upstream and downstream participants in the scheme and others in the area – not to mention for the environment. The ideal is a voluntary agreement between at least one buyer and one seller of ecosystem services (or land-use changes presumed to provide an ecosystem service). PES schemes have become increasingly popular with donors over the last few years. Yet despite their widespread application, by their nature they are not primarily intended as a tool for poverty reduction. They may be tailored to this purpose, however. From IFAD’s perspective, the problem is that poor rural people lack the prerequisites for participation in PES. Often, they do not have secure land tenure, rewards are easily usurped by the elite, and they lack the assets (human capital, natural resources) to provide the level of service needed to yield the desired impacts. Part of the solution to this stubborn dilemma may be to eschew PES schemes that simply seek market creation. Rather than clinging to economic principles, develop a variant of PES that builds on the reality faced in rural areas. This means allowing for market support, subsidies and a means of directing PES benefits to poor people – in short, developing pro-rural-poor PES.

Synthesis of strategic approaches: Enhancing pro-poor investments in water & rural livelihoods.

The reduction of hunger and poverty depends on improved access to water for poor rural people. Progress in community water supplies and agricultural water management (AWM), particularly irrigation, is one of the success stories of the twentieth century. However, it is disappointing to learn that AWM, by far the largest consumer of water in developing countries, has had little impact on world hunger and poverty. The experience of agency- and government-led interventions has not been good. They often impose ‘blueprint’ methods that ignore important local issues. A critical gap exists between planning and successful implementation. Approaches focus on what needs to be done, rather than on how to do it, and they ignore the complex interactions among individuals, the state and service providers –as well as their limited capacity to translate plans into practice. If poor rural people are not to be the losers again in the struggle for declining water resources, a new, pro-poor water management strategy is needed. It must focus more on how to do it, while still addressing what to do, where and with whom.

InnoWat: Water, innovations, learning & rural livelihoods