This article first appeared on the Nature Conservancy Blog. Click here to view the original.
Around the world a growing number of programs address these concerns through the use of formal or informal contractual arrangements between water users and upstream land managers that have the explicit purpose of improving downstream source water quality or timing of flows through changes in land management. As of 2016, 95 collective-action, local-level “payments for watershed services” (PWS) programs or Water Funds were active or in the pilot or development stages, with a proliferation in Asia, Africa and North America, where previously most had been concentrated in Latin America. Forest Trends research shows that those 95 programs represented a total investment of over US$564 million and covered nearly 9 million hectares, while these collective action PWS programs are a subset of all PWS programs which in turn are a subset of all payments for environmental services (PES) programs.
The Nature Conservancy alone currently leads or directly supports 34 such programs, with the goal of increasing that number to 100 by 2022. The global potential for watershed conservation as a cost-effective approach to improving water quality is much larger still.
Mobilizing these ambitious increases in watershed conservation investments will require credible assessments of the performance and cost-effectiveness of these investments in providing desired hydrologic services. This is especially true for private sector investments, which are seen as key to closing the funding gap for water infrastructure globally. The business case of a PWS program for a particular investor hinges on the benefits they receive from the program (as a result of changes in key ecosystem services flows) outweighing the cost of their investment in the program. Likewise, the overall economic case for a PWS program depends on the ratio of its total costs and benefits.
Not surprisingly, then, “How much does it cost?” is a common question we hear in discussions with people interested in exploring watershed conservation as a tool for improving water quality or flow regulation in their area. Yet, remarkably, few economic analyses of PWS programs account for the full cost of these programs. Most completely or partially omit the transaction or overhead costs associated with planning, convening and engaging partners and communities, which some recent studies find can make up half of total program costs. Moreover, the few studies that do report costs focus mainly on national-level, government-financed programs, not on the municipal-scale, collective action type programs like the ones the Conservancy and other conservation organizations are engaged in together with local partners.
Lack of access to reliable cost information can severely limit a program’s ability to effectively plan and fundraise, and hampers a rigorous evaluation of its return on investment. The resulting uncertainty on the costs and the economic rationale of watershed conservation programs dampens the increase in the number of such programs. Importantly, costs are likely to vary across programs, even adjusted for program size, due to differences in institutional environments, opportunity costs of land, numbers and types of program objectives and design characteristics, as well as in the mixes of interventions implemented.
To overcome this problem, The Nature Conservancy and Forest Trends have teamed up to carry out the first global survey of the costs, institutional context and program characteristics of watershed conservation programs. The goal of this ambitious effort is to better understand the full costs of local PWS programs as well as the main drivers of those costs. To achieve this, we are reaching out to over 100 PWS programs spread across every region of the globe, to collect information of program costs by major activity category, institutional context and program characteristics. A large number of responses is necessary to test for statistically significant relationships between specific institutional and program attributes, and program costs.
Importantly, the results will yield a better understanding of what it actually costs to create and implement local-scale watershed conservation programs, and what the main drivers of program costs are. Both of these – more clarity on funding needs, and understanding how those needs might be reduced through design choices and institutional changes – will allow more realistic assessments of funding needs; make it more attractive to launch new watershed conservation programs; and make it easier to sustain both new and existing programs. It also may indicate where economies of scale might be had, that is, how a program’s size might be increased without increasing costs by the same proportion. In short, our hope is that this work will allow a scaling up of local watershed protection initiatives.
We will share the results of our study with all participating programs and acknowledge participants and their programs in the resulting report and peer-reviewed paper. Participating programs will be able to identify where their costs fall within the distribution of all sampled programs, and why. As an additional benefit, the Excel sheet will auto-generate a graph showing the composition of costs by major category over the life of the program.
If you are involved in a watershed conservation program, please consider participating in the survey. The deadline for participation is 30 April. You can find the two survey components here – a questionnaire that collects information on institutional and program characteristics, and an Excel file to enter your program’s cost information.
If you are interested in obtaining up to 500 points in credit for participating in the survey as part of The Nature Conservancy’s 2018 Water Funds Olympics, please complete the survey by 15 April; see here for more information.
If you have any questions about the survey, please feel free to contact us at the email addresses listed below. You can also watch a short video on the survey.