Developing markets for watershed services

The services that watersheds provide - such as quantity and quality of water - are decreasing, yet demand for these services is increasing. Can market mechanisms help to increase these services by offering incentives for improved land use in catchment areas? Can mechanisms also bring benefits to poor people living in those catchments such that their livelihoods are enhanced? This project addresses some of these critical questions.


Our overall aim is to better understand the role of market mechanisms in providing  watershed services and improving livelihoods in developing countries. This aim is being achieved through three complementary actions:

  • action learning in five countries (Saint Lucia and Jamaica in the Caribbean, India, Indonesia and South Africa)
  • diagnostics in a further two countries wishing to adopt market mechanisms for watershed protection (Bolivia and China)
  • networking and development of guidance material for dissemination to other countries and institutions to improve knowledge of market mechanisms.

Within each of the countries involved, the project has made a major contribution to the debate on the potential and limits of payments for watershed services (PWS) to contribute to changes in land use, land management and livelihoods.

PWS have been directly facilitated by the project in three sites in Indonesia and ongoing PWS mechanisms have been strengthened at a further site in Bolivia. In Bolivia and China, the project has played an important role in influencing policy makers and plans. In the Caribbean, this initiative has helped create a highly successful regional action learning group, which has prepared the ground for a unified government council to integrate environment and natural resource issues.

An independent evaluation concluded that: ‘The project has been effective in addressing an important set of issues at a time when decisions were being made both nationally and internationally on PES/PWS type mechanisms. IIED’s work has provided a lot of the substantive input to an international debate where untested hypotheses and speculation were dominant. The project has made major contributions to understanding of PWS issues in all of its partner countries.’ (Sayer, 2005) was created as part of this project to provide free online access to payments for environmental services case studies across the world.


All that glitters: A review of payments for watershed services in developing countries

Fair deals for watersheds services in Bolivia

Fair deals for watershed services in Indonesia

Fair deals for watershed services in the Caribbean

Fair deals for watershed services in India

Negotiating watershed services

Silver bullet or fools’ gold? A global review of markets for forest environmental services and their impacts on the poor

¿Bala de plata u oro de tontos? Una revisión global de mercados para servicios ambientales forestales y sus impactos en la pobreza

Watershed services: who pays and for what?

Payments for watershed services: opportunities and realities

For details of other publications by IIED on watershed management please search our online publications database

Reports and papers

IIED commissioned a range of case-specific studies for this project:

Report of an external evaluation of the IIED project by Jeff Sayer
English version of full report
Bahasa Indonesia version of executive summary

Powerpoint presentations
A review of payments for watershed services


Shed Loads - paying to protect watersheds
This 26 minute documentary looks at the potential and problems for payments for watershed services in Africa, Asia and The Americas. Available in English and Spanish.


Department for International Development


Bolivia Fundacion Natura Bolivia

Caribbean Caribbean Natural Resources Institute

China Centre for Humanities and Development

India Winrock International India

Indonesia Institute for Social and Economic Research, Education and Information

South Africa Council for Scientific and Industrial Research - Environmentek



Ina Porras