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 addressed some of these critical questions.

This project aimed better understand the role of market mechanisms in providing watershed services and improving livelihoods in developing countries.

Work included: 

  • 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), and
  • 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 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 were directly facilitated by the project in three sites in Indonesia and ongoing PWS mechanisms were strengthened at a further site in Bolivia.

In Bolivia and China, the project played an important role in influencing policymakers and plans. In the Caribbean, the initiative helped create a highly successful regional action learning group, which 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)

The website 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, Ina Porras, Maryanne Grieg-​Gran, Nanete Neves (2008), IIED

Fair deals for watersheds services in Bolivia, Maria Teresa Vargas, Nigel Asquith (2007), IIED | Español

Fair deals for watershed services in Indonesia, Munawir, Sonja Vermeulen (2007), IIED

Fair deals for watershed services in the Caribbean, Sarah McIntosh, Nicole Leotaud (2007), IIED

Fair deals for watershed services in India, Chetan Agarwal, Sunandan Tiwari, Mamta Borgoyary, Amitangshu Acharya, Elaine Morrison (2007), IIED

Negotiating watershed services, R A Hope, I Porras, M Borgoyary, M Miranda, C Agarwal, S Tiwari, J M Amezaga (2007), IIED

Watershed services: who pays and for what?, Ina Porras, Maryanne Grieg-​Gran (2007) IIED Opinion Paper

Policy learning in action: developing markets for watershed protection services and improved livelihoods, Jeffrey Sayer (2007), Report

Payments for watershed services: opportunities and realities, Ivan Bond (2007) IIED Opinion Paper

The Vittel payments for ecosystem services: A 'perfect' PES case?, Daniele Perrot-​Maitre (2006)

A study of policies and legislation affecting payments for watershed services in China, Changjin Sun, Chen Liqiao (2006)

Linking tourism to watersheds and people: A preliminary analysis of the potential of the tourism sector to contribute to PWS in Dunn's River, Jamaica and Speyside, Tobago, Nicole Leotaud (2006)

Hydrology and land use in the Ga-Selati catchment, Arthur Chapman (2006)

A framework for decision-making using a cost-effectiveness approach: a case study of the Ga-Selati River, Russell M. Wise, Josephine K. Musango (2006)

Cost pricing for water production and water protection services in St Lucia, Cletus Springer (2005)

Water, watersheds, forests and poverty reduction: a Caribbean perspective, Lyndon John, Daniel Firth (2005)

Economic valuation study: action learning project on incentives for improved water services in the Buff Bay/Pencar watershed, Dennis Pantin, Veronica Reid (2005)

Can payments be used to manage South African watersheds sustainably and fairly? A legal review, Gavin Quibell, Robyn Stein (2005), Report

An analysis of the livelihoods of communities of the upper Selati catchment, South Africa, A.E. Visser, S. Olorunju, S. Dippenaar, N. Moilwa (2005)

A hydrolgical assessment and watershed management plan for the Talvan water catchment, St. Lucia, Christopher Cox (2004)

Silver bullet or fools’ gold? A global review of markets for forest environmental services and their impacts on the poor, Natasha Landell-​Mills, Ina T Porras (2002), IIED | Español