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Home > Basin > Andes > Payment for environmental services in upper watersheds in the Andes (PN22)

Full Project Title: Payment for environmental services as a mechanism for promoting rural development in the upper watersheds of the tropics (PN22)


In the Andean watersheds spread across Colombia, Ecuador, Peru and Bolivia, poor farmers cultivating steep or marginal lands are looking to augment their income with compensation for providing water-related environmental services (ES).

Payment for Environmental Services (PES) has two forms: farmers receive awards for implementing new land uses that deliver ES and are not high-input demanding) or obtain ES payments for current land uses that with changes in management practices can be beneficial for the environment while improving competitiveness (e.g. by increasing the use of local labor).

The project aimed to investigate, analyze and prioritize positive water-related environmental externalities, quantified for selected Andean pilot watersheds, as a driver to promote social investment and sustainable rural development.

Research Highlights

Research highlights

  • Developed a methodological approach for quantifying and valuating the environmental services and their potential of these services to positively impact socio-economic conditions.
  • Assessed the social and economic benefits (including multiplier effects by additional employments and income generated) derived from proposed land use changes to deliver environmental services.
  • Developed a new approach to determine how changes in the provision of the environmental service may influence the competitiveness indexes of land use systems benefiting from that service based on the cost of domestic resources and the social cost and benefit.
  • The design of PES-type schemes in selected watersheds revealed the difficulty in using these mechanisms for increasing poor farmers’ income and conserving nature as the areas with the highest potential to deliver environmental services are not necessarily occupied by the poorest.
  • Many poor people in Andean watersheds do not own lands, thus they cannot capture some of the economic benefits derived from agricultural activities (e.g. producer’s surpluses) and from compensations for environmental services. For the landless, land use changes promoted to provide environmental services in a watershed will only generate benefits via a multiplier effect resulting from increase of labor use and income.
Project Outcomes

Project outcomes

  • Based on early results, the project through its development partners, made direct investments in the selected watersheds to test if financial or economic mechanisms (e.g. PES) were viable and feasible for providing environmental services under the existing socio-economic context.
  • Strategic alliances and financial schemes to improve the provision of environmental services were created based on results from the analyses conducted to quantify the service, to explore the willingness to cooperate, the investment cost of different land use scenarios and the socioeconomic impacts on farmers and society.
  • Different types of alliances and schemes were developed: with the public (governments, environmental authorities and public water supply companies) and private (farmers associations, development agencies, etc) sectors; and different type of incentives, from direct payments and soft loans to technical assistance in agricultural technologies.
Publications and Outputs

To view all outputs from project PN22 visit our document repository.

Project Completion Report

Selected publications and outputs

Peer-reviewed publications

  1. Aspajo, F. 2006. Mechanism of Payment for Environmental Services in Moyobamba City.–gtz-x-x1-&x=7595
  2. Cardenas, J.C. and Ramos, P.A. 2006. Manual de juegos económicos para el análisis del uso colectivo de los recursos naturales. August, 2006. 250 p. Lima, Peru.
  3. Moreno, A & Renner, I. 2007 (Eds). Integrated Watershed Management. The experience of the Andean Watersheds Project [In Spanish]. Lima, Peru.
  4. Pernett, X. 2006. Process to quantify and interpret the physical and chemical soil properties that determine water-related functions and nutrient storage. The Fuquene watershed case study.

Papers, posters and presentations

  1. Andean Watershed Project – CPWF PN 22. 2004. Sustainable Land Use in Andean watersheds “Andean Watersheds” Project. Poster presented at the Innovation Marketplace held during the Annual General Meeting AGM 2004 of the CGIAR. October 2004. Mexico.
  2. Estrada, R. & Quintero, M. 2005. Economic compensation for environmental services and its role in rural income equity. Fuquene (Colombia) and Altomayo (Peru) study cases. Presented at the Latin-American Symposium of Farming Systems (IESA-AL VI): The Valuation of goods and environmental services. Manizales, Colombia. July 20th, 2005
  3. Estrada, R. & Quintero, M. 2005. Using Environmental Externalities to Generate Equito in Rural Income. From Theory to Practice. Case study: Fuquene Watershed (Colombia). Paper prepared and presented for the 18th Symposium of the International Farming System Association (IFSA) with FAO and IFAD. Rome, Italy. 31 October – 4 November 2005.
  4. Moreno, A. 2007. Lessons learnt in PES schemes formulation. Oral presentation presented at the workshop of the project “Making Nature Count: enhancing payments for environmental service initiatives in Ecuador and Colombia” lead by CIFOR and Ohio University. The workshop was held in Ecuador on January 15-17, 2007.
  5. Moreno, A. 2006. Experiences of PES in Peru and Colombia. Oral presentation presented at the workshop “Compensation for Environmental Services and Poverty Alleviation in Latin America” funded by IDRC and organized by Randi- Randi and other regional organizations. Quito. Ecuador.
  6. Quintero, M. 2007. Cuantificación y valoración de servicios ambientales como instrumento para el diseño de esquemas financieros para la promoción de mejores practicas de manejo. Cuencas de Fuquene (Colombia) y Moyobamba (Perú). Presented at the Workshop on PES mechanisms in watersheds, lessons from Latin America. It was organized by the project in Cochabamba on September of 2007.
Final Report
Project Partners

Project partners


Project Lead

Project lead


For more information on Phase 1 outputs please contact Udana Ariyawansa.