CPWF’s Andes Basin Development Challenge focuses on institutional mechanisms for the sharing of water-related benefits. This program builds directly on the findings of several Phase 1 projects.
One Phase 1 project, titled Payment for Environmental Services (PES), examined the relationship between upstream land and water managers and downstream water users. Downstream users seek reliable supplies of good quality water, even in the dry season. Their water supplies are, however, affected by land- and water- management practices employed by upstream communities. The challenge is to design suitable, mutually acceptable, mechanisms for downstream water users to influence upstream land and water management.
In one instance, the quality of lake water and the livelihoods of people living near that lake were negatively affected by agricultural practices in surrounding hillsides. These practices caused erosion, and flows of sediments and nutrients into the lake. Nitrates and phosphates from crop production and nitrates from cattle manure stimulated growth of water plants, resulting in eutrophication, endangering fisheries as well as water supplies to lakeside settlements. An innovative financial mechanism — a revolving fund with preferential interest rates — was introduced to encourage the use of conservation agriculture in upland farming systems, to reduce erosion while raising productivity.
In another instance, the reliability of dry season flows to downstream communities was reduced as upstream communities introduced cattle grazing into alpine wetlands, disrupting basin hydrology. A trust fund was created, funded by water user charges and other contributions, to invest in productivity-enhancing technologies to improve the livelihoods of upland farmers. In exchange, these farmers agreed to forego cattle grazing in alpine wetlands.
In a second Phase 1 project (Sustaining collective action linking economic and ecological scales in upper watersheds), existing legal tools were harnessed to encourage dialogue between communities, stakeholders and public officials. The result of these dialogues was an increase in public sector investment in activities to improve productivity while conserving resources and enhancing ecosystem services.
In general, it was found that benefit-sharing mechanisms (BSM) were most effective when they were carefully tailored to local circumstances: needs of downstream users; incidence and drivers of negative externalities; ‘win-win’ strategies to address them; availability of resources for investment and incentives; an enabling policy environment; and the willingness and capability of stakeholders to identify ways for all to benefit.
Phase 2 projects take these findings one step further. One of them quantifies and values the benefits actually produced by the introduction of BSM. This provides reassurance to downstream investors that they are getting their money’s worth — or, alternatively, may identify instances where investments by downstream communities represent only a tiny fraction of the benefits they receive in return. Two other projects aim to develop a much wider range of BSM and to identify the conditions under which each one is most suitable. A fourth project focuses on stakeholder engagement, informing policy, capacity building, communications, and integration across projects.
The challenge is to increase the use of BSMs, from a dozen or so examples up to hundreds, covering wide areas of the Andes.
In broadening the use of BSM, Andes Phase 2 projects also build on the Phase 1 Andes Basin Focal Project, which developed spatial analysis tools to assess water availability, water productivity, poverty, and opportunities for interventions. These tools will assist in matching categories of BSM with local conditions, to accelerate and systematize scaling up the use of BSM across the basin.