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Local Markets for Payments for Environmental Services: Can Small Rural Communities Self-Finance Watershed Protection?

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Abstract

Payment for environmental service (PES) programs are innovative approaches for watershed and natural resources management that increasingly are being used around the world. Most well-studied PES examples rely predominately, if not entirely, on large governmental and outside non-governmental organizations for financial and management assistance. We examine the potential for using a locally-financed PES scheme in a small, agricultural community in a developing country as a means to preserve environmental services of watersheds, namely clean drinking water. A dichotomous choice, contingent valuation survey is used to examine the community’s demand for protection of the headwaters of the nearby river, the source of their drinking water. The survey results demonstrate local water users’ substantial willingness to pay for increased protection of the watershed environmental services. We find that a local-market PES scheme for watershed services, even in a relatively low-income context, may be sufficient to protect ecosystem services independent of external financial resources.

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Acknowledgements

The authors thank EARTH University, especially Drs. Daniel Sherrard, Carlos Hernandez and Bert Kohlmann, for valuable help. We also appreciate the assistance of members of La Argentina rural water service association, especially Don Eladio Chinchill. Thanks to Delanie Kellon for her help with fieldwork and to Stefano Pagiola for his useful insights and comments. This research was funded, in part, by the U.S. Department of State’s White Water to Blue Water Initiative; the Fulbright U.S. Scholars program; Michigan State University’s Vice President of Finance and Operations. All opinions, errors and omissions are the authors.

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  1. Department of Community, Agriculture, Recreation, and Resource Studies, Michigan State University, 133 Natural Resource Building, East Lansing, MI, USA

    Michael D. Kaplowitz & Oscar Arreola

  2. Department of Agricultural, Food and Resource Economics and Department of Fisheries and Wildlife, Michigan State University, East Lansing, MI, USA

    Frank Lupi

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  1. Michael D. Kaplowitz
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Correspondence to Michael D. Kaplowitz.

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Kaplowitz, M.D., Lupi, F. & Arreola, O. Local Markets for Payments for Environmental Services: Can Small Rural Communities Self-Finance Watershed Protection?. Water Resour Manage 26, 3689–3704 (2012). https://doi.org/10.1007/s11269-012-0097-y

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