Douglas Southgate

1
Analysis required for Payments for Watershed
Environmental Services Bridging Project Report

• Douglas Southgate
• Ohio State University

2
Original Proposal

• Contingent-valuation (CV) estimation of
• the benefits of conserving the Paquiestancia
  watershed, which supplies Cayambe, Ecuador (near
  the national capital) with much of its potable
  water and
• the costs of conserving that same watershed
  including payments to small farmers who reduce
  agricultural land use in hydrologically sensitive
  areas.

3
Abandonment of Benefit Estimation

• Cayambe appears to have the least-subsidized
  prices for potable water in the entire country.
  To win public acceptance of this reform, the
  mayor recently promised a ten-year freeze on
  price-adjustments. The mayor, who supports the
  idea of payments for environmental services
  (PES), has been a valued partner in this project.
  He asked us not to carry out a CV survey of
  water consumers in Cayambe, as was needed for
  benefit estimation, for fear of raising doubts
  about his promise. We agreed.

4
Cost Estimation

• Ecuadors indigenous movement, like its
  counterparts in neighboring countries, opposes
  any and all measures that hint at water
  privatization. As far as many in the movement
  are concerned, PES is one such measure.
• Paquiestancia is an indigenous community and,
  when new leaders took office in late 2005, our
  field research was suspended, pending an
  explanation from Ecuadorian investigators. A
  satisfactory explanation was provided, although
  this delayed our schedule for data collection and
  analysis.

5
Tentative Results

• A households willingness to accept conservation
  payments in exchange for reducing the area it
  farms depends both on the size of those payments
  and the strategies it employs to raise living
  standards and contain income-variability.

• For example, agriculturally dependent households
  are more willing than others to accept fixed
  annual payments for withdrawing a hectare from
  production this is because this production tends
  to be highly variable.
• In contrast, households with more diversified
  income sources are less interested in such
  payments, perhaps because maintaining access to
  agricultural land is a way to cope with the
  variability of non-agricultural earnings.

6
Probit Estimates of WTA/Hectare Reduced Function
7
Spillovers of Bridging Project forHost-Country
Counterpart

• Fundación Antisana, an environmental NGO working
  to conserve parks and reserves in the Cordillera
  del Condor (east of Quito), is facilitating the
  implementation of PES in Cayambe, Baeza, and
  other communities using two SANREM products.

• In-country capacity for CV estimation of the
  benefits and costs of watershed management.
• Legal assessment of PES, financed by Bridging
  Project.