The new generation of watershed management
The political economy of watersheds
Watersheds provide human societies with many goods and services, such as clean water, erosion control, carbon sequestration and conservation of biodiversity. Unlike those of timber, livestock products or minerals, however, the value of these goods and services is rarely expressed in monetary terms. These goods and services are known as “public goods” or “positive externalities”.
The concept of public goods implies that one person’s consumption of a good does not diminish another person’s consumption (non-rivalry) and does not bar anyone else from benefiting from the good (non-exclusion). Watershed-generated environmental public goods include regulation of water flow and quality, sediment delivery and maintenance of landscape beauty.
An externality is a value of a commodity that is not reflected in that commodity’s market price. For example, the value of a forest in controlling stream-bank erosion and sediment load in a river is not reflected in the market price of the forest land, neither is the value of a highland swamp in recharging an aquifer reflected in its price.
Markets fail to recognize the value of watershed public goods and externalities because there are no incentives for beneficiaries to pay providers. As any payment to improve a good or service will benefit all beneficiaries, it is rational for each beneficiary to wait and see whether others will make an investment that improves access to the service. This is a “free-rider strategy”: if all beneficiaries adopt it, the good or service will not be supplied.
However, society generally attaches a high value to the positive externalities of watershed landscapes and will take action to guarantee that they are provided for and conserved. This is the primary justification for the public funding of watershed management programmes. Many countries have laws regulating access to and use of watersheds, but these are often inefficient and difficult to implement.
Efforts have recently been made to create markets for watershed externalities. Under such payment schemes, the beneficiaries of externalities or services pay the providers. This transforms an externality into a tangible income for service providers.