Incentive-Based Mechanisms for Forest-Water Ecosystem Services

22 Nov, 2021

Dr. Suneesh Buxy, Inspector General (Forests) Externally Aided Projects, MoEF&CC; Meenakshi Saikia, Junior Technical Expert, GIZ

Western Himalayas are home to a wide range of forest types, ranging from tropical and subtropical to dry tropical evergreen and mountain moist deciduous forests. These forests not only provide wide array of services for sustaining livelihoods, but also provide services that enhance the supply of water to upward and downward communities. Water-related forest ecosystem services or water ecosystem services are benefits derived from various functions of forests. These include ground water recharge, water supply and recreational opportunities. Therefore, management of forest can directly impact the delivery of water and associated ecosystem services.


However, markets rarely value these ecosystem services. These are seen as free and continuous, rather than essential components of development. This calls for the proper management for conservation of these services. The upstream communities living closer to water sources have significant role in management and protection of these services as their usage directly affects the downstream communities depending on whether it is the same water source. Changing land use activities like less erosive land use practices, reduction in use of chemical fertilisers and improvement in upstream sanitary conditions of upstream communities can contribute to better water quality and quantity to the downstream communities. Encouraging them to switch to sustainable practices will improve the supply of forest water ecosystem services.



The communities may face technical, cultural or financial barriers to discourage changing approach. As a result, they need a reason or motivation to shift to new sustainable practices. Incentives based mechanisms (IBMs) seeks to address these issues. IBMs include charges (such as taxes, user fee and deposit-refund systems), subsidies, tradable permits (including markets for pollution reduction and tradable development rights), and market friction reduction (e.g., liability rules and information) programmes.


Incentivising the communities for their efforts in conservation and ecosystem management will ensure benefits to the communities and decrease unsustainable practices. Incentives could be given to the upstream communities to protecting the catchment areas. Bohal village in Himachal Pradesh is an example of such a practice from the ‘Himachal Pradesh Forest Ecosystem Services’ project (2016-2020) implemented by GIZ. Here, the catchment of water source supported piped water supply to the Municipal Council of Palampur (MCP). An agreement was signed between Village Forest Development Society (VFDS) and MCP to annually transfer an amount of 10,000 INR to VFDS also towards protecting the Bohal spring catchment against grazing and indiscriminate lopping. 


Incentivisation also helps in providing equitable access to all members of the community. At policy level, embedding incentive mechanisms will ensure long term supply of forest and water ecosystem services in the Himalayas.


In response to the call from Convention on Biological Diversity (CBD) to blend private and public approaches, a variety of actors can be involved to offer incentives. These range from policy driven investment to private market driven strategies. Besides these, voluntary investments can provide social and livelihood benefits. Therefore, combining incentives from private, public, and civil society will create an overall impact to shift towards sustainable practices thereby enhancing water related forest ecosystem services.


(Source: FAO)

The ‘Forest Ecosystem Services (FES)’ project jointly implemented by MoEFCC, GIZ, Himachal Pradesh Forest Department and Uttarakhand Forest Department will be working towards upscaling and implementing IBM models focusing on improved water availability in the Western Himalayas from 2021- 2023. For effective implementation of incentive-based mechanisms, proper institutional arrangements among different stakeholders, including upstream and downstream communities and local government, is required. With the help of appropriate institutional mechanisms, the upstream communities can be engaged in maintenance of water source through subsidiary schemes. This will help in sharing water resources as well as maintaining water quality and quantity for drinking water supplied to downstream communities. The FES project will also identify and document best practices across the Himalayan region which will be useful at other sites. This will help in rehabilitation and protection of ecosystem services, enable sustainability, and improve livelihood.


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