Water Could Be The World's Next Biggest Market

little colorado river

Photo: Henry Munter

In Uganda, a beer brewer is paying communities to protect wetlands in a bid to secure a steady supply of water for its businesses. In neighbouring Kenya, flower companies, ranchers and hotels are giving farmers vouchers for seeds and tools in exchange for efforts to reduce farm runoff, which can damage irrigation systems and spoil landscapes. In China, a government-backed scheme is giving tens of thousands of people health insurance benefits in exchange for land management practices that could improve the quality of drinking water.The number of projects that pay communities – either cash or in-kind compensation, such as training or even land rights – to protect or revive water supplies has doubled over the past four years, according to analysts at Ecosystem Marketplace, an online portal that tracks and promotes the development of markets for “ecosystem services” – natural processes that benefit humans and ecosystems, such as water purification by pristine watersheds or carbon sequestration by forests and oceans.

This market-based approach to sustainable development is expanding at rapid pace – but so are concerns about exactly who stands to benefit. In a report published this week, analysts identified at least 205 projects in 2011 – up from 103 in 2008 – where governments, NGOs and private companies in almost 30 countries “bought” more than $8bn of “watershed services” – up almost $2bn (£1.2bn) from 2008.

“We are witnessing the early stages of a global response that could transform the way we value and manage the world’s watersheds,” said Michael Jenkins, president and chief executive of Forest Trends, a US non-profit organisation that oversees the Ecosystem Marketplace. “The level of activity is far more intense than it was just a few years ago when we began tracking these types of investments.”

Most projects involve deals between downstream cities or businesses that “buy” improvements in water quality by paying property owners or cities upstream for changes in land management or pollution control. In places where water resources are more highly commodified, special water funds and water quality trading schemes have been set up. Analysts say they expect more experimentation in future, including cross-investment between ecosystem markets – for example, linking water funds to international carbon trading schemes.

More than 30% of the projects identified were in China – accounting for 91% of the total billions spent in 2011 – where funding for government “eco-compensation” schemes has soared under the country’s five-year development plan. Analysts found 73 programmes under development in countries worldwide, including Ghana, Malawi, and Romania.

Supporters argue that payments for ecosystem services projects and other market-based schemes will help pave the way to a “green economy”, where the value of water and other natural resources is captured by economic systems, environmental efforts and impacts are easier to quantify and manage, and new “green” income opportunities are created for the poor.

However, not everyone is excited about market-based approaches to the world’s water woes. The global water justice movement – emboldened by a decade of struggles against the commodification and privatisation of water – warns that setting up markets for the benefits provided by ecosystems could pave the way for a wholesale commodification of nature while doing little to address imbalances of money, power and resources. Commentators have lashed out at payments for ecosystems services for heralding the greatest privatisation since the enclosure of common lands, and sounded the alarm over prospects for a future financialised global water market and the impact that could have on food security.

Alarmingly, this week’s report notes that social goals – from poverty reduction to gender inequality – are not measured or monitored in most projects, even when mentioned as priorities. In many cases, it seems, it’s assumed that project intentions will simply come true. “Worryingly, little socio-economic monitoring appears to be taking place,” says the report, noting that of the more than 200 projects identified, just over 50 explicitly included social goals among stated objectives and evidence could be found in just 16 cases that these impacts were being tracked.

“There’s definitely anecdotal evidence that there are some social and ecological benefits. But these things are very difficult and expensive to track,” said Nathaniel Carroll, one of the report’s authors, adding that he’s sure there are examples of projects where no such benefits have been generated for either the ecosystems or people involved.

The uncertainty around what such schemes could mean for human development is a serious failing, one that needs urgent attention if market analysts are right and ecological service payments are indeed primed for growth in coming years. With governments bankrolling the bulk of these projects, we need some evidence that these efforts are doing good. Are resources really better managed when people are paid to look after them? Who decides which natural processes are worth protection? What’s the impact of these schemes on human welfare, poverty, inequality – and on the people “selling” such “services”? It’s time to take a closer look.

This article originally appeared on guardian.co.uk

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