Water Funds

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7th GEF Biennial International Waters Conference in Barbados Presentation on Latin American Water Funds Partnership
Experiences from Scaling Up Watershed Conservation by Fernando Veiga and Rebecca Tharme, The Nature Conservancy



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Water Funds

  1. 1. Water Funds Latin American Water Funds Partnership Experiences from Scaling Up Watershed Conservation Fernando Veiga Rebecca Tharme The Nature Conservancy 1
  2. 2. Investing in Green Infrastructure Ecosystems provide services to society Growing evidence that the conservation and restoration of ecosystems are key to guarantee water security for human needs, and in many cases represent the most cost-effective solutions Water funds rely on concept of ecosystem services e.g. erosion abatement; sediment reduction; nutrient filtration; flow regulation; flood control - clean reliable water sources Water Funds invest in conserving watersheds to improve or maintain waterrelated benefits and regulate water-related risks 2
  3. 3. Water Funds Users ECOSYSTEM SERVICES MODEL Providers Water Fund Board $ Financial Fund $ Quito Ecuador Population 2 million Condor Bioreserve & Surrounding farmlands WATER SERVICES WF is a conservation trust fund that finances watershed protection 3
  4. 4. Water Funds are effective tools for watershed conservation because they: • Connect suppliers of ecosystem services with beneficiaries, providing direct benefits downstream and improved livelihoods upstream (efficient) • Mitigate water scarcity and pollution problems at the source rather than end-of-pipe treatments (effective) • Provide a sustained funding mechanism with a flexible governance structure to allow for adaptive management of risks and opportunities (sustainable)
  5. 5. Business case São Paulo, Brasil • Most important water supply area in Brasil - 50% of São Paulo metropolitan area, 9 Mill people • Poor land-use practices in sensitive areas undermining system capacity to serve growing demand • Invest models estimated mean erosion rates and sediment loads – 14 300 ha of priority areas (3% of total area) for water fund investments = 50% of sediments abated = 600 000 tons per year • US$ 4.9 million/year of potential reduction in water treatment and drainage costs (excl. other potential benefits e.g. contaminants reduction) 5
  6. 6. Business case Cauca Valley, Colombia - Most important sugar cane production area in country (200 000 ha) - Increased pressure on water resources - potential future reduction from 5 to 4 irrigation cycles with current degradation trends 18 Sugar cane harvest (million tons) 8.7% decrease in productivity 15 12 Loss of $33 million / year Loss of $250 / ha / year 9 6 Sugar cane mills are main funders - for water supply assurance 3 0 2006 2007 2008 Production Caña 5 Riegos Producción dewith 5 cycles 2009 2010 Promedio Production with 4 cycles Producción de Caña 4 Riegos Source: Sugar Cane Research Centre - Cenicaña – estimations Asocaña 6
  7. 7. Feasibility Study Economic Rationale Bogotá, Colombia 50.0 m3/ha/año m3/ha/year Ton/ha/year toneladas/ha/año 40.0 10:1 Reducing sediment loads Water quantity Cantidad agua 2 Million tons by Quantity de sedimentos Cantidadof sediments (Component of Quality) 30.0 RegulationProjected savings significant but not quantified USD 3.5 M per year in treatment costs 20.0 10.0 0.0 Conserved Conservado Area Uses inside Uso actual (con Protected Area política ambiental) Sources: CIAT 2007, Bogota Water Fund Outside Uso fuera parque Protected Area (sin política ambiental) 7
  8. 8. Proof of Concept Quito Water Fund • Páramo and forest as biodiverse natural water tower • 80% of water for the city of Quito, Ecuador, from three protected • areas and their buffer zones Conversion with land pressures reducing ability to provide services Importance • 2 million residents • Condor Bioreserve: 2.5 million acres, exceptional biodiversity, inc. 760 bird spp.; 28 rivers Fund Progress • 2000: $21 000 start-up 2013: ~ $13 000 000 • Since 2006, 2% of the water utility revenues • Annual investments of nearly $2-3 million (leverage) Partners • EMPAAQ (Quito’s Water Agency); Quito Electric Company; USAID; Swiss Development Corporation; Cerveceria National (beer company); Tesalia Springs Co. (water bottling company) 8
  9. 9. Proof of Concept Quito Water Fund Conservation Progress Benefits to People • 85 000 ha of public lands protected • 19 000 ha of private lands restored and/or under Best Management Practices • Permanent support through various programs to communities close to the water sources • Enrolled 30 500 children in environmental education programs • Over 200 families engaged in community development projects in rural basins 9
  10. 10. Steps to establish a Water Fund Prefeasibili ty and Evaluati on Which ecosyste m services? Where is the area of Design Feasibility studies: Environme ntal Socioeconomic Institution al and legal Negotiat ion Instituti onal arrange ment Partner s’ commit ment (financi al and Operatio n Contracts with local stakehol ders Field activities Fundraising Maturity Financial sustainab ility Consolid ation of field activities and monitori ng Monitori 10
  11. 11. Science-based approach Contribution to aquifers Contribution to flows Sediments Coverage Biodiversity connectivity Highest priority areas for conservation Sistema Water for life and sustainability Río Río Río Río Río Río Amaime Bolo Desbaratado Fraile Nima Tuluá TOTAL Área ronda del río (250 mts cada lado) (Has) 7.126 2.210 1.016 2.792 1.642 13.234 28.020 Área en cobertura natural para conservación (Has) 3.135 1.414 772 2.345 1.133 5.426 14.226 % 44 64 76 84 69 41 Área intervenida para restauración (Has) 3.991 796 244 447 509 7.808 13.794 % 56 36 24 16 31 59 11
  12. 12. Investment Portfolio
  13. 13. Investments Private and communal lands 1. 2. 3. 4. 5. 6. Conservation agreements Best agricultural and cattle ranching practices (silvopastoral systems) Riparian forests Reforestation and restoration Income generation Environmental education Public areas 1. Implementation of management plans 2. Park guards 13
  14. 14. Peru Ecuador Colombia Brasil 14
  15. 15. WATER MONITORING Water Monitoring Sites Quality • 9 sites • 9 parameters Precipitation • 3 sites Parâmetro Analítico Flow • 3 sites Community Engagement PH Turbidez DBO Cor Coliformes Termotolerantes Oxigênio dissolvido Nitrogênio amoniacal Fósforo Total Temperatura 15
  16. 16. Biodiversity Monitoring • Importance of riparian areas •Terrestrial monitoring of páramos and forests also showing first encouraging results (e.g. forest bird species in restoration areas) Paulo Petry 16
  17. 17. Community monitoring 4218 families benefited upstream in watershed
  18. 18. Monitoring of multiple water funds ongoing
  19. 19. TNC, FEMSA Foundation, IDB and GEF Launched in 2011
  20. 20. The vision Over the next 5 years $27 million in Seed Capital will support direct investment of $143 million in 32 Water Funds, leveraging additionally $500 million providing long-term payments for environmental services to rural communities, and securing clean and sufficient water and effectively conserving 7 million acres for 50 million people in Latin America 20
  21. 21. Goals 1. Support the establishment and strengthening of the WFs 2. Identify and share best practices 3. Development of regional projects 4. Support monitoring initiatives 5. Keep developing the business cases 6. Raise awareness (Where Does Your Water Come From?) 7. Support the green infrastructure approach in water sector loans (IDB and CAF) 8. Partner with water regulators with the aim of including the watershed conservation costs in water tariffs (ADERASA – PE, CR, BR)
  22. 22. Water Funds as at June 2013 Status 15 in evaluation 14 in design 13 operating 1 mature Opportunities • Exchange lessons learned • Regional players (public and private) – reduction of transaction costs • Diversity and cooperation • Upscale (implementation channel) • Expand to new geographies (Africa, USA)
  23. 23. Thanks www.fondosdeagua.org 23

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