Around the world there are a growing number of contractual
arrangements—sometimes called “water funds”—between municipal water
companies and upstream land owners aimed at improving source water
quality or quantity. Nevertheless, the potential of natural
infrastructure options for improving water quality or flows far exceeds
current spending. According to the Beyond the Source
report—which analyzed 4,000 cities to demonstrate the health, climate,
and biodiversity benefits of source water protection—costs can be fully
offset by water treatment savings alone, in 1 out of 6 cities.
Mobilizing more investments hinges in part on the business case for water users, that is, the competitiveness of watershed conservation programs with conventional engineering solutions.
remarkably few credible examples of such business cases exist for
watershed conservation. Furthermore, those interested in evaluating the
business case in their own geography lack the examples and tools to do
so in a robust manner.
To fill the gap, scientists from The Nature Conservancy constructed an analytical framework
that provides a template for how to conduct a rigorous return on
investment (ROI) analysis for watershed conservation programs. This ROI
framework connects interventions (forest conservation and restoration)
in the watershed to changes in hydrologic outcomes (total suspended
solids concentration) and associated economic values for specific water
users, like EMASA.
Applying this ROI framework to the Camboriú watershed conservation program, they found that reductions
in sediment treatment cost and water losses offset 80 percent of the
water company’s investment in the program over a 30-year time horizon,
and all of its investment over time horizons of 43 years or more.
However, because approximately one fifth of the total program costs are
borne by others than EMASA, the program’s ROI as a sediment control
measure is <1 if the costs borne by all program partners are counted.
overall ROI >1 is achievable by sharing costs with beneficiaries of
the co-benefits of watershed conservation, including reduced risk of
flooding and water supply shortages during the tourist season, to say
nothing of protecting imperiled species. Such cost-sharing can be
achieved by incorporating watershed conservation costs into the water
user fee structure. Recognizing these additional benefits provided by
the program, the Balneário Camboriú municipality is concluding a review
of a new water tariff structure for EMASA that recognizes watershed
conservation as a supply measure and would cover the program’s full
operational costs. This outcome represents a fundamental change for
water utility operation in Brazil and many other places, which
historically have not considered watershed management as part of their