Partnerships of Payments for Ecosystem Services on the Watershed Scale

This study discusses some insights for adaptive aquatic ecosystem management, based on evidence of upstream-downstream financial partnerships on watershed scales, or watershed-based Payments for Ecosystem Services (PES) programs. Socioeconomic and watershed information on 13 advanced PES programs being implemented in 13 developing countries was collected and synthesized to analyze their partnership structures. Structured by the distributions of downstream payers and upstream payees within specific legislative tiers and hydrological orders, the PES partnerships revealed three important features with broad implications for aquatic ecosystem management: (1) institutional incentives for water resources, (2) participation units within the watersheds, and (3) organizing scopes for aquatic ecosystem management. In particular, as a reflection of organizing scopes, landscape entrepreneurship, or development of new organizations on the landscape, suggested two visions for adaptive aquatic ecosystem management: (1) connective lifestyles of individual stakeholders, with a transformation from benefiting from ecosystem services to providing conservation services, and (2) compatible technological innovations among organizational stakeholders, with a transformation from supplying latent and disconnected organizing services to strengthening systematic and accountable organizing services. This study is intended to provide a socioeconomic perspective to bridge the domains of water resources management, watershed management, and aquatic ecosystem management, in order to substantially promote diverse scales of stakeholder behavioral adaptations for the common mission of sustainable development in our societies.


Introduction
At a time of global climate change, societal resources are allocated largely based on the scales of targeted areas (Kollner et al., 2002;Ring, 2002;Hajkowicz, 2007). Subsequently, management of water resources, as in small watersheds and in small aquatic ecosystems, is confronted with poor local adaptation potentials, resulting from less flexible financial resources and vague cooperation regimes. Consequently, it is essential to strengthen the organizational capacities (Ivey et al., 2004) that enable watershed stakeholders to develop mutually re-enforced partnerships for protecting aquatic habitats (Bohn & Kershner, 2002) to sustain the most fundamental supporting ecosystem services (Millennium Ecosystem Assessment, 2005) of human societies and other biological communities. One promising approach for identifying and overcoming watershed stakeholder challenges in forming financial partnerships is the institutional approach of Payments for Ecosystem Services (PES).
About 163 watershed-based PES programs ( Figure 2) have been recognized in 34 developing countries (Lin & Nakamura, 2012), since the pioneering national PES program was implemented in Costa Rica in 1997(Chomitz et al., 1998World Bank, 2006;Pagiola, 2008). However, evaluation of the cost-effectiveness of the PES system and generalization of the PES approach remain two critical policy and research issues. Generalization of the PES approach requires incorporating the economic and institutional ideologies of the PES system within the cultural wisdom and scientific knowledge applicable to various aquatic and terrestrial ecosystems. Importantly, without sufficiently understanding of both the challenges and the potential contributions of the PES approach to managing the socioeconomic, cultural, and scientific inter-linkages of a local human society residing on a landscape, there is very little on which to base answers to the evaluation issue. In other words, it is very limiting to evaluate whether or not the PES approach is more cost-effective than an alternative approach, using traditional evaluation "standards". The main reason is that current or traditional standards do not have a consistent framework within which to examine the institutional principles behind the PES approach, which specifically targets the ecosystem-human interface rather than either side alone.  Table A1 in Lin & Nakamura, 2012, pp. 203-206. This paper discusses some insights for adaptive aquatic ecosystem management gleaned from evidence of upstream-downstream financial partnerships on watershed scales, or watershed-based PES programs. It is intended to provide a socioeconomic perspective to bridge the domains of water resources management, watershed management, and aquatic ecosystem management, in order to substantially promote stakeholder behavioral adaptations at diverse scales for the common mission of achieving sustainable development in our societies. In this pursuit, a set of advanced programs suitable for revealing their partnership structures was selected from among the 163 cases and analysed. The features of the PES partnerships with broader implications for aquatic ecosystem management are discussed, and their reflections on understanding the relationships among the three water management domains are explored.
Regarding the institutional arrangements for the 13 PES programs, information from related PES literature was synthesized. The information included: (1) the name of the water body and the year of project initiation, (2) the identity and the names of the organizing intermediaries, (3) the identity of the upstream payees, (4) the conservation services provided by the payees, (5) the identity of the downstream payers, and (6) the ecosystem services demanded by the payers (Appendix 1).

Advanced PES Partnerships
Based on the institutional arrangements, information on the institutional environments of the respective PES programs was also collected, including statistics and studies on the towns, mountains, parks, rivers, lakes, coastal areas, watersheds and landscapes encompassed by the projects. The specific information gathered included: (1) the townships and the numbers of payees in a transaction year; (2) the townships and the numbers of payers in a transaction year; (3) the river systems within the watersheds along which the waterbodies were located; (4) the legislative and hydrological locations of the payees and payers; and (5) the hydrological distances in kilometers between the payees and the payers.
Items (1) and (2) represented the participation status in the PES programs (Appendix 2). Items (3), (4) and (5) reflected the partnership structures of the PES programs (Table 1) on the watershed scales. In particular, 4 out of the 13 river-/lake-/reservoir-focused PES programs were located within 154 large watersheds located across the globe (IUCN et al., 2003; Figure 3; Figure 4).

Features of PES Partnerships
Three key features of the PES partnerships examined, useful for aquatic ecosystem management, were: (1) institutional incentives, (2) participation units, and (3) organizing scopes or boundaries.

Institutional Incentives for Water Resources Management
Formed by organizing intermediaries, downstream payers, and upstream payees, the PES partnerships revealed three main institutional incentives (Figure 1 (b)): (1) lifestyle adaptation of upstream payees to provide conservation services (e.g., afforestation instead of deforestation in headwater areas), (2) lifestyle adaptation of downstream payers to recognize the values of bundled conservation and ecosystem services (e.g., water purification through soils), with ecosystem services provided by ecosystem functions (e.g., the inland section of the hydrological cycle), and (3) technological innovation by organizing intermediaries for supporting the lifestyle adaptations on the watershed scale.

Participation on Watershed Scales
The PES partnerships reflected the third legislative tier of a country as a common participation unit for both upstream payees and downstream payers, albeit various legislative Aquatic Science and Technology ISSN 2168-9148 2013 distances inbetween ( Figure 5). The third legislative tier refers to municipalities in Mexico, Guatemala, El Salvador, Honduras, Nicaragua, Brazil and Indonesia, provinces in Colombia and Ecuador; and, cantons, cities and districts in Costa Rica, China and India, respectively. The legislative distances are counted as the sum of hierarchies from the immediately higher common tier for both the payee and the payer, to the tier of the payee and the tier of the payer. For example, the simplest and the most complicated partnerships were, PES09 (Bolivia) and PES13 (India), respectively. The higher the common tier, the more complicated the PES partnership, since, should a PES contract be breached, a corresponding level of court would be required to determine the expected settlement. Three types of PES partnerships, relative to watersheds, also could be distinguished: • PES partnership type I applied to first (i.e., mainstream) or second hydrological order small rivers as the main water sources to coastal towns located outside of larger watersheds; e.g., Aquatic Science and Technology ISSN 2168-9148 2013 Coatepec city next to the Papaloapan watershed in Mexico (PES01). Similar cases are PES02 (Guatemala) and PES03 (El Salvador).
• PES partnership type II applied to third or greater hydrological order large rivers as critical water sources for geographical locations of national importance, whether for agriculture, modernization, politics and/or hydrology; e.g., Causa valley in the Magdalena watershed in Columbia (PES07). Similar cases are PES08 (Brazil), PES12 (Indonesia) and PES13 (India).
• PES partnership type III applied to various hydrological order of rivers to downstream towns experiencing acute water quantity reduction and/or water quality deterioration, the status of which could be directly improved by land users immediately (< 40 km) upstream; e.g., farmers in Honduras (PES04), Nicaragua (PES05), Costa Rica (PES06) and Ecuador (PES10), foresters in Bolivia (PES09), and urban residents in China (PES11).

Organizing Scopes for Aquatic Ecosystems
Since the upstream and downstream PES participants were not constrained to specific legislative or hydrological units, the PES partnerships indicated the organizing scopes of the PES programs as being superior to both the legislative and the hydrological boundaries. Such a feature has direct and significant implications for the coordination difficulties induced by the inconsistency between legislative, hydrological and socioeconomic boundaries in integrated water resources management. In particular, reconciling these difficulties suggests that, for PES programs to succeed, organizing scopes at the entrepreneurship level would be required to discover opportunities to transform social demands into social values.
The behavioral perspective (Gartner, 1988;Thornton, 1999) of entrepreneurship emphasizes the greater benefit of promoting "entrepreneurship" (i.e., creation of new organizations) over defining "entrepreneurs" (i.e., founders of new organizations). Indeed, the PES programs all reflected the importance of partnerships not only in the form of spatial cooperation at a specific temporal point, but also in defining a vision for developing new organizations to improve long-term ecosystem management. Such a vision is particularly crucial for aquatic ecosystem management since it is the domain that connects both water resources management and watershed management, which in turn underpins the healthy and sustainable development of every human society at any location on our planet.
Two visions can be reflected by the PES partnership features to define the relationships between entrepreneurship and aquatic ecosystem management: • Vision 1: connective lifestyles for individual stakeholders (e.g., urban and rural citizens) residing in watersheds, with a transformation from benefiting from ecosystem services to providing conservation services; and • Vision 2: compatible technological innovation for organizational stakeholders (e.g., municipal governments and manufactures) acting on landscapes, with a transformation from supplying latent and disconnected organizing services to strengthening systematic and accountable organizing services.
Aside from partnerships and entrepreneurships for adaptive aquatic ecosystem management Aquatic Science and Technology ISSN 2168-9148 2013 on the watershed scale, the connectivity between individuals, the compatibility of technologies, and the necessary institutional changes from the individual level to the organizational level, reflect the following important and interrelated institutional aspects: • Organizing services infrastructure similar to but more broadly based than that of existing public service infrastructure; e.g., water, electricity, transportation and communication (OECD, 2010); • Social capital, i.e., networks, shared norms, and trust (Putnam, 1995); and • Interactive governance, i.e., interactions taken to solve societal problems and to create societal opportunities (Kooiman et al., 2005).

Discussions and Conclusion
The three key features of the PES partnerships reflected from the 13 advanced, small-scale PES programs collectively suggest the needs and prospects for developing an integrated water governance system to connect the three thus far detached water management dimensions -water resources management, watershed management and aquatic ecosystem management. One prospect of generalizing the PES partnership rationales resides on the fact that the PES organizing boundaries can take precedence over both legislative boundaries and hydrological tiers. Indeed, the analysis in this study has demonstrated that upstream and downstream participants in PES programs were not constrained to specific legislative or hydrological boundaries. Rather, they belonged to legislative units of same, different or mixed legislative tiers, ranging from the 3 rd to the 6 th tiers of government; they resided in watershed sections confined between different hydrological orders, ranging from the 1 st order (i.e., mainstream) to 7 th order tributaries within the watersheds. On the other hand, one significant challenge for such prospect would be a sound theoretical framework to integrate the governance aspects of institutional incentives, participation units and organizing scopes, and of more fundamental socioeconomic issues such as transaction costs and property rights. Without such a theoretical framework, the important institutional aspects of partnerships, entrepreneurships, organizing services infrastructure, social capital, and their interrelated roles in a governance system could not be effectively incorporated with current aquatic management systems. Similarly, nor could these aspects be effectively incorporated to reflect the necessary interactions between managing aquatic ecosystems and managing terrestrial ecosystems. An explorative analysis will be given in another publication (Lin & Thornton 2013). Subsequent topics for investigation arising from this line of reasoning could provide a wider horizon for promoting new management philosophies for both lifestyle adaptation and technological innovation. As such, we invite various professionals and kindred spirits to join in the glorious exploration of realizing a dream that has been long imagined, a vision which would be called by many as sustainable development of human societies in the adaptive, vivacious and invaluable Earth ecosystem. by the Field Science Education and Research Center (FSERC) in Kyoto University for the research project "Public Policy and Dam Construction in Toyo River, Aichi Prefecture, Japan", and from discussions (May 2010 -January 2011) within the International Lake Environment Committee (ILEC) working group preparing the "Methodology for the GEF Transboundary Waters Assessment Programme: Methodology for the Assessment of Transboundary Lake Basins". The opinions presented herein are those of the authors and do not necessarily reflect the opinions of FSERC or ILEC.   Water Policy, 9(1), 87-104. http://dx.doi.org/10.2166/wp.2006.001 Gartner, W. B. (1988. "Who is an entrepreneur?" is the wrong question. Entrepreneurship Theory and Practice, 13(4), 47-68. Greiber, T. (2009). Payments for ecosystem services: legal and institutional frameworks. Gland, Switzerland: World Conservation Union (IUCN). ISSN 2168-9148 2013, Vol. 1, No. 1 IUCN, International Water Management Institute, Ramsar Convention Bureau and World Resources Institute. (2003. Water resources eAtlas. [Online] Available: http://www.wri.org/publication/watersheds-of-the-world. (Nov 15, 2012). on geohydrogical changes in the Yamuna-satluj region. Envis Bull.: Himalayan Ecology and Development, 10(2), 18-31. Smith, M., de Groot, D., Perrot-Maite, D., & Bergkamp, G. (2006). Pay -establishing payments for watershed services. Gland, Switzerland: IUCN. http://dx.doi.org/10.2305/IUCN. CH.2006.WANI.4.en Suyanto, S., Khususiyah, N., & Leimona, B. (2007. Poverty and environmental services: case study in Way Besai watershed, Lampung Province, Indonesia. Ecology and Society, 12(2), 13-26. Thaittai, D., Kjerfve, B., & Heyman, W. D. (2003). Hydrometeorology and variability of water discharge and sediment load in the inner Gulf of Honduras, Western Caribbean.