Lessons from Applying Market-Based Incentives in Watershed Management

Watershed management is a complex activity with constraints on funding and human
resources in many parts of the world, and there is a need for global effort to identify
strategies that can work. To complement regulatory approaches, attention is now also being
given to market-based incentives because of their potential cost-effectiveness. This study
seeks to provide impetus to the use of the most successful market-based incentives to
promote sustainable watershed practices through strengthening and increasing direct participation
by local communities and the private sector. To identify proven market-based
incentives for use to catalyze local community and private sector participation, a review of
a sample of 26 purposively selected case studies from different contexts in Africa, Asia,
Europe and the Americas is conducted. In reviewing those case studies, emphasis is placed
on understanding the threats to specific watersheds, the market-based incentives used, the
countrywide policy environment, the outcomes from the interventions, the factors for
success and failure, and the pertinent policy issues in support of upscaling and the uptake of
appropriate market-based approaches. The study identifies seven key policies that Governments
should consider to upscale and facilitate the uptake of market-based incentives to
promote participation by local communities and the private sector in watershed management.