Forests play an important role in producing and regulating freshwater flows, and forested watersheds are essential for sustaining freshwater supply. The SDGs related to water (SDG 6) and land (SDG 15) explicitly acknowledge the linkages between forests and water. Forest management and planning will increasingly need to allow for the consideration of water-related issues, as well as to strategically implement these issues to optimize watershed services, such as water purification, surface flow regulation and erosion control. Such innovations require an enabling legislative framework, as well as decision makers who understand the functioning of payment for ecosystem services (PES) schemes in the context of forests and water.
By analysing enabling frameworks at the international, regional and national level, this study shows that countries can build on cross-cutting initiatives and replicate local best practices to counter the sporadic and weak integration of PES legislation at the national level. The amendment and/or integration of existing legislation on ecosystems services and natural resources might be an alternative solution to the development of brand new PES-specific legislation. For instance, the protection and enhancement of freshwater resources can be directly linked to forest management objectives. Besides promoting an understanding of the wide range of values related to watershed services of forests, this study assesses the governance, design and funding sources of various payments for watershed services (PWS) schemes.
Analysis shows that PWS schemes based on a partnership model are more successful in accessing multiple sources of funding, increasing organizational resilience to changing political support, and ensuring that forest owners and managers engage in these schemes over the long term. Recommendations to make PWS more cost-effective include focusing on a single ecosystem, such as forests, delivering multiple services, such as watershed services, that are sold together or combined in a single credit. Analysis of diverse case studies show that PWS schemes can provide important co-benefits, such as carbon mitigation, biodiversity conservation and social benefits.