The report presents field experiences and lessons in developing Incentive-based Mechanisms (IBMs) for watershed protection services and improved livelihoods at micro and macro-scales, derived from an action-learning project in India at three locations in the states of Himachal Pradesh (HP) and Madhya Pradesh (MP).

An inter-village transaction was facilitated at one site (the Kuhan micro-catchment in HP), while at the second site (Suan micro-catchment in HP) a transaction failed to materialize despite initial interest. At the third site in MP, there was interest in undertaking a transaction between the city of Bhopal and the catchment of its lake, the Bhoj Wetlands. 

The action research has yielded insights into the role of hydrological information, types of incentive mechanisms, the importance of institutions and the implementation of IBMs.

The report introduces the concept of IBMs, provides an outline of the project methodology and sites, the process, progress and problems in the three sites, and the initial findings. In the concluding section, key lessons are discussed, followed by some specific recommendations. The findings suggest the scope for developing incentive mechanisms and supporting legislation for payment for watershed services if required in the future. More specifically it recommends that -

• Incentive-based mechanisms should complement mainstream approaches of regulation and public investment
• Invest in watershed hydrology expertise, in linking land uses to hydrological impacts and in exposure and skills in developing incentive based mechanisms to promote an effective multi-disciplinary approach

Download the report from the International Institute of Environment and Development website here.