The study is based on a scoping study on ‘Developing Markets for Watershed Protection Services and Improved Livelihoods in India,’ which Winrock International India (WII), New Delhi, undertook as part of a larger international study being carried out by the International Institute for Environment and Development (IIED), London. 

The two states of Himachal Pradesh and Madhya Pradesh were the focus of this study. The study did not aim in any way to promote the development of markets for watershed protection services. It intended to explore primarily the potential and limits of a market-based approach, particularly in the context of other existing approaches such as regulation and collective action, and to identify areas where adoption of such an approach can benefit poor people.

The key findings of the study at various levels are –

Micro level -

• De-linking of land and water rights has led to development of ‘embedded markets’ in some cases. But it is not very common. There is tremendous potential in this for addressing the issue of equity.

Meso level –

• Traditional examples of inter-village cooperation exist, which closely resemble market arrangements. Much can be learned from these for developing more sophisticated mechanisms.

Macro level -

• There is significant potential to develop mutually beneficial market-based mechanisms for watershed protection services between poor upstream communities and downstream beneficiaries (such as hydropower and municipal water supply agencies) in the medium to long term. Markets for environmental services are not necessarily anti-poor. Market mechanisms have the potential to promote equity and improved livelihoods;
• Regulatory, participatory and market-based approaches can be complementary and combinations may be better than one approach alone;
• Development of market mechanisms require greater scientific validation of upstream-downstream linkages and appropriate and transparent institutional mechanisms;
• Environmental services traditionally under state control are considered as ‘public goods’. However, market-based approaches can often provide more cost-effective and efficient solutions to meet environmental goals by creating incentives for conservation.

Winrock International India (WII) is a non-profit organization working in the areas of natural resources management, clean energy and climate change.

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