The Impacts of Payments for Watershed Services in Ecuador: Emerging lessons from Pimampiro and Cuenca

Payments for environmental services (PES) is a topic of increasing interest in Ecuador, particularly as a way to leverage funding for environmental protection. Payments systems are emerging, but as Ecuador's experience of PES is only recent, the implications for national and local welfare are not yet clear. Thus, the objective of this study was to provide guidance in order to ensure that policies support payments systems that are beneficial to the poor, as well as to the environment. This report focuses on two case studies - Pimampiro and Cuenca. The report recommends inter alia that further understanding of the hydrological functions provided by particular ecosystems is needed, further information is required on the value of watershed services, a tax managed by the municipalities should be levied on water for agricultural use based on consumption, and that household surveys may not be the most effective way to gather information to evaluate social impacts of a compensation mechanism.