The Emergence and Persistence of Payments for Watershed Services Programs in Mexico

Abstract

Payments for watershed services programs (PWS) have become a prominent tool to protect ecosystems and hydrological services but little is known about where these innovative financing tools and governance systems emerge and persist. In 2008, the Mexican government started a program where they match funding from local partners to establish user-financed PWS programs, leading to the creation of 145 programs between 2008 and 2019. We study the factors that led to the emergence and persistence of these local PWS programs across Mexico. We assemble a unique database on these programs, as well as biophysical, economic and socio-cultural, and institutional variables, at the municipality level. We use logistic regression to analyze the variables that led to the emergence and persistence of PWS. We find that PWS programs are more likely to emerge in municipalities with lower opportunity costs; that are wealthier and more populated; that have complementary conservation programs; and that have more collective land tenure and protected areas. PWS programs are more likely to persist in municipalities with poorer water quality and more floods; that have more protected areas; and that have a non-governmental organization or water utility involved as the local counterpart. These results suggest that the emergence and persistence of local, user-financed PWS could be facilitated through better information on the condition of watershed services to signal need for hydrological protection; capacity building and institutional strengthening efforts that provide the social capital needed for collective action; and involvement of decentralized non-state actors that are politically neutral and can provide more sustainable financing.