March 16, 2017 10:00 am JST

Boccaletti and Bedford: Conservation funds can save Asia's water on the cheap

Self-financing funds are a practical solution to a pressing problem

For China and India, it is air pollution that captures the headlines, but water pollution is an equally pressing issue, as it is for other industrializing countries across Asia.

As these nations address their water quality issues, it will be important for their strategies to include conservation and land management activities that improve the health of source water catchments. This kind of source water protection can be implemented through financing vehicles such as water funds that require less direct government spending and can create sustainable business opportunities.

While stronger environmental regulations and improved conventional infrastructure are also needed to address water pollution, better land stewardship can play an important role in reducing pollution resulting from water flowing across landscapes that have been degraded by human development and agricultural practices.

Interventions through nature, such as protecting existing forests, planting trees and shrubs on pastureland, and using cover crops on agricultural land, can minimize soil erosion and increase water infiltration to provide more reliable water flows and prevent fertilizer runoff into water sources. Reforestation and avoided deforestation have the added benefits of protecting habitats for endangered species and capturing carbon dioxide.

With China looking to reduce its greenhouse gas emissions and take a greater world leadership role in addressing climate change, nature-based source water protection strategies can help Beijing make progress on several priorities at once.

AFFORDABLE INVESTMENT These strategies can be attractive from a financial standpoint. A recent study by The Nature Conservancy and other groups found that a sixth of the 4,000 cities studied could see a positive return on investment from reduced water treatment costs alone.

Others could see an overall positive return on investment when taking into account climate mitigation and other benefits. For half the cities included in the study, source water protection strategies could be implemented for as little as $2 per person annually.

Around the world, funding for conservation ecosystem services in water catchments has come almost entirely from government subsidies. China spends more than any other government on these services. But water funds offer an alternative and perhaps more sustainable financing strategy, allowing downstream water users to compensate upstream land stewards for activities that deliver water benefits to the payers.

Public and private users, including businesses, utilities and local governments, invest collectively in conservation of the water catchments, with comparable costs to what would otherwise be spent on water treatment downstream. China's Longwu Water Fund, established in 2015 to reduce nutrient pollution in a Zhejiang Province reservoir, offers one example of how this process can work. The Nature Conservancy acts as a science adviser to the fund. A farmers' representative and a food company also provide guidance.

The fund contracts with farmers via a property rights trust to transition to organic bamboo farming, which reduces fertilizer runoff into water sources and can potentially bring premium returns for the growers. Through the trust, an operating company also implements nature education, ecotourism and other environmental projects. After an initial investment of $50,000, the profits from these business activities help support the operation of the fund.

The Longwu Water Fund is comparatively small, but shows how this model might succeed in China. In the wake of a recent government audit that found that 17.6 billion yuan ($2.54 billion) earmarked for water pollution prevention work in 2016 was not effectively used, the Chinese government has a strong incentive to consider public-private models that can be potentially self-funding and foster business opportunities.

Furthermore, establishing more water funds for source water protection could allow China to further position itself as an environmental leader. With 60% of Asian source water catchments at high risk of erosion as well as sediment and nutrient pollution, water funds offer the chance to address water quality issues in a way that also encourages rural development and attends to other environmental and social goals.

Giulio Boccaletti is chief strategy officer and global managing director for water at The Nature Conservancy. Charles Bedford is the organization's Asia-Pacific managing director.

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