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Payments for watershed services in the United States

Cost-effective strategies to align landowner incentives for abundant clean water



October 1, 2011

Short Summary

This brief summarizes a study that EcoAgriculture Partners conducted of PWS in the United States, with a particular focus on new and innovative project models involving non-federal ecosystem service buyers.


What is Payment for Watershed Services?

Payment for watershed services (PWS) are voluntary programs that offer cash payments or other benefits to landowners in exchange for providing “watershed services” that help protect water quantity or quality.

For instance, landowners may manage water quantity by increasing aquifer recharge, storing flood waters, or improving irrigation efficiency on their land. Or, they may manage water quality by restoring forests, protecting wetlands, or implementing pollution reduction measures. Watershed services are purchased by service beneficiaries such as water utilities, government agencies, or industrial water users.

Some forms of publicly-funded PWS—such as Conservation Reserve Program payments under the U.S. Farm Bill—are relatively well-known. However, new forms of PWS involving local governments, non-governmental organizations, private companies, and others are pointing the way toward cost-effective watershed protection approaches that may benefit landowners, water users, and ecosystems alike.

Lessons Learned from Recent Innovations in PWS

With support from the U.S. Endowment for Forestry and Communities and the USDA Office of Environmental Markets,  The study identified 32 PWS projects from around the country, including public drinking water protection efforts, watershed-friendly certification labels, and “landscape auctions” in which private entities bid on projects proposed by landowners to provide watershed services. These projects already have benefitted over 1,300 landowners, with many projects still in the planning phase or set to scale up.

The Potential of PWS: Opportunities and Challenges

Thus far, the total scale of PWS from local government, private, and philanthropic buyers in the United States remains small relative to established conservation mechanisms such as Farm Bill incentive programs, conservation land acquisition, and regulation.

The greatest challenge to increasing the use of PWS as a win-win solution for private landowners and watershed health is to identify and motivate buyers to participate. At present, many heavily rely on watershed services and poor watershed stewardship jeopardizes the benefits.

Adding the typically relatively small costs of watershed protection into water rates paid by individual, industrial, and irrigation water users could support PWS programs that equitably compensate upstream service providers while ensuring water users of continued water availability and quality.

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