Considering farmer land use decisions in efforts to ‘scale up’ Payments for Watershed Services

Abstract Significant effort is being devoted to the expansion of payments for watershed services (PWS) programs at national, regional, and local scales. This expansion faces logistical challenges, in particular identifying appropriate incentives and enrollment processes to provide additional ecosystem services under budget constraints. In Brazil, PWS programs have mostly occurred at the local level, using formulaic contracts to ensure landowners are compensated for provision of specific types and quantities of ecosystem services. However, it is unclear how these financial incentives will function as programs expand to new areas, as pilot programs report high recruitment costs. Using as an example the Cantareira System, an important drinking water supply for the Sao Paulo metropolitan area, we review PWS incentives in the context of factors that affect farmer land use decisions. We base our research on a review of policies affecting PWS in Brazil, existing PWS in the Cantareira region, and drivers affecting land use and technology adoption by cattle ranchers, drawing from the literature and interviews with farmers and agronomists in the study region. While financial incentives (payments) account for both the value of ecosystem services and opportunity costs of shifting pasture production to forest, several economic, social, political, and biophysical factors will likely affect landowners’ decisions to enroll in PWS. This suggests that, while PWS programs may lead to the provision of additional ecosystem services, the complexity of contracts and diversity of local conditions create challenges to broad deployment in the absence of significant outreach efforts.