Investing in nature-based solutions: Cost profiles of collective-action watershed investment programs

Abstract: Worldwide, an increasing number of watershed management programs invest in nature-based solutions (NbS) to water security challenges. Yet, NbS for water security currently are deployed at well below their hypothesized cost-effective global potential, with uncertainty about costs identified as one key constraint on increased investment. Data on administrative and transaction costs of watershed investment programs are especially limited, but the few available studies indicate that these costs can be substantial. We conducted a cost survey of municipal-scale collective-action watershed investment programs, which pool resources from water users and other stakeholders to finance NbS. We obtained data from 18 programs in Latin America and the Caribbean (16), Asia (1) and Africa (1) with intervention areas from 133 ha to over 100,000 ha. During the first ten years, programs with ≥ 10 years of data had average annual costs of 0.25–3.02 million (median: 0.75 million) purchasing power-adjusted 2018 international dollars, and average annual per-hectare costs varied more than 50-fold among these programs. Administrative and transaction costs on average accounted for 46 % (range: 10–84 %) of total cumulative costs across programs during the first ten years. This share sharply declined over the initial five years but stabilized at around 40 percent of annual costs. The wide range in per-hectare costs, and the size and range of administrative and transaction cost shares reflect diverse local contexts, intervention portfolios, and program design and implementation characteristics. While large, the observed share of administrative and transaction costs is not surprising given the social, political, institutional, and technical complexity of implementing collective-action programs that involve land use changes and is similar to that of some large public environmental programs. Our findings are consistent with the few available estimates for comparable programs, underscoring the need for watershed investment programs to budget for substantial administrative and transaction cost throughout their life cycle.

Kang, S., Kroeger, T., Shemie, D. et al. Investing in nature-based solutions: Cost profiles of collective-action watershed investment programs. Ecosystem Services (2023).

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