http://www.fao.org/in-action/incentives-for-ecosystem-services/en/ Incentives for Ecosystem Services.

1. Incentives for Ecosystem Services
Upper Tana Watershed &Nairobi Water Fund
Fred Kihara, TNC

2. • Two of Kenya’s 5 major water towers
• A water deficit country
• 95% of Nairobi water supply and growing
• Source of Kenya’s 50% electricity
• One million farm families
The Ecosystem

3. Situation in Upper Tana Watershed
Poor road construction & maintenance, leaves
soils to erode , filling dams and rivers- affects
water & power utilities
Sediment filled water intake
Inadequate soil conservation &
riparian protection on steep farmlandsPoor water drainage
Land and water conservation efforts bear fruits

4. Threats to the Ecosystem
1. Deforestation:
• Expanding cultivation areas and wood extraction is unchecked in both
Aberdares and Mt Kenya protected areas
2. Increased erosion:
• Unsustainable practices causing loss of soils, increasing sedimentation in
rivers, high turbid waters for city & residents
3. Demand for agricultural land:
• Increases intensive agricultural practices and small-holder irrigation,
riparian encroachment and unsustainable river abstractions draining rivers
4. Reservoir sedimentation:
• Reduces the storage capacity of the reservoir for city and municipality
water supply, hydropower dams
5. High water demand:
• City’s 4 million people, 5.3 million watershed inhabitants, large-scale
industrial users

5. Best Practices
1. Re-afforestation, restoration of
forest, riparian areas with tree,
Napier grass
2. Sustainable land management,
farming practices: e.g. terracing,
agroforestry, improved fodder
3. Improved water management eg.
Efficient irrigation, RWH, city and
industrial-user efficiency
4. Coordination of actors and
investment from multiple sources
5. Monitoring and evaluation
Adoption Barriers
1. Small holder farmers lack:
• Capital to invest in SLM and
reforestation
• Quality information on how, scale,
management
• Knowledge on inter-connectivity of
ecosystem services
2. Absence of governance mechanism
to enable cross-sector collaboration
3. Lack of transparent, legal, robust
mechanism for attracting & investing
innovative financing

6. Incentives Required Categories of incentives
• Capital
• Investment in inputs for afforestation, agricultural
production, soil conservation measures, irrigation
• Technical Assistance
• Farmer capacity in improved ag practices, erosion
management, water use
• Strengthening inter-institutional coordination and
extension services to better focus support at
watershed scale
• Increased livelihood opportunities
• Value addition, marketing modalities
Sources?
Establishment of a Water Fund

7. The Water Fund Model
Improved water quality
& quantity
Improved food security
Endowment
Fund

8. Incentives Sources Private Sector Public Sector
Capital for investment
Technical Assistance
Strengthening inter-institutional
coordination
Increased livelihood
opportunities
Facilitating Agencies

9. Approach
Downstream water users support upstream watershed keepers.

10. Incentives for Ecosystem Services in Agriculture (IES)
10
Upper Tana Watershed, KENYA
River riparian, native species, bamboo, erosion
prevention, terracing
Rainwater harvesting,
Improved irrigation
technology
Improved access to
market opportunities,
higher value crops,
green loans, rewards
Re-afforestation,
Restoration of forest,
Agroforestry
Coca-Cola, IFAD-GEF,
E.A. Breweries, M-Pesa IFAD-GEF, E.A.
Breweries, county
governments, TNC
Nairobi Water Company
Coca-Cola, Pentair , KenGen
IFAD-GEF,
Coca-Cola, IFAD-GEF
Frigoken Ltd, Tarda,

11. Benefits to Contributors/ Payers
• Investments in specific priority areas- 3
major sub-watersheds
• Quick wins
• Demonstration of success
• Clear return on investment and
timelines
• Role in governance, decisions making
• Common good- beneficial activities
• Due credit accorded to payers
Steep farm lands
Land conversion: tea to annual crops

12. Case of Frigoken Ltd in Upper Tana
• Invested in a partnership project worth USD
800,000
• Company contributes 88% of funds
• Company has 70,000 small holder farmers
contracted main challenge is water during dry
season and flooding during wet seasons
• Aims to support 15,000 small holder farmers get
own storage facility
• Year round supply of horticultural produce
• Project promotes rainwater harvesting and
stabilizes production
Steep farm lands
Land conversion: tea to annual crops

13. The Nairobi Water Fund
& the Kenyan Law
• What the existing laws provide for
• What existing laws don’t provide
for
• Desired legal inclusivity
• Consequences of the law

14. NAIROBI
WATER
FUND
The Kenya tax law
• Almost doesn’t allow tax holidays for
conservation giving
• Lengthy procedure for exemption
• Now requires 5 year cert’ renewal
• Taxes income from investments
Laws governing government expenditure
• Annual budget
• Expenditure proof while accounting
• Capitalization of endowment not regarded as
expended
Laws regarding benefit sharing
• New laws meant to encourage investment at
source
P-P-P Policy and Law of 2013
• Encourages private sector to team up with
government for investments

15. Policy interaction Issues
• Capitalisation of funds
• Tax incentives for givers
• Public contribution eg tax and fees
• Good laws, difficult application
• Development funds- government loans,
low inter-institutional interest
Good Examples
• Governance-participation in decisions
• Water tariff based contribution, a first
• Private Sector pro-activeness
• Conservation endowment for future
• Long term planning
• Public sector contribution to trust-
national priority for GEF 6 funding

16. 16
United States
4 funds
Brazil
5 funds
Mexico
2 funds
Peru
1 fund
Ecuador
4 funds
Colombia
3 funds
Dominican Republic
2 funds
Operating1
In Design
• 170+ TNC staff working on Water
Funds provide lessons, backstopping
• 35 Water Funds established over 15
years
• 290,000 ha of land directly impacted
through Water Funds
• More than 120 partners engaged in
Water Funds across 8 countries
• 30+ additional Water Funds in
design
• African Cities –Growing demand-
Cape town, Dar, Lilongwe, Kigali,
Lusaka
Water Funds in operation
Kenya
1 fund
Proven Science: Water Funds of the World

17. "I have seen rivers that were brown
with silt become clean-flowing again.
The job is hardly over, but it no longer
seems impossible.”
– Wangari Maathai

18. Thank you!
For more information, contact Fred Kihara: fkihara@tnc.org
© EABL

19. The Upper Tana- Nairobi Water Fund Green Army
Asante sana!!