From Rate-Payers to Corporations: A New Approach to Water Markets and Payment for Ecosystem Services
For years, Payment for Ecosystem Services (PES) water market models have been built around one idea: incentivize conservation by charging those who benefit directly, often through utility fees. But what happens when this traditional model doesn’t fit the local context, especially in rural areas where the political and economic landscapes are different? That’s the question the Keeping Forests partnership faced in South Carolina’s Saluda River Basin, and it led us to an entirely new way of thinking about water markets and PES—one that shifts the burden from rate-payers to corporate partnerships.
The Traditional PES Model: What Works and What Doesn’t
The traditional PES model has seen success in certain regions, particularly in urban settings with large populations. Here, utility companies tack on small fees to water bills to fund conservation efforts like watershed protection. It’s a system that makes sense in places where residents see the immediate benefits, and where utilities have the capacity to manage these funds effectively.
However, in the Saluda River Basin, where the population is smaller, utilities are stretched thin, and political resistance to rate increases is high, this model hit roadblocks. Through our pilot project, we quickly realized that asking utilities to fund conservation through rate-payer programs wasn’t viable. The administrative costs alone would have outweighed the benefits, and public pushback was a major hurdle.
This isn’t to say the traditional PES model is flawed—it simply doesn’t fit everywhere. In regions like the Saluda River Basin, we needed a different solution.
What we Learned From the Saluda River Pilot
Our project began with a focus on Community-Based Social Marketing (CBSM), a strategy that prioritizes understanding local communities and their unique behaviors, values, and needs. Through workshops, expert consultations, and community engagement, we identified several key challenges:
- Limited market access for landowners: Many landowners in the area weren’t fully aware of how their forest management practices impacted water quality or how they could benefit from market incentives.
- Utilities unable to carry the load: Small, rural utilities didn’t have the capacity to manage a PES program, especially one reliant on increasing water fees.
- Political resistance: Local communities were resistant to any model that involved increased costs on water bills, making traditional PES unfeasible.
These insights prompted a crucial pivot in our approach. Instead of focusing on utilities and rate-payers, we shifted our attention to corporate partnerships, recognizing that companies with sustainability goals were better equipped to invest in conservation.
Innovating the PES Model: Shifting to Corporate Engagement
What makes our approach innovative is how we’ve reframed PES from a model reliant on public funding to one driven by corporate investment. Many corporations today are under pressure to meet Environmental, Social, and Governance (ESG) goals, including reducing their environmental impact. By engaging with these companies, we’ve opened up a new pathway for conservation funding—one that benefits both landowners and corporations.
Here’s how it works:
- Corporations meet their ESG goals: Instead of collecting fees from water users, we connect corporations directly with landowners. These companies invest in water conservation, carbon sequestration, and sustainable forest management practices to meet their ESG targets.
- Landowners access new markets: Corporate investments allow landowners to manage their forests sustainably while gaining market access to certification programs like FSC (Forest Stewardship Council) and SFI (Sustainable Forestry Initiative). This enhances the value of their land and ensures long-term stewardship.
- Measurable outcomes: Corporations benefit from measurable conservation outcomes—such as water quality improvements and carbon offsets—while landowners receive financial support and technical assistance to meet certification standards.
Why This Model Is a Game-Changer
The shift from rate-payers to corporations represents a fundamental change in how PES models can work in regions like the Saluda River Basin. Here are three key reasons why this approach is groundbreaking:
- Scalability: By engaging corporations, we can scale this model to other watersheds across the Southeastern U.S., and potentially beyond. Corporate investments offer far more financial resources than small utilities, making this approach more sustainable and scalable.
- Flexibility: Every corporation has unique sustainability goals, and this model allows them to invest in a way that aligns with their priorities. Whether it’s water conservation, carbon capture, or biodiversity protection, companies can tailor their investments to meet multiple objectives.
- Community-Centric: CBSM ensures that landowners and local communities are at the heart of this solution. By understanding the specific needs and behaviors of the community, we can design programs that are not only effective but also culturally and economically appropriate.
The Future of PES and Water Markets
Looking ahead, this new PES model offers a blueprint for how we can address conservation challenges in regions where traditional models fall short. Our experience in the Saluda River Basin taught us that to succeed, PES models must be flexible, scalable, and responsive to local contexts.
We’re excited about the potential to replicate this approach in other watersheds, helping to create sustainable forest management practices that protect water quality and support rural economies. By leveraging corporate partnerships and innovative strategies like CBSM, we’re creating a new path forward for water conservation and ecosystem services.
Creating Water Markets is a Learning Journey that Continues
The journey from rate-payers to corporations in the Saluda River Basin demonstrates the power of innovation in conservation. By adapting PES models to meet the realities of rural areas, we’ve found a way to align corporate sustainability goals with local conservation needs. This approach not only provides a more sustainable funding source for water conservation but also opens up new opportunities for landowners to manage their forests in a way that benefits both the environment and the economy.
We believe this model has the potential to revolutionize water markets and PES programs across the South—and we’re just getting started.
