Safeguarding Lake Ol Bolossat, Nyandarwa County by exploring the possibility of Payment for Ecosystem Services (PES) Scheme


The state of the world’s waters remains fragile and the need for an integrated and sustainable approach to water resource management is as pressing as ever. Available supplies are under great duress as a result of high population growth, unsustainable consumption patterns, poor management practices, pollution, and inadequate investment in infrastructure and low efficiency in water-use. The water-supply-demand gap is likely to grow wider still, threatening economic and social development and environmental sustainability. Integrated water resource management will be of crucial importance in overcoming water scarcity. The Millennium Development Goals have helped to highlight the importance of access to safe drinking water supplies and adequate sanitation, which undeniably separates people living healthy and productive lives from those living in poverty and who are most vulnerable to various life-threatening diseases. Making good on the global water and sanitation agenda is crucial to eradicating poverty and achieving the other development goals (UNEP, 2007).

There are various sources of this water which include wetlands which considered biologically diverse areas. According to the Millennium Ecosystem Assessment Report (2005) there are twenty-four specific ecosystem services. These are food production (in the form of crops, livestock, capture fisheries, aquaculture, and wild foods), fibre (in the form of timber, cotton, hemp, and silk), genetic resources (bio-chemicals, natural medicines, and pharmaceuticals), fresh water, air quality regulation, climate regulation, water regulation, erosion regulation, water purification and waste treatment, disease regulation, pest regulation, pollination, natural hazard regulation, and cultural services (including spiritual, religious, and aesthetic values, recreation and ecotourism). Notably, however, there are a “big three” among these 24 services which are currently receiving the most money and interest worldwide. These are climate change mitigation, watershed services and biodiversity conservation, and demand for these services in particular is predicted to continue to grow as time goes on.

Researchers argue that of the five mechanisms available for ensuring the provision of ecosystem services – prescription, penalties, persuasion, property rights and payments – only payments are likely to be effective at the global level. However, while a number of international Payments for Ecosystem Services (IPES) schemes exist, their impact on ecosystem services remains negligible (European Commission DG Env., 2012). Payments for Ecosystem Services (PES), also known as Payments for Environmental Services (or Benefits) broadly defined, is the practice of offering incentives to farmers or landowners in exchange for managing their land to provide some sort of ecological service. These programs promote the conservation of natural resources in the marketplace. The main four types of the environmental services that have been sold were Carbon Capture/Sequestration Services, Biodiversity Protection, Protection of Landscape Beauty, and Watershed Protection (Wunder, 2007).

The growth of watershed based PES has been mainly in Latin America, although China has a major Programme. There are some ‘cap and trade’ water quality trading systems in the US, Ecuador and Australia, but these are demanding in terms of administrative and enforcement capacity. The main examples of Payment for Biodiversity, landscape beauty and ‘bundled’ ecosystem services are in Brazil and the USA (European Commission DG Env, 2012).

Regionally WWF and USAID have been working to establish a functioning Equitable Payment for Watershed services scheme in the Mara River Basin which is trans-boundary shared by Kenya and Tanzania ( J. Wakibara, A. Mwakaje, C. Mung’ong’o & D. Ong’are, 2011). WWF has been broadly involved in PES in Kenya and they have seen through the establishment of one scheme between the Lake Naivasha Water Resource Users Association (WRUA) and the Kinangop WRUA.

Lake Ol Bolossat has been recognized as an important wetland. The lake is an important bird area it being a stopover for migratory birds from as far as Australia, Europe and Egypt. It also serves as a catchment for Ewaso Nyiro River and supports important functions and lifestyles of communities living in the arid and semi-arid parts of North Eastern, Eastern and Rift Valley provinces. The marshes and swamps that form 85% of the lake ecosystem filter and purify the water. The streams that feed the lake provide water for domestic use and irrigation. However, the wetland was noted to have been diminishing due to human encroachment and his subsequent activities.

The Lake has been noted to have significantly shrunk from its initial level. Farmlands were noted to have increased owing to the rapid rise in commercial and subsistence agriculture favored by the humid tropical climatic conditions of the highland. Upstream deforestation lost some of forest area and floodplains reduced with a majority of the area being gradually turned to farmland. Built-up area generally increased as a result of settlement of some Post election violence victims in the riparian zones(Olang Luke, March 21, 2013).Several initiatives have been undertaken in the past to address these issues. However these initiatives have been largely ineffective due to several factors, which include fragmented and sectoral approach in initiation and implementation, limited scope and objective, weak interagency linkages, inadequate stakeholder involvement and lack of a financial structure that funds conservation. The overall weakness has been lack of a framework that integrates and guides these initiatives to achieve the overall environmental conservation and development targets.

PES practices offer incentives to farmers or landowners in exchange for managing their land to provide some sort of ecological service and in this way promote the conservation of natural resources in the marketplace. PES will see the conservation of the catchment prioritized while and also improve the livelihoods of the local community.

There are various sources of water which include wetlands which attract a lot of attention because they are important for conservation education (Fanshawe and Bennun, 1991) and also serve as critical areas of research, play an important role in hydrologic regime, acting as a reservoir of biodiversity, biomass storage, maintenance of the nutrient cycle/food web and providing a crucial flyway for migratory water birds (Goodwin and Niering, 1974), essential to the maintenance of various fish and invertebrate stocks while freshwater wetlands are essential spawning grounds for many fish, amphibian and invertebrate species. Wetlands also support a range of large fauna; provide a habitat for beneficial insects such as pollinators. Pollination is an essential aspect of the lifecycle of flowering plants (Feinsinger, 1987) which are, in turn, an important source of food for human beings and herbivores. Owing to their aesthetic appeal wetlands are associated with a range of recreational activities such as wildlife safaris, bird spotting, sailing, swimming and picnics (Emerton, 1998).Wetland vegetation foliage and dense roots also help to brake the speed of floodwaters thereby limiting the detrimental effects of floods and controlling soil erosion (Uluocha and Okeke, 2004). Wetland vegetation purifies water by up taking nitrates, phosphates and toxins from the water flowing through, thereby lowering the nutrient load (Verhoeven and others, 2006).

They are therefore considered biologically diverse areas. According to Agenda 21 fragile ecosystems are important ecosystems, with unique features and resources and they include deserts, semi-arid lands, mountains, wetlands, small islands and certain coastal areas.

Ecosystem Services

Ecosystem services have no standardized definition, but might broadly be called “the benefits of nature to households, communities, and economies or, more simply, “the good things nature does.” Twenty-four specific ecosystem services are identified and assessed by the Millennium Ecosystem Assessment, a 2005 UN-sponsored report designed to assess the state of the world’s ecosystems. The report defines the broad categories of ecosystem services as food production (in the form of crops, livestock, capture fisheries, aquaculture, and wild foods), fibre (in the form of timber, cotton, hemp, and silk), genetic resources (bio-chemicals, natural medicines, and pharmaceuticals), fresh water, air quality regulation, climate regulation, water regulation, erosion regulation, water purification and waste treatment, disease regulation, pest regulation, pollination, natural hazard regulation, and cultural services (including spiritual, religious, and aesthetic values, recreation and ecotourism). Notably, however, there is a “big three” among these 24 services which are currently receiving the most money and interest worldwide. These are climate change mitigation, watershed services and biodiversity conservation, and demand for these services in particular is predicted to continue to grow as time goes on.

PES schemes and mechanisms

PES Schemes

What makes PES-PES is that in any payment arrangement those who pay are aware that they are paying for an ecosystem service that is valuable to them or to their constituencies -and those who receive the payments engage in meaningful and measurable activities to secure the sustainable supply of the ecosystem services in question. Three types of possible PES schemes – private PES schemes, cap and trade schemes and public PES schemes – need to be distinguished (Smith, de Groot, Bergkamp 2006):

Private PES

Private PES are self-organized schemes between private entities which involve;

Direct payments by service beneficiaries to service providers for the protection or restoration of watershed services;

Cost-sharing among involved private parties;

Purchase of land and lease back to former owner with the objective to ensure watershed services originating from the land in question; or

Purchase of development rights to land which are separated from property rights.

Cap and trade schemes

These are tasked to;

Establish a cap (an aggregate maximum amount) for water pollution or abstractions.

Allocate pollution or abstraction permits which divide the allowable overall total among water users.

Allow trading of permits between those who do not need permits and those who need more than their allocation.

Public PES

Public PES are government driven schemes which involve public agencies and include user fees, land purchase and granting of rights to use land resources as well as fiscal mechanisms based on taxes and subsidies.

PES Mechanisms

Payments for watershed protection services

Water use has increased at twice the population rate for the last hundred years, while erosion has increased the scarcity of clean water. Watershed PES can be for water quality, flood prevention and (dry season) water quantity, although propositions about the role of forests in these services often lack a proven scientific basis. There are a range of public and private mechanisms for watershed PES involving a diversity of institutional arrangements. Public or state-mediated schemes are currently much more important (over $2 billion globally) than voluntary market-based schemes (less than $5 million). The growth of watershed based PES has been mainly in Latin America, although China has a major Programme. There are some ‘cap and trade’ water quality trading systems in the US, Ecuador and Australia, but these are demanding in terms of administrative and enforcement capacity.

Table 1: Below summarizes some strengths and weaknesses of watershed PES.



Beneficiaries or users are easy to identify and are often willing to pay for forestry interventions – even though there may be weak scientific evidence

Hydrological impacts of forest interventions are largely site- specific and additionally are hard to prove. If buyers are unsure they are getting what they are paying for, sustainability is doubtful.

Investments in watershed management are cheaper than treatment or new water supplies, e.g., in the US, it is estimated that each $ spent on watershed protection saves $7-200 in new filtration and water treatment facilities.

In state managed programs, additionally or cost-effectiveness is problematic, e.g., in Mexico’s Programme, the forests most at risk have received only 10% of payments; tendering schemes are needed to reduce over-payments

There is high win-win potential in developing countries since upper watershed farmers are usually poor, e.g., the Rewards for Upland Providers of Environmental Services (RUPES) Programme in Asia has built up collective action institutions and consolidated tenure.

Common equity constraints are insecure tenure, weak local institutions and inequitable public enforcement capacity; strong donor/NGO support has therefore been key to positive or neutral equity impacts.

Watershed PES works best when there is a scarcity of clean water, and water users have capacity to pay, e.g., urban citizens, companies.

Beneficiaries are often poor and/or unwilling to pay for a ‘free good’ or their basic right to water, and it is difficult to exclude beneficiaries who won’t pay.

For private or market-based mechanisms, there is good potential for leverage of federal or municipal finance.

‘Cap and trade’ mechanisms are demanding of administration and compliance, and tend to rely on high external support

Sources: Scherr et al (2006), Bishop et al (2006), Chomitz et al (2006)

A study by Asquith et al, 2007 reveals considerable optimism for pro-poor watershed PES. Based on a review of watershed PES in six countries tradeoffs can be minimized with appropriate design and implementation, and that these projects tend to involve transfers of wealth (from wealthier urban areas to poorer rural areas) and can empower the poor by explicitly recognizing them as valued Service providers. On the other hand, an earlier review (Landell-Mills and Porras, 2002) identifies some demanding preconditions for effective and equitable watershed PES projects, including:

         Secure property rights of local stakeholders, including over the ecosystem service.

         Collective institutions for both sellers and buyers are normally needed to defray transaction costs and ensure equitable negotiations.

         A range of support services, including: legal, financial, insurance and business management support and advisory services; credit provision; independent verification; and inter-sectorial knowledge sharing and coordination.

         Effective and equitable public enforcement regimes.

         Reliable measurement and monitoring of the hydrological impacts of land use change.

Biodiversity, landscape beauty and ‘bundled’ ecosystem services

Carbon and water benefits from forest management or conservation are fairly tangible or measurable benefits in comparison with biodiversity and aesthetic or landscape beauty benefits. The measurement difficulties have not however prevented the emergence of a range of potential PES mechanisms for compensating biodiversity and aesthetic benefits.

Table 2: Some PES mechanisms with their perceived strengths and weaknesses

PES mechanism



Eco-labeling or certified forest products

Fast-growing demand driven by concerns about illegal imports; potential to move to landscape level certification.

The ‘green premium’ is rarely paid by consumers resulting in weak incentives for certified SFM

Regulatory and voluntary biodiversity offset

Self-financing and relocates development to lower biodiversity areas without constraining national development objectives

Can give ‘license to destroy’ unique habitats – offsetting biodiversity and livelihood impacts is complex and ‘second best’ to avoidance

Conservation easements and land trusts

International NGOs are able to target biodiversity hotspots through management contracts for habitat/species Preservation

Not market based or self-financing; opportunity cost compensation may be high; unsuitable for state and community tenure.

Conservation concessions

Similar to logging concessions – compensates foregone timber profits; suitable for state and community tenure

Not market based or self-financing; too expensive for primary forest – more viable for ‘logged over’ forest

Bio prospecting

Over 50% of drugs are derived from natural products; the Costa Rica in Bio model shows potential of raising pharmaceutical funds, but little replication to date.

Unrealistic expectations: there are substantial business risks; ‘bio piracy’ risk; transparency and public accountability concerns

Ecotourism, including

sport hunting and fishing

Huge market – up to 20% of

all tourism; potential for participatory approaches; new ecotourism certification standard proposed by Rainforest Alliance; participatory CAMPFIRE

Model being adapted in Luangwa National Park, Zambia.

Most benefits go to urban-

based companies; forests have shy and elusive wildlife; faces a fickle market – tourism fashions can change; sport hunting requires game animals and strong regulation

Entrance fees to national parks

Emerging cooperative revenue sharing agreements with local communities.

Previous free entry makes people reluctant to pay; few benefits to local stewards to date.

Sources: Scherr et al (2006), Bishop et al (2006), Chomitz et al (2006), Karsenty (2007)

Regulatory biodiversity offsets are one of the higher potential mechanisms, since they offer a market-based alternative to the ‘command and control’ approach. It involves a ‘cap and trade’ system, the ‘cap’ being in terms of a number/size of tradable emission permits or in the form of legislation restricting biodiversity degradation. The main examples are in Brazil and the USA. But a drawback is that it is problematic for state or common pool tenure since communities and/or the state cannot easily trade land use rights for financial compensation (Karsenty, 2007). Some biodiversity PES mechanisms, like eco-labeling and conservation easements, as well as the state-mediated PES programs, effectively capture the value of a ‘bundle’ of ecosystem services, even though biodiversity or water may be the lead service. The importance of bundled PES is that a single compensated ecosystem service can be less than the opportunity cost of forest retention. Bundled PES approaches are particularly relevant for the landscape level; for example, Eco-agriculture Partners are developing methods to assess PES opportunities for ecosystem services in agricultural landscapes, including payments for wild products, eco-labeling and market infrastructure (Scherr et al, 2006). But a limitation is the difficulty of establishing ‘additionally’: buyers are often reluctant to pay for more than one ecosystem service.

Stakeholders in a PES scheme

In order to come to an agreement on a PES scheme (e.g. Watershed PES), the right parties have to be involved in the planning, negotiation and implementation processes. The following categories of stakeholders can be distinguished (Porras et al. 2008; Smith, de Groot, Bergkamp 2006).


Donors provide the funds for the provision of water-related ecosystem services, and most commonly are:

Government – providing municipal and national government funding;

Private sector – making voluntary and required payments for water-related ecosystem services;

Private individuals – paying household and agricultural fees for use of water;

Charitable foundations – making donations from their assets.


Beneficiaries are private or public entities who have a demand for the provision of watershed ecosystem services. Beneficiaries and donors will often overlap.


Typical suppliers of water-related ecosystem services, in order of prevalence, are:

Private landowners – individual owners with clear and undisputed property rights.

Communal landholders – farmers living on or drawing their livelihood from communal property.

Private reserves – whether an individual or group, private entities registered as reserves and committed to ecosystem conservation are the third most common supplier of watershed services.

Governments or non-governmental organizations (NGOs) – land owned and managed by governments or NGOs for conservation purposes.

Informal occupiers of public lands.

Farmers living on public property oftentimes designated as a protected area, who may have long-standing rights to the land.


Intermediaries (governmental entities, international agencies or NGOs) may link donors, beneficiaries and suppliers of water-related ecosystem services, and aid in the development, administration or operation of a PES scheme. Specific roles for intermediaries comprise:

Scientific advice to project developers, particularly regarding the identification of expected downstream services.

Design of payment mechanisms, feasibility studies, management plans and monitoring systems.

Facilitation of negotiations among all stakeholders.

Land management capacity-building.

Collection of hydrological data.

Contract administration, allocation of funds and payments.

Provision of buying and selling services as an intermediary.

Drivers and Considerations for Community Participation


Drivers of any PES schemes, or incentives for positive ecosystem management, may be demand, supply, or solution-led. All three drivers are capable of creating the initial interest for a PES scheme. (Thomas Greiber, 2009)


Downstream water problems serve as a demand-led driver for PES. When downstream users are willing to pay, landholders are incentivized to change land management in exchange for compensation.


Supply-led drivers occur when there are threats to upstream natural or protected areas or the upstream land use is unsustainable. Payments from downstream water users can provide funds to meet the need for upstream resource management changes that benefit both the downstream water users and the threatened upstream ecosystem(s).


A solution-led market driver is an external organization seeking to identify situations where a PES scheme would be ideal and feasible.


The community’s consideration on how to participate gives rise to their property rights either as an individual or as a community. Property rights regulate the relationship among people as individuals or groups with respect to a determinate thing, which can be any physical or intangible entity (e.g. land and its natural resources which provide ecosystem services). As a general concept property rights comprise ownership and a sub-set of rights which follow from the ownership. There are many different types of property ownership. Traditionally, ownership implies the right to possess, use and enjoy, for example, a piece of land and its natural resources, coupled with the right to exclude others. Rights following from ownership can be distinguished as follows (FAO 2002):

• Access and use rights which give the right to access the land in order to use its natural resources;

• Control rights which give the right to make decisions how the land and its natural resources should be used; and

• Transfer rights which give the right to sell, to convey or to mortgage the land to others through contracts, to transmit the land to heirs through inheritance, and to reallocate access, use and control rights.

These rights can be inseparably attached to the right of ownership or exist as separate, transferable rights. Certain rights, like the right to use a piece of land can be further split into more specific use rights, such as use rights for natural resources but also ecosystem services. Different forms of transferring property rights exist. One possibility is to transfer the whole bundle of rights from one person to another. This happens, for example, by means of sale or inheritance, and requires the seller/decedent to have all property rights at his disposal. More complicated situations comprise the transfer of only parts of the bundle of rights (e.g. by means of easements/servitudes, licenses, permits, or concessions).

Depending on a country’s legislation, property rights can be:

• Public – i.e. held by the state;

• Private – i.e. held by a natural or legal person;

• Communal – i.e. held by each member of a community; or

• Openly accessible – i.e. not assigned to anyone.

Property rights as such are generally recognized by the constitution of a state. Their specific conditions and characteristics are further laid out in the state’s legislation (e.g., the civil code).

Property rights play a crucial role in the creation of PES schemes. The object of a PES contract could be an ecosystem service, such as the purification of water. A downstream user enters into a contract, paying for this service. In this constellation, the question arises as to who can actually sell the specific ecosystem service. To give an answer, it is necessary to determine the property rights (ownership and/or use rights) over the ecosystem service.

Theoretical Framework

PES are economic instruments based on the economic Coasean theorem by which, as long as transaction costs are low and property rights are clearly defined, the social optimum (for the allocation of resources) might be attained via bargain among the parties. Therefore, the creation of markets for trading environmental services becomes the “solution” for the correction of negative externalities.


  The government should conduct an audit of its ecosystem services (Food production (in the form of crops, livestock, capture fisheries, aquaculture, and wild foods), Fibre (in the form of timber, cotton, hemp, and silk), Genetic resources (bio-chemicals, natural medicines, and pharmaceuticals), Fresh water, Air quality regulation, Climate regulation and Climate change mitigation, Water regulation and Watershed services, Erosion regulation, Water purification and waste treatment, Disease regulation, pest regulation, pollination, Natural hazard regulation , Cultural services (including spiritual, religious, and aesthetic values, recreation and ecotourism), Biodiversity conservation) and their status for the purposes of guiding conservation work in the County.

      There should be a GIS database developed by the Minister of Environment of the above mentioned ecosystem services as an easier way of keeping records. If such a database existed it would help to determine things such as the highest water mark that is important in determining the riparian zones for demarcation and protection to avoid land grabbing or resettlement of people there.

      The Government should liaise with research institutions such as Kenyatta University to continue studies in line with in line with implementation of a PES scheme.

         With the successful implementation of such schemes with one previous one in the county, the legislators should look to developing a policy to guide PES in the county and further it to even the National assembly.

      Adjustments to the use of highest ranked water quality improvement BMPs should be used as a basis for determining PES and economic criteria should only be considered if there are problems with willingness and ability to pay by the downstream communities.

       A voluntary strategy where farmers are asked and agree to get involved in the protection and improvement of water resources is likely to succeed: This however would require some education through workshops to make farmers understand the benefits of BMPs adoption and how PES works.

         Educating the farmers, government, downstream business community and all other stakeholders would be the ideal starting point of a PES scheme.

       There is need for more research on institutional strengths and weaknesses in the management of funds and community mobilization. There is also a need for plat forms where each specific stakeholder can be able articulate their views, needs and the way forward.

         As there is currently no PES experience in the area, implementation of PES scheme would require institutions that would easily gain trust from the community.


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