ABSTRACT
There is a growing awareness about how land-use patterns in watersheds might affect the availability and quality of water needed to feed drinking water systems. Although there are several governmental regulations that aim to maintain and increase the attributes of different land uses to provide hydro-logical ecosystem services (HES), 1 these initiatives usually lack enforcement and financial resources. More importantly, these command-and-control practices fail to generate the appropriate economic incentives to guide private landowner decisions towards social well-being. Given these problems, payment for hydrological ecosystem services (PHES) has been proposed as a market-based approach that promises to overcome these deficiencies by means of direct payments to farmers who make environmentally friendly production decisions in recharge areas of watersheds of particular interest (Landell-Mills and Porras, 2002; Porras et al, 2008; Wunder et al, 2008; Boscolo et al, 2009). In order to guarantee financial self-sustainability, the funds to finance these schemes must come, ideally, from direct payments made by those who benefit from HES (e.g. consumers from drinking water systems).
