Economic Financial Analyses PreAssessment Activities 1 PreAssessment Activity

Economic & Financial Analyses Pre-Assessment Activities 1

Pre-Assessment Activity 1 BENEFICIARY MAPPING

Pre-Assessment Activity #1 BENEFICIARY MAPPING - TEMPLATE Beneficiary Description Ecosystem Service Urgency / Interest Description Influence Description Willingness to Cooperate Description Name 1 Option 1 High, Medium, Low 1 – 5 or ? Name 2 Option 2 High, Medium, Low 1 – 5 or ? Name 3 Option 3 High, Medium, Low 1 – 5 or ? Name 3 Option 1 High, Medium, Low 1 – 5 or ? Name 4 Option 1 High, Medium, Low 1 – 5 or ? ETC 3

Pre-Assessment Activity #1 BENEFICIARY MAPPING – CAMBORIU EXAMPLE: CAMBORIÚ Beneficiary Ecosystem Service Urgency / Interest Influence Willingness to Cooperate EMASA Sediment retention, increased water availability during peak demand time High 5 experiencing seasonal water shortages during high tourist season responsible for providing water to entire basin and making infrastructure investment decisions In 2013, EMASA created the Camboriú Payments for Watershed Service (PWS) project w. the beneficiaries listed below Balneário Camboriú municipality Sediment retention, increased water availability during peak demand time High 4 Camboriú Watershed Committee Sediment retention, increased water availability during peak demand time High Low 4 Agesan Sediment retention, increased water availability during peak demand time High 3 Sediment retention, increased water availability during peak demand time Medium Low 3 Sediment retention, increased water availability during peak demand time High Medium 3 water utility in Balneário Camboriú in Santa Caterina state, Brazil State Sanitation Regulatory Agency ANA National Water Agency EPAGRI-CIRAM Santa Caterina State’s Environmental Information and Hydrometeorology Center Camboriú city council 4

Pre-Assessment Activity #1 BENEFICIARY MAPPING – Background information: Beneficiaries & interests Public Water regulator X X X Private Local government X X Water Utility X X Irrigation board X X X Hydropower X X Agricultural Association X X Insurers X International Cooperation Poverty alleviation Conservation & Biodiversity X X X X Residents & businesses Private corporations (e. g. food & beverage, chemicals) X X Environmental authority Public / Private (depending) Watershed management Water allocator (e. g. Dept of Water & Sanitation) Groundwater recharge Flood mitigation Sediment Levels Nutrient Load Stakeholder Water Yield Sector Water Regulation This table provides a list of watershed actors that may be primary beneficiaries of a water fund, and the typical benefits that those actors tend to care about. These stakeholders may be sources of direct or in-kind funding to implement the eventual watershed implementation plan. X X Non-profits / NGOs X X X International donors X X X 5

Pre-Assessment Activity #1 BENEFICIARY MAPPING – Background information: Cooperation willingness matrix Willingness to Cooperate Qualifying Questions Level • Is the stakeholder an activist with negative perception of catchment management / water funds/ 1 • Has the stakeholder turned down requests for cooperation, but done so politely & with an explanation? 2 Opportunistic attitude • Does the stakeholder react positively to cooperation requests? 3 High willingness • Has the stakeholder pro-actively created cooperation opportunities? 4 Acts as partner & refers openly to involvement • • • Has the stakeholder signed a partnership agreement? Has the stakeholder spoken publicly in support of the partnership? Has/will the stakeholder contribute financially? 5 Unknown • Insufficient engagement to categorize cooperation level ? Negative attitude Unwilling to cooperate 6

Pre-Assessment Activity 2 INTERVENTION MAPPING

Pre-Assessment Activity #2 INTERVENTION MAPPING - TEMPLATE Intervention Description Ecosystem Service Influence Potential Activity 1 Description Ecosystem Service 1 High, Medium, Low Activity 2 Description Ecosystem Service 1 High, Medium, Low Activity 3 Description Ecosystem Service 2 High, Medium, Low Activity 4 Description Ecosystem Service 2 High, Medium, Low Activity 5 Description Ecosystem Service 3 High, Medium, Low Activity 6 Description Ecosystem Service 4 High, Medium, Low Activity 7 Description Ecosystem Service 2 High, Medium, Low 8

Pre-Assessment Activity #2 INTERVENTION MAPPING – CAMBORIU EXAMPLE: CAMBORIÚ Intervention Description Ecosystem Service Influence Potential Fencing for cattle exclusion Restoration of degraded riparian and headwater areas; landowners receive payments as compensation for maintenance & recurrent annual opportunity costs Sediment Retention High, depending on level of degradation Planting of native tree seedlings Restoration of degraded riparian and headwater areas; landowners receive payments as compensation for maintenance & recurrent annual opportunity costs Sediment Retention High, depending on level of degradation Enrichment Restoration of degraded riparian and headwater areas; landowners receive payments as compensation for maintenance & recurrent annual opportunity costs Sediment Retention High, depending on level of degradation Dirt road mitigation Implementation of dirt road best-management practices (e. g. reducing slope; appropriate grading and drainage on slopes; sediment traps) Soil Retention Highly site-dependent, and current data limitations prevent modeling watershed-scale impacts NOTES The PWS program currently implements the first three interventions, and the priority ranking is based on where they are implemented: - HIGH PRIORITY: restoration of degraded riparian and headwater areas - MEDIUM PRIORITY: conservation of relatively intact riparian areas featuring regenerating forest - LOW PRIORITY: restoration of degraded upland forest on steep slopes 9

Pre-Assessment Activity #2 INTERVENTION MAPPING – Background information: Intervention options Water Regulation Water Yield Nutrient Load Sediment Reduction Flood Mitigation Groundwater recharge Ecosystem Service Targeted habitat protection Broad term for all conservation activities to protect target ecosystems. Includes preventative measures (e. g. easements, land rentals, fencing out cattle, funding of park guards) to reduce future adverse land use changes. X X X Revegetation / reforestation Restoration of native habitat via either active planting (e. g. seedlings) or passive measures (creating suitable enabling environment for regeneration). X X X Riparian restoration Restoring natural habitat that act as interface between land water along the banks of a river, stream, or lake. Often referred to as ‘riparian buffers’. X X Wetland restoration Re-establishment of the hydrology, plants and soils of former or degraded wetlands. May also involve installation of new wetlands to offset losses or mimic natural wetland functions X X Mechanical thinning Reduction in invasive alien plants and/or harmful levels of biomass (e. g. overly dense forests) via selective mechanical removal (e. g. chainsaw, loppers) X X Controlled burns Reduction in invasive alien plants and/or harmful levels of biomass (e. g. overly dense forests) via controlled targeted burns. X X Agricultural best management practices (BMPs) Land management changes that reduce harm of agricultural activities. Related measures include: cover crops, precision fertilizer application, irrigation efficiency, agroforestry and contour farming. X X Ranching best management practices (BMPs) Practices that reduce harm associated with ranching. Related measures include silvopastoral schemes, range structures (e. g. access roads, fencing), land treatment e. g. (range seeding, brush management), & rotational grazing. X X Intervention Category Description & Associated Interventions X X 10

Pre-Assessment Activity 3 DEFINITION OF Ba. U SCENARIO

Pre-Assessment Activity #3 DEFINITION OF Ba. U SCENARIO - TEMPLATE Consideration Influence Level Other Inputs Climate Change High, Medium, Low Timeframe Land-use driver #1 High, Medium, Low Resolution Land-use driver #2 High, Medium, Low Discount rate Land-use driver #3 High, Medium, Low Ecosystem Service Metric Land-use driver #4 High, Medium, Low Value / Note 12

Pre-Assessment Activity #3 DEFINITION OF Ba. U SCENARIO – CAMBORIU EXAMPLE: CAMBORIÚ SHOULD BE FULLY DEVELOPED IN CONSULTATION WITH YOUR BENEFICIARY Consideration Influence Level Other Inputs Value / Note Pasture to Bare Low Timeframe 2012 – 2025; estimated benefits until 2045. Bare to Pasture Medium Rice to Pasture Medium Forest to Pasture Medium Pasture to Rice Low Pasture to Impervious Medium Pasture to Plantation High Pasture to Forest High Climate change At this time, the program is expected to have enrolled the lands considered most crucial for sediment control whose owners are interested in participating in the program, and many of the interventions are expected to have attained their full functionality. Resolution 1 meter land-use-land-cover data High-resolution land-use-land-cover data from 2004 to 2012, expected to be representative of the nearto medium-term future Discount rate 3. 85% (Brazil’s social discount rate) Discounted all costs and benefits of the PWS program through 2045 to their 2014 present value equivalents. Ecosystem Service Metric Concentration of total suspended solids (TSS) at treatment plant intake Since the heavier sediment fraction settles in the intake channel prior to reaching the pumping station, the fraction reaching the treatment plant is composed almost exclusively of suspended solids. High (used to calibrate model) Land cover change in the study area during 2003 -2012; gross. (Kroeger et al, 2017) Predicted 2012 -2025 land cover change in study area, assuming no PWS program (Kroeger et al, 2017) 13

Pre-Assessment Activity #3 DEFINITION OF Ba. U SCENARIO – Background information: Landscape drivers Driver Category Urban expansion Urban development Supporting infra (roads, airports, etc. ) Regulatory drivers Zoning code changes Expansion of protected areas Infrastructure development River infra (reservoirs/ dams, channelization) Energy infra (renewables, transmission lines) Extractives Mining Oil & gas drilling Dredging Agricultural expansion & intensification Expansion of agricultural and pasture lands Landscape element removal (e. g. wetlands) Upscaling & consolidation of plots Afforestation Plantation conversion Timber & wood harvest intensification Forestry expansion & intensification Additional Categories Examples of Landscape Drivers within Category Climate change Sectoral regulations (e. g. forest codes) Land abandonment Spread of invasive plants Water extraction 14

Pre-Assessment Activity 4 ROI & CO-BENEFITS MAPPING

Pre-Assessment Activity #4 ROI & CO-BENEFITS MAPPING - TEMPLATE Ecosystem Services Metric ROI Type Relevant Co-benefits Metric 1 Type 1 Co-benefit 1 Metric 2 Type 2 Co-benefit 2 Metric 3 Type 3 Co-benefit 3 Metric 4 Type 2 Co-benefit 2 Metric 5 Type 1 Co-benefit 1 16

Pre-Assessment Activity #4 ROI & CO-BENEFITS MAPPING – CAMBORIU EXAMPLE ROI METRIC: EXAMPLE: CAMBORIÚ Detailed Economic Analysis Ecosystem Services Metric ROI Calculations Relevant Co-benefits Concentration of total suspended solids (TSS) at treatment plant intake Cost-effectiveness in reducing TSS Biodiversity conservation Since the heavier sediment fraction settles in the intake channel prior to reaching the pumping station, the fraction reaching the treatment plant is composed almost exclusively of suspended solids. The benefit-cost ratio or monetized ROI Calculated by dividing the monetary value of TSS reductions in municipal water treatment plant intake water by the costs of the PWS program expressed as average reduction in mg TSS per liter in intake water per million USD invested in the PWS program Peak-season water supply risk Flood risk reduction 17

Pre-Assessment Activity #4 ROI & CO-BENEFITS MAPPING – Background information: Co-benefits options Co-benefit Category Examples within co-benefit category Human health Reduction in heat-deaths Reduction in vector-borne disease Food security Mental health Economic benefit Job / income generation Recreation / tourism value Timber production Non-wood forest products Climate change Mitigation / carbon sequestration Adaptation / resiliency Ecological Species & ecosystem protection Genetic diversity Pollination 18

Pre-Assessment Activity #4 ROI & CO-BENEFITS MAPPING – Background information: ROI assessment options The below three categories represent three of the most common valuation methods for calculating the ROI of water infrastructure: Valuation Method Description Example: Flood risk mitigation Welfare gain (profit; net benefit) Total value of ecosystem service gains associated with economic activity generated by service gains Increased net farm income due to increased irrigation water availability during growing season Avoided cost Difference in cost compared to producing the same ecosystem service gain using the next-best alternative (i. e. , cost comparison among alternatives providing the same ecosystem service quantity & quality gains) Costs of improved levee system downstream; cost of relocation or flood-proofing of assets at risk; cost of repairing damaged assets; business interruption losses Willingness to pay Amount that a population would be willing to pay for the physical benefit within the study area Public willingness to pay to avoid flooding 19