Review of Environment, Energy and Economics - Re3 Urban Areas and Watershed Services: Strategies for Ecosystem Management and Urban Risk Reduction


Print this article Print this article
Urban Areas and Watershed Services: Strategies for Ecosystem Management and Urban Risk Reduction
by Yaella Depietri, Lorenzo Guadagno and Margaretha Breil
Environment - Articles

Under scenarios of increasing unplanned urban expansion, environmental degradation and hazard exposure, the vulnerability of urban populations needs to be tackled through novel, integrated solutions. Basing our analysis on the concept of ecosystem services, we suggest that urban areas would benefit from a shift in perspective recognizing the connections between urban areas and watersheds. By integrating an ecosystem approach into the management of water-related services, urban management policies could take a first step towards fostering an improvement of the health of upstream and downstream areas of the watershed, activating environmentally sound practices and economic strategies which aim at guaranteeing the sustainable and cost effective supply of services. From our analysis it results that, through the recognition of the primary role played by watershed ecosystems, cities can benefit from an enlarged set of policies, which can help strengthen the supply of essential environmental services, while reducing the vulnerability of its population and contributing to the maintenance of healthy ecosystems.

Keywords: Urban watersheds, Ecosystem services, Water supply and Sanitation, Disaster risk reduction, Valuation

JEL classification: I14, Q01, Q25, Q54, Q57

Suggested citation: Depietri, Yaella, Guadagno, Lorenzo, and Breil, Margaretha, Urban Areas and Watershed Services: Strategies for Ecosystem Management and Urban Risk Reduction (March 27, 2014). Review of Environment, Energy and Economics (Re3), 

See other useful links

1. Introduction
Urban areas have always established strict connections with flowing water and water bodies using water from rivers and lakes for drinking water, sanitation, irrigation and trade. Among the range of ecosystem services urban areas benefit from, those related to freshwater are of particular importance. Actually four out of every five people live downstream of, and are served by, renewable freshwater services, representing 75% of the total supply. Thus, to draw the tight link between urban areas and more regional ecosystems, we proceed focusing on freshwater services for urban needs, such as water supply, wastewater treatment and hydro-meteorological hazard mitigation. These functions are fundamental for human settlements, and will need increased attention as population continues to concentrate in urban areas.
The growth of cities has been characterized by the partial substitution of ecosystem services with man-made alternatives, through transformation and replacement of the natural infrastructure providing clean water, wastewater remediation or flood protection. Resorting to hard infrastructures for the management of natural resources and the prevention and mitigation of hazards often results in the degradation of the environment, loss of local sources of livelihoods and ultimately in a reduction of resilience and long-term adaptive capacity of the urban areas. In fact, these man-made structures distort the population’s risk perception and have encouraged significant encroachment of floodplains and overexploitation of drinking water resources, further exacerbating long-term risk in urban areas. 

Considering cities parts of larger ecosystems, a change in the perspective of urban policies becomes possible: from this new point of view, ecosystem services can be considered as services to be compared to those provided by technical solutions. The advantage of applying the ecosystem concept to problems of urban governance lies in its capacity to bridge environmental and socio-economic perspectives in the face of socio-economic pressures on elements of the watershed, integrating environmental issues into policy agendas.

2. Urban watersheds and pressures on ecosystem services
Watersheds include a variety of ecosystems, such as forests, wetlands, grassland, savannahs, which affect the delivery of hydrological services to downstream users. Quality and characteristics of soils determine water infiltration and surface runoff, thus defining the retention capacity and the rate at which precipitation waters cross the watershed and their potential for causing inundations. Vegetation increases the rate of evapotranspiration and storage capacity of soils, while improving the water quality by filtration and absorption of nutrients and contaminants. Wetland ecosystems improve water quality through removal of nutrients, and increase the retention capacity within the watershed, reducing the risk of flood hazards and increasing dry season flows. Urban water supply depends on hydro-geological processes, which are essential to the creation and regulation of water supply for urban use: waters flows are enriched with salts and minerals essential for life, while vegetation growing on slopes ensures absorption, filtration and release of runoff. The state of the ecosystems located in a watershed therefore affects both the quantity and the quality of water that flows within it, and supports different uses like power generation, recreation, and extraction of water for human uses. 

As urban water demand grows with the increase of urban population, the pressure on the water system also increases. Productive activities such as farming, grazing or industrial manufacture located upstream, while providing goods and services to urban areas, affect water streams, both above and below the surface, often reducing the range and the quality of services provided downstream. In this sense the city of New York, for instance, is financing the protection of ecosystems in the watershed in order to ensure clean water supply for the urban area, and Bogotà (Colombia) benefits from a wetland ecosystem (called pàramo) providing the city with clean water with little seasonal variation and minimal need for treatment, diminishing significantly the costs that the city should otherwise bear for managing water supply. The water supply sector is well aware of the direct economic benefits provided by ecosystems to their services; water suppliers estimate for instance that a 10% increase in the forest cover in the source area would reduce the water treatment costs of approximately 20%. Highlighting the value of healthy watersheds for the satisfaction of urban water supply needs at reduced costs can help make the case for the restoration and sustainable management of ecosystems, avoiding the ecological impacts of expanding water supply systems (e.g. trans-basin water transfer and dams).

2.1 Wastewater treatment
Cities also produce significant amounts of outputs (i.e. pollution and wastewater). Historically, an advantage of locating human settlements along water courses consisted of the possibility to discharge these outputs into the water and have them carried away from the settlements and decomposed. Water bodies and wetlands are capable of removing nutrients and contaminants from water. Ecosystems have provided these services throughout human history, and ecosystem-based solutions (i.e. constructed wetlands), especially in association with technological solutions, are still are a recurrent management option for the treatment of outputs in many countries as an economically effective solution with relatively low construction, operation (e.g. reduced energy consumption) and maintenance costs, while providing a wide range of additional services (e.g. biodiversity, recreation, ground water recharge). 

The trade-off of these solutions lay in the existence of critical thresholds, in the capacity of natural areas of dealing with pollutants and in their greater requirements of space, compared to technological solutions.

2.2 Hydro-meteorological hazard prevention and mitigation
Occurrences of extreme weather events have been steadily on the rise, affecting an increasing number of people and causing an increasing amount of human and economic losses. The increasing intensity and frequency of hazards is only in part due to an increasing frequency of natural events, but must be attributed mainly to socio-economic drivers (i.e. concentration of vulnerable communities in hazard-prone areas, displacement, increasing urbanization) and to environmental degradation.

In a context of a changing climate, urban growth is thus generating new patterns of hazard, exposure and vulnerability. In these conditions, the adoption of an ecosystem approach that recognises the functions of in-situ and surrounding ecosystems would significantly reduce exposure and vulnerability of urban populations. 

The regulation of the hydrological cycle at the watershed scale is of fundamental importance for cities. Healthy or well-managed forests and soils can significantly contribute to the regulation of water flows, storing and slowly releasing waters, thus buffering the impacts of extreme events, including downstream urban areas. In Pakistan, illegal logging and deforestation largely contributed to the devastating effects of the 2010 flood that affected about 20 million people. In Taiwan, the clearing of forests has led to reduced slope stability, increased sediment and pollutant delivery downstream, and increased peak flows, a fact that is particularly problematic in regions exposed to typhoons and similar meteorological hazards. There are a number of examples demonstrating how watershed restoration can significantly reduce the impacts of weather-related events, for instance the Portland Watershed Management Program (USA), or the “Room for Rivers” programme currently implemented in the Netherlands.

Droughts and water scarcity also affect urban watersheds. It is in fact estimated that 41% of the world’s population lives in river basins where the per capita water supply is so low that disruptive shortages could occur frequently. Measures protecting and restoring upstream watershed areas can potentially reduce the risk of droughts for agriculture and urban areas.

3. Valuation methods
Further to the qualitative evidence provided so far, quantitative recognitions of the value of ecosystems are increasingly gaining importance as a means of establishing ecosystem services as potential alternatives to (hard) infrastructure based solutions for cities. 

Assessments of values provided by ecosystems allow for the consideration of the role ecosystems play in supporting human wellbeing in policy making, estimating the amount and distribution of flows of goods and services supplied by the environment and comparing their evolution under different scenarios. At the watershed scale, valuation techniques can provide, for example, hints for the prioritization of protection and restoration projects.  

Nevertheless, there are some caveats to assessments of the value of ecosystem services: it needs to be recognised that values can be higher than those that  can be expressed in monetary terms, as these encompass also ethical and societal values, which are rather difficult to be captured completely in monetary terms. Furthermore, the knowledge about quantitative aspects of relationships between the characteristics of ecosystems and the services provided is still quite limited, existing knowledge on specific ecosystems is difficult to be transferred to other systems, because of the complexity and the distinctive traits of every single ecosystem and very little is known about the trade-offs between the provision of different services or about specific thresholds. These caveats suggest a rather cautious use of quantitative assessments of ecosystem services as unique advice for policy. It is recommended instead to consider a rather vast range of criteria, including criteria related to environmental improvement and distributive justice.

3.1 Monetary valuation methods
The assessment of monetary values provided by ecosystems represents a quite novel approach, which is still scarcely employed as support for decision making. Especially in urban areas, where water is usually treated as a commodity and economic losses caused by natural hazards are frequently being quantified, the economic value of ecosystems providing water or flood protection is substantial.

Considering that the value of ecosystems goes well beyond those potentially considered as services for urban management, the Total Economic Value (TEV) is the concept that is more widely applied to estimate ecosystem services in monetary terms. In attempting to include all aspects of benefits the society obtains from an ecosystem, it considers the aggregate amount of use, non-use and option values of the environmental goods, and allows for measuring what individuals and societies gain or lose from ecosystem services. Among its components, use values relate to benefits obtained through direct (e.g. production of foods or raw materials) or indirect (e.g. benefits to productive activities through pest control and pollination) interactions with the natural ecosystem. Use of ecosystems can in turn be consumptive (e.g. use of timber or fuel wood) or non-consumptive (e.g. recreation and education). Non-use values are derived from the simple knowledge about the existence of the ecosystem, or about the fact that other people and future generations are or will be able to access the benefits it provides. The TEV framework can furthermore include the ecosystem’s option value (i.e. derived by the possibility of it providing known and unknown benefits in the future) but the opportunity of their inclusion in the TEV measurements is debated. 

The valuation methodologies more commonly used are based on estimating the value of an ecosystem service by observing one of the following measures: in the case of use values, its market value; in the case of use and non-use values, either the way it influences economic choices of people (i.e. expenditure for travel), or, with respect to non-use values, the people’s reactions to simulated changes in its availability. Among the approaches based on market prices, values of ecosystem services are estimated, inter alia, considering direct market values (e.g. for resources like drinking water), the estimation of losses avoided, for example in terms of flood damages avoided, or the value of an ecosystem used as an input for the delivery of a market service like wastewater treatment. With respect to further use values, techniques based on the observation of economic actors, like expenses for travel to ecosystem sites, are used for the determination of values attributed to the specific ecosystem. With regards to non-use values, the willingness to pay for services is assessed in surveys where market situations are simulated.  

Among existing valuation studies, water supply appears as a service assessed rather frequently, while there are fewer studies focussing on hazard regulation and wastewater purification functions.  

Monetary assessments, nevertheless, represent a series of risks, if not applied properly and in a participatory approach: as most methods focus on valuing only single elements of what should be considered the total value (TEV), or only one or few of the whole range of services provided by an ecosystem, results from quantifications like this can raise the potential of social conflicts, for instance, related to problems of equity in the access to resources .

4. Policy and economic instruments
Urban water services are provided (in particular in most urban areas of the richer countries) through centralised, technology-oriented measures which can potentially be substituted by ecosystems providing alternatives or integrations to these technology-based systems and, furthermore, also technological solutions ultimately rely on functioning ecosystems.  

By making full use of the capacities of wetlands and natural vegetation in water bodies for water reclamation and of green areas as buffer and regulating element against floods, for water retention and for groundwater recharge, ecosystem management strategies can help maximise the resilience-enhancement potential of natural systems for urban dwellers. 

A particular strategy that found multiple applications at the watershed scale are Payment schemes for ecosystem services (PES), where users of environmental services, for instance, freshwater provision, pay for land uses which are likely to secure that service. Payment schemes have been realised mostly in not extremely degraded watersheds, and beneficiaries of the payments are normally land owners who receive the compensation, for instance, for applying extensive agricultural practices.  

There seem to exist a series of preconditions that facilitate the decision and implementation of payment schemes, in particular the need for a community to prevent or halt initial condition of degradation. While providing services to the urban area, PES schemes can improve living conditions in rural areas and provide at the same time a series of additional benefits for the entire watershed, like the prevention of environmental damages and negative consequences of land abandonment, of the loss of cultural and aesthetic values, the provision of local food and livelihood. 

Not unlikely the ecosystem valuation exercises and their results, the PES programs demonstrated to be highly context-specific. Most cases are found in the global South. Although, theoretically,  economic valuation can inform on the value attributed to up/downstream services, the actual structure of payment schemes can often be the result of complex social processes involving multiple stakeholders rather than of a merely technical assessment.

Evidence thus suggests that, when implementation policies are able to buffer the socio-economic disadvantage generally affecting marginal, upland and lowland communities and when ecosystem service users are willing to pay for improved environmental quality and service delivery, good watershed management and upstream/downstream balance can be achieved. Cities therefore need to be better connected to environmental management strategies and socio-economic practices of upstream and downstream communities.

5. Concluding remarks
An important first step for integrating ecosystem services in the consideration of urban policies is to acknowledge the importance of local as well as remote ecosystems when designing and implementing urban policies and to adopt a wider geographical perspective, which we suggest to be the watershed level. Cities could thus become the drivers of a regional ecosystem approach improving the conditions of local and more distant ecosystems, not least through the transfer of resources.


Depietri, Yaella, Lorenzo Guadagno, and Margaretha Breil, 2013, “Urban Watershed Services for Improved Ecosystem Management and Risk Reduction, Assessment Methods and Policy Instruments: State of the Art.”









Yaella Depietri, United Nations University, Institute for Environment and Human Security (UNU-EHS) and Institut de Ciència i Tecnologia Ambientals (ICTA), Universitat Autonoma de Barcelona (UAB)

Lorenzo Guadagno, International Organization for Migration (IOM)

Margaretha Breil, Fondazione Eni Enrico Mattei (FEEM) and Euro-Mediterranean Center on Climate Change (CMCC)