Watershed development is the focus of poverty alleviation programs in rural India. Watershed projects aim to solve problems of externalities, but they also create their own externalities, which cause uneven distribution of costs and benefits that undermine project objectives and harm the poor. Numerous approaches exist to internalize externalities, including awareness creation, moral suasion, investment subsidies, regulatory limits and fines, indirect benefits, mergers, and recent innovations like payment for environmental services and cap and trade. These can be judged on several criteria; the best approach would solve the problem cost effectively and help or at least not hurt poor people. Watershed projects in India were examined to identify the approaches taken to internalize watershed externalities. Investment subsidies and indirect employment benefits are the least effective approaches theoretically, but they are the most commonly applied, most likely because they are easy to administer and bring popular short term gains. Some theoretically favorable approaches that have been used elsewhere, such as payment for environmental services, may not work as well in India due to high transaction costs. However, one key innovation that easily could be applied in India is to make investment subsidies contingent on performance. Legal support and property rights reform would be needed for other favorable approaches.

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RCsumC

Water Working notes are published by the Water Sector Board of the Sustainable Development Network of the World Bank Group. Working Notes are lightly edited documents intended to elicit discussion on topical issues in the water sector. Comments should be e-mailed to the authors.

Ecological connectivity among coastal marine habitats—linkage in the movement of organisms and natural processes across habitat boundaries—has significant implications for the health and resilience of commercially important or threatened species in the Gulf of Maine (GOM), off the coast of the northeastern United States. Methods designed to efficiently assess connectivity are vital for identifying and managing critical habitats (Perry et al., 2018). Paired use of passive acoustic monitoring (PAM) and metabarcoding seawater samples (MSS) for observing biological and functional connectivity at various spatiotemporal scales in the marine environment is largely unexplored and may provide an efficient alternative or supplement to existing strategies.