Integrating ecology and economics in understanding responses in securing land-use externalities internalization in water catchments

Securing sustainable upstream land-use externalities internalization in developing countries' water catchments continues to be a serious challenge. Uluguru water catchment in Tanzania presents a compelling case for analysis. The catchment is currently under downstream–upstream conservation subsidy arrangement. However, lack of information on the long-term impacts of the approach on the functioning and distribution of benefits threatens its sustainability. Based on system dynamics framework, this study developed an integrated ecological-economic model to evaluate the long-term impacts of this arrangement on the functioning and distribution of benefits. The model was also used to compare the arrangement with other economic instruments in the same respect. Simulation results indicate that the scheme has a potential of securing conservation goals without compromising upstream well-being. Taxing crop inputs and outputs also has a potential securing conservation goal, but at the expense of upstream well-being. Tax cuts on inputs to tree fruit and basic domestic goods also secure conservation goals without compromising upstream well-being. These results show that a downstream–upstream subsidy scheme is better for achieving upstream land use externalities internalization without compromising distribution of benefits among beneficiaries and well-being of upstream land holders than taxing crop inputs and outputs.