Submitted by Sukaina Bharwani | published 25th Mar 2011 | last updated 30th Mar 2011

Micro-finance for landscape protection to manage energy-water systems


To evaluate Green Water Credits (GWC) related to carbon and renewable energy To apply ABM to energy policy in partnerships with stakeholders in Africa To investigate microfinance in sustainable energy-water management

Background and rationale

Carbon saving potential of GWC is based on reduction of demand for blue water and the subsitution of renewables for fossil fuels. The scheme will be funded by payments from the energy company KenGen and by the downstream irrigators subsidising the upstream small farmers, who in wet or in normal years traditionally operate rain fed systems, to implement sustainable soil management practices that would normally be too expensive. The expected benefits of GWC demonstrate the close linkage between water and energy concerns in Tana River basin.

Poor upstream land management produces a build-up of silt in the areas of the five reservoirs. This reduces the capacity for water storage and regulation, presenting a particular problem in wet years where flood control measures are needed. It also inhibits the ability to generate hydropower and threatens the longevity of power turbines.

For the upstream farmer, the benefits are the diversification of income provided by GWC contracts, and more reliable local water supply. The problems of soil erosion are diminished by practices that allow asset-building in stable soils, and better quality crops (leading to improvements food security). For the commercial irrigator, who largely abstracts from groundwater resources, erosion control and GWC will increase the availabilty of 'blue' water -- a benefit in dry years. Small irrigation farmers operating downstream of the 5 dams are unlikely to be able to participate.

Microfinance would be an appropriate financial instrument for coordination, it being often employed to support livelihoods in developing countries. The advantages are that it could remain community-based (farmers could enter as a group) and therefore more likely to be a trusted mechanism. It has been suggested that K-Rep, a national bank having experience in microfinance schemes would be able to establish GWC contracts, manage the fund and make payments.

Research having concentrated on water systems planning for the Tana basin*, has identified as a research gap the need for further analysis of micro-behavioural aspects with agent-based models linked to water resources models**. Actors' responses to the proposed GWC scheme (e.g. trust, price aspiration, political pressure) are acknowldedged to be important for its adoption, but are little understood. The application of the project methodology outlined below will elicit actors' decision-making rules and will investigate by formal means -- using agent-based modelling-- the complex social patterns that result, and that to a large extent condition the behaviour of the energy-water system.

Above all the research emphasises the multi-objective uses of a water catchment -- flood management, hydropower, food production -- and the complex nature of the management challenge in the Tana River basin (increasing demand both for energy and water, climate variability).

Research plan

Phases, Plans, Outputs

A two-phase project may allow inputs from different groups of users of the research and ensure that it maintains high relevence and merit. Phase I will identify and establish links with local scientists and practitioners / decision makers, and will involve a fieldwork stage to obtain data on baseline socio-environmental characteristics. As well as carrying out conceptual modelling of the Tana study and developing a rulebase of actors' decision-making, this phase will deliver training in the use of ABM / water resources models. Phase 2 will concentrate on the techical development of modelling software, and on engaging with and making the modelling accessible to policy makers - through policy exercises. Model validation (ensuring the model faithfully represents known aspects of the real world) and development (making iterative improvements). Expected outputs are baseline assesments of socio-environmental characteristics, agent-based simulation models, demonstration and training workshops, policy consultations and reports on analysis of model results and on scenario building exercises.

Model development

Model development is seen as playing a supporting role in engaging the researchers and case study team with the users of the research (like municipal decision makers) and and other stakeholders (like land managers) and will be used in different ways to accomplish different objectives, e.g. conceptual modelling, validation, reflection on model generated scenarios.

The ABM will help to obtain insights into - the role of 'buyers' of GWC and their influence upon upstream land management practices - social patterns and social learning around land protection measures - community-wide institutions' ability to support adaptation to climate risk - climate vulnerability situation of 'sellers'; delivery of benefits to 'buyers' - the implications for hydropower generation of an efficacious GWC scheme

Of particular interest are the attitudes of land managers, in terms of their trust, price aspiration, willingness to assert political pressure, etc. regarding environmental measures, and the introduction of microfinance and GWC schemes.




  • Hoff, H., S. Noel, P. Droogers, S. Kauffman. 2007. Quantifying Water Usage and Demand in the Tana River Basin. GWC report 8.
  • Purkey, D and Downing, S (2007), 2007 SEI NOVA FUND Progress Report, Using Agent Based Modeling in Water Resources Planning. SEI Internal Document