Towards cost-effective watershed management in the Brazilian Atlantic Forest: valuing forest ecosystem services related to water quality in the Guapi-Macacu watershed.

The Brazilian Atlantic forest is considered a global biodiversity hotspot, harbouring a large number of endemic species, and providing essential watershed services to millions of urban water users. However, agricultural expansion and urban development have reduced the forest area to less than 8% of its original size. Multiple pressures on the Atlantic forest ecosystem continue. Payments for ecosystem services (PES) schemes are increasingly proposed by local initiatives and supported by international cooperation to manage the trade‐offs among agricultural uses and watershed services in a cost‐effective manner. Studying the provision costs of as well as the demand for watershed services can help decision makers to evaluate the scope and economic feasibility of PES and alternative management options. The Guapi‐Macacu watershed in the state of Rio de Janeiro supplies water to 2.5 million inhabitants within five municipalities. Water resources are of utmost importance for agriculture and industries, such water bottle companies, breweries and the biggest Brazilian petrochemical complex COMPERJ. Our study concentrates on valuing watershed services in terms of controlling nutrient and sediment loads under different land use systems. Nutrient loads include Nitrogen and Phosphorus found in surface water, whereas sediment loads are measured in terms of turbidity and total solids. Replacement and avoided cost methods are applied focusing on the local water treatment facility to estimate demand for service maintenance and improvement. To provide empirical evidence of the link between land use/land cover and water quality indicators, we rely on water quality modelling and monitoring specifically adapted to this area. This takes place within the framework of the multi‐disciplinary German‐Brazilian cooperation project DINARIO/MP2. Spatial conservation opportunity cost analysis is used to study the costs of watershed services maintenance and improvement and derive implication for cost‐effective management on the basis of scenario analyses.