Environmental Authorities Turn to Water Fees as Ecological Strains Deepen

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Environmental authorities have signalled a shift toward regulatory intervention, introducing a usage-based payment system for water drawn from natural reservoirs such as Lake Zway.

The country’s ecosystems, broadly categorised into forest, wetland, mixed forest, mountainous, and grassland zones, have long been under strain from deforestation, urban encroachment, and unsustainable land use. However, it is the aquatic systems, such as lakes, rivers, and wetlands, that now appear to be under the most acute pressure. Invasive aquatic weeds, including water hyacinth, and unchecked siltation due to upstream erosion have impaired the ecological functions of these bodies, threatening biodiversity, fish stocks, and the livelihoods dependent on them.

The Environmental Protection Authority (EPA) has drafted a proclamation introducing a structured Payment for Ecosystem Services (PES) initiative, intended to address mounting environmental degradation and the growing vulnerability of aquatic ecosystems.

The initiative requires payments to be negotiated between buyers and sellers, facilitated by intermediaries under formal agreements. Fees will vary by geographical level, including international, national, catchment, and local areas, depending on the specific ecosystem involved.

Ecosystems are categorised into forest, wetland, mixed forest, mountainous, and grassland. Water bodies are identified as particularly vulnerable, with severe degradation noted due to invasive weeds and accelerated siltation. This concern has prompted the Authority to establish a specific payment system for water sourced from natural reservoirs, such as Lake Zway. Users, including commercial entities, informal users, and individuals, would be required to declare their annual water usage and make corresponding payments.

Wasihun Yimer, an EPA specialist on ecosystem service pricing, stated the urgency of implementing PES due to growing ecological pressures. Historically, ecosystem services have been used without financial compensation due to a lack of regulatory frameworks.

"Ecosystem services were used without compensation due to the lack of legal and regulatory frameworks," Wasihun told Fortune.

According to him, the new proposal would not only ensure ecological sustainability but also create a revenue stream for the government and local population. Official assessments have already projected the potential revenue from major lakes, including Bishoftu, Hawassa, Chamo, Abyata, Zway, Tana, and Ashange. These assessments provide the basis for pricing benchmarks, seeking to regulate and incentivise sustainable practices.

Lake Zway, for example, is extensively tapped by more than 150 water tanker trucks and over 10,000 pumping systems, pressing for greater accountability.

“They'll now be required to pay for what they extract,” said Wasihun.

Lake Tana faces similar pressures, with invasive weeds now covering over 84,000cm² of its surface area. The Ministry of Water & Energy plans to involve nearby institutions in stewardship roles, shifting away from previous unsuccessful interventions.

At Sabana Beach Resort, located by Lake Langano, the impact of proposed regulations is already evident. Previously dependent on lake water for irrigation and guest use, despite its high salinity, the resort has transitioned to government-supplied piped water for cooking and drinking purposes.

Duga Leta, the resort’s front desk manager, is concerned about the financial burden of this change, acknowledging the necessity of the PES scheme.

“Now, it will be difficult,” he said, noting additional costs could strain operations.

Yet, Duga recognised the scheme’s potential long-term conservation benefits, conceding, “There is no alternative. Payment is a must.”

At Liesak Resort by Lake Bishoftu, management already pays substantial fees to local authorities for maintaining the buffer zone.

Teklu Kondelo, Liesak’s finance manager, disclosed that the resort pays millions of Birr annually to the city.

"Another mandatory payment would further complicate business conditions," he told Fortune.

Despite buffer zone regulations allowing property development within 50m of shorelines, Teklu described difficulties in maintaining profitability due to limited tourist traffic and the landlocked location of the resort. He called for transparency and consistent enforcement.

“The government and other bodies are the real beneficiaries,” he said.

According to Wasihun, voluntary participation remains central to the PES scheme. Payments would directly link buyers and sellers, ensuring that only those willing to compensate providers gain access to ecosystem services. Contracts would clearly outline responsibilities, geographic scope, and payment terms, including schedules and methods. Agreements would also include mechanisms for monitoring compliance and provisions for termination if obligations are not met.

The draft proclamation allows diverse payment structures. Single buyers can assume full costs, multiple buyers might pay for individual services, or bundled services could be offered. Financing arrangements for PES could be public, private, or hybrid. Public models involve government payments to ensure collective environmental benefits, while private models support direct buyer-seller transactions. Hybrid schemes blend public and private approaches.

Community-based institutions or newly established inclusive governance bodies would oversee these arrangements. Providers will be expected to report outcomes to buyers and the EPA, preventing unintended environmental harm.

The EPA would manage the PES system, including creating monitoring guidelines, maintaining a registry of agreements, and certifying intermediaries. These intermediaries will be required to assist in determining prices, negotiating access, and structuring payment agreements.

Despite the policy momentum, Semaw Asmare, an environmental consultant and PhD candidate at Addis Abeba University, insist that establishing a robust legal framework is merely a first step. According to him, the real challenge lies in implementing the PES model on the ground.

“It's beneficial for a country to have a robust legal structure supported by law,” Semaw told Fortune.

Semaw urged the need to distinguish between ecosystem products and services to ensure fair valuations and payment mechanisms. He also noted that Ethiopia currently lacks sufficient institutional capacity, particularly technical expertise and human resources, to manage such complex initiatives effectively. Even developed countries encounter difficulties in implementing PES schemes due to complexities in cost determination.

“The biggest problem is determining the cost of the ecosystem," he said. "You've got to know the price to pay for each.”

He pressed for extensive awareness campaigns, stakeholder consultations, and rigorous evidence-based research. Without these elements, he warned, the Authority might face difficulties in implementation. He also noted that existing environmental directives, particularly buffer zone protections around lakes and rivers, are already poorly enforced.

“Even the previously issued buffer zone rules are not being enforced,” he said, citing ongoing violations in resort and lodge construction near water bodies.

Rather than exclusively emphasising payments, Semaw advocated for stronger punitive measures against environmental degradation. Proper penalties for harmful actions such as forest destruction and water pollution would provide clearer deterrents, he suggested. Semaw raised concerns about how the PES system would accommodate traditional pastoralist communities, particularly in regions such as Afar, Somali, and Borana. These communities rely heavily on mobility rather than fixed land usage.

“For them, it isn't about payment,” he said. “It’s about ensuring the continuity of the ecosystem. Otherwise, over-extraction will continue unchecked.”

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