13.3.4.2 Vittel

Perrier Vittel S.A. (Vittel) is one of the world's largest bottlers of natural mineral water. The maintenance of water quality is vital for a water bottling business. Often, the quality of a water source degrades over time. Vittel had calculated that the protection of an existing water source is more cost-effective than building a new filtration plant or transferring its operations to new sources.1 Vittel therefore decided to finance 'quality drinking water' through compensation for services of landholders located around the springs. The services provided by farmers and forest landholders entailed the improvement of agricultural practices and the reforestation of sensitive infiltration zones. The farmers agreed to adopt less intensive farming practices in order to reduce agricultural run-off of herbicides and other pollutants. The idea behind this is that the enhancement of farming activities eventually restores and keeps the water quality at a desired level. Vittel had financed the programme with the support of the French National Agricultural Institute (INRA), and the French Water Agencies.2 This project was claimed to be a success, because Vittel had achieved its goals. The level of non-point-source pollution3 were reduced significantly and, according to a cost-benefit analysis study ofthe Vittel case by INRA, the project was economically justifiable.

This example illustrates the potential of these types of PES schemes. Financial institutions can play an important role as intermediaries in designing and implementing similar market-based instruments. As analysed in one of the studies, the Vittel model would be appropriate for profitable industries with a rapidly growing demand for water, because the high level of initial invest-ment.4 The Vittel model might however be difficult to implement in a large geographical area, or in a region with many farmers without government support.