Maintaining and Enhancing Water Yield through Land and Forest Rehabilitation

Start & End Date: 2022-Ongoing

Country/Countries: Indonesia

Multilateral Institution(s) Involved: Global Environment Facility Trust Fund, United Nations Industrial Development Organization

In the Brantas River Basin of East Java, Indonesia, deforestation for agriculture has led to, increased soil erosion, loss of biodiversity, and decreased water retention. These impacts have made floods more severe and reduced groundwater recharge. Downstream, water scarcity has become a problem during the dry season. Floods and droughts are expected to worsen with climate change, and if no action is taken, land degradation will continue.

The project is designed to restore degraded land in the Brantas River catchment. It will establish 387 hectares of upstream agroforestry systems and 150 hectares of riparian bamboo plantations. In total, the project will improve management practices of 3,697 ha in a buffer zone and ultimately bring 26,033 hectares under improved management. The project will also construct absorption wells and biopori holes to enhance water retention. The project will benefit 278,600 people (153,230 men and 125,360 women) and address the priorities to restore land as defined in the National Medium Term Development Plan 2020–2024 (RPJMN).

It was found that the carbon storage benefit alone covers the costs of planting trees, installing water retention wells, and maintaining these investments for at least 30 years. The project also avoids large costs due to flooding, erosion, and nutrient runoff, which are more than three times larger than the value of carbon storage. These avoided costs are larger when climate variability is greater. The MEWLAFOR project is also instructive with regard to funding NBI. First, when using a conventional approach to carry out the economic and financial analysis, carbon pricing makes the project economically attractive. Without carbon pricing, given the many intangible avoided costs and benefits of the project, securing funding would be challenging. This is also reflected in the low investment in NBI observed in the past decades worldwide, a trend that may change soon. Second, the distribution of accrued benefits across many individuals and sectors from the reforestation and improved water management meant that single-source financing for the project was unlikely at the outset and should not be a priority. Catalytic grant funding and in-kind contributions from the GEF and UNIDO crowded-in a multitude of other grant funders from both the public and private sectors. Third, while small in scale, the MEWLAFOR project provides insight regarding the potential benefits of reforesting larger areas and installing water retention wells more widely. It also demonstrates the value of coordinating across sectors and geographies to restore degraded land and improve water management.