Cidanau Watershed Payment for Environmental Services (Indonesia)

The Cidanau watershed in Banten Province, western Java, supplies raw water to PT Krakatau Tirta Industri (KTI), the water company serving the Krakatau Steel industrial estate and surrounding municipalities around Cilegon. Upstream deforestation and smallholder farming in the catchment raised concerns about sedimentation and dry-season flow reliability for KTI's intake. The Cidanau Watershed Communication Forum (FKDC), established in 1998 as a multi-stakeholder body, brokered a payment-for-environmental-services contract in which KTI pays upstream Forest Farmer Groups to maintain tree cover on their land.

The scheme launched as a 50-hectare pilot in 2004-2005 at Rp3,500,000 per hectare per year (Rp175,000,000 total for the pilot), with a scaled-up target of roughly 3,364 hectares at about US$100 per hectare per year once the intermediary and buyer's contributions were combined. Cidanau is widely documented as the oldest continuously operating PES scheme in Indonesia, cited as a reference case in national PES policy discussions and in multiple IIED, CBD and peer-reviewed studies spanning two decades of operation.

Independent academic reviews, including a 2024 governance study, describe persistent implementation gaps: an incomplete transition from the 50-hectare pilot to full watershed-scale payments, uneven participation among farmer groups, and financing that has fallen short of the estimated full-scale budget. The scheme should be read as a long-running but only partially scaled model rather than a fully matured, watershed-wide programme.