Financial analysis

To make parts of projects financially viable, they need to generate tangible revenue streams that can be captured by a stakeholder. However, aside from carbon credits and potentially biodiversity credits or Payment for Ecosystem Services (PES), there are no tangible revenue streams. Carbon credits and biodiversity credits could contribute to the overall funding of the projects, though will not be able to fully fund the projects. PES could be initiated for water storage, groundwater replenishment and fish spawning functions. As discussed in the CBA, revenues from carbon credits are small – only around 1% of the total project cost in present value - and the value of biodiversity credits is at this moment unknown. The price of a tonne of carbon in the nature-based offset market is currently, however, very low; end-2021 the price was peaking above USD 20 / tonne and it can be expected that prices will increase in the coming years. Ecotourism may contribute to funding the project at some of the wetlands, though it is unlikely that it could fund a substantial part of the project. Revenues from ecotourism will go directly to the households and private sector companies as they sell their services, and only for instance an entrance fee or license fee paid by households and private sector companies could provide funding for the projects.

Biodiversity credits and carbon credits are a form of Payment for Ecosystem Services (PES). PES could provide a viable avenue for large-scale flooded forest restoration and conservation, though there are many challenges in setting up such schemes.^[1] One of the challenges is financial viability: financial viability requires sufficient, stable, and sustained payments for project investment and operational costs and acceptable rates of return for project investors (including public financers seeking societal benefits). Carbon credits alone are not sufficient, and while biodiversity credits could contribute to the overall funding of the projects, this is still a largely undeveloped market. Other ecosystem services, including the most important one – an increase in fisheries – are difficult to capture under a (privately funded) PES scheme.

Hence, public funding would need to cover the majority of the expenses.

[1] See Canning, A. D., Jarvis, D., Costanza, R., Hasan, S., Smart, J. C., Finisdore, J., ... & Waltham, N. J. (2021). Financial incentives for large-scale wetland restoration: Beyond markets to common asset trusts. One Earth, 4(7), 937-950.