Singkarak Lake is located in West Sumatra, well known for its culture of blending its matrilineal society with Islamic tradition, entrepreneurship, a strong tradition of village governance (Nagari), and collective management of land belonging to clans (Ulayat Kaum) and local Nagari groups (Ulayat Nagari). In 2002, National Strategy Studies on CDM conducted by the Indonesian Ministry of Environment identified the Singkarak watershed as a potential site for implementing a national reforestation-carbon project. But despite its preparedness, the project has no confirmed buyers of the carbon. One of the difficultness in identifying investors is that the project was initiated when most rules regarding implementation of the Kyoto Protocol and the carbon market in Indonesia were still in an embryonic stage. Beyond the carbon market, the RUPES-Singkarak team sought to have hydropower royalty money flow to upstream communities, to clarify links between land use and environmental services, and to facilitate emergence of appropriate institutional arrangements for managing land use. In 2005, the Nagaris surrounding the lake received about US $40,000 under their first allocation of hydropower royalties. The system uses criteria that include compensation for damage to livelihoods in Nagaris bordering the lake, which favors relatively poor Nagaris. Funds are intended to provide incentives for maintaining healthy environmental conditions. As the amount of royalties available depends on the amount of electricity produced, all players have a strong interest in the good performance of the hydropower company.