Financing of Emission Reductions Programs

Billions of dollars will be required to implement the large-scale programs being designed by developing countries across the world to reduce emissions from deforestation and broader land use. Yet we know that only 3% of current climate finance is directed to addressing landscapes and forestry. Moving forward, more support from a wider variety of sources will be needed to help countries sustainably manage and protect their forests in a participatory fashion.

3%

The portion of current global climate finance earmarked for landscapes and forestry

Building on the work done to date on REDD+ readiness, the Forest Carbon Partnership Facility is working with countries to help governments direct their own investments and policies to implement ER programs. Readiness work is also being used to “crowd in” the private sector so that countries can get more resources flowing into forest development to not only reduce carbon emissions but to also create livelihoods for forest-dependent communities.

 

Financing plans for Emission Reduction Programs

Financing plans support credible Emission Reduction (ER) program design by outlining sources of finance and presenting financing information to reflect the feasibility of achieving the program’s overall objectives. These plans are an integral part of ER programs proposed for implementation under the Forest Carbon Partnership Facility.

In developing their financing plans, countries are expected to:

  • Organize data and information on land use;
  • Estimate the costs and benefits of program activities;
  • Identify sources and categories of financing;
  • Analyse financing surplus or gaps;
  • Identify options for addressing financing gaps;
  • Arrange for flow of funds;
  • Give financial and economic analysis, as well as sensitivity analysis of factors influencing the financing plan.

The type of information required for a financing plan depends on the program’s objectives, land use categories covered under a program, and categories of public and private costs and benefits of an ER program.

 

 

 

Scope of ER financing plans

Reducing emissions and enhancing greenhouse gas removals are key objectives for most land use mitigation programs. For programs focused solely on these objectives, the nature and scope of financial and economic analysis is expected to be limited to the achievement of reducing net emissions. However, for programs that include additional objectives such as improvement of incomes, livelihoods of communities, and ecosystem services, the nature and scope of financial and economic analysis must reflect these multiple objectives.

In programs focused solely on REDD+ under the FCPF Carbon Fund, the financing plan is expected to focus on the costs and benefits of activities addressing the drivers of deforestation and forest degradation and enhancement of removals. Programs focused on multiple land uses to promote sustainable landscape management are expected to fund a wide range of activities associated with multiple land use categories targeting emissions and removals with in agriculture, forests, grassland systems, among others. In this case, the financing plan is expected to consider activities associated with these various land uses.