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Arbre liane © Frank Ribas-BRLi

Carbon finance is essentially a way of assigning a value to the climate impact of actions on the ground. Carbon finance mechanisms were introduced through the Kyoto Protocol. They allow developed countries to offset their surplus greenhouse gas (GHG) emissions by funding GHG reduction or carbon storage projects in countries of the “Global South”. Alongside this regulated market created through the Kyoto Protocol, a voluntary carbon market has emerged, which is open to any type of organisation. Although the carbon markets have been quite sluggish for a number of years, the 2021 Glasgow climate conference (COP26) and its negotiations on Article 6 of the Paris Agreement have led to a resurgence in interest.
Carbon finance can be a useful source of additional funding to launch new projects or to sustain the activities and outcomes of existing ones. Funders are also encouraged to investigate additional innovative financing mechanisms, in order to mobilise the cash flows needed for climate change mitigation and adaptation, and to address other environmental challenges. However, enhanced vigilance is needed with regard to the integrity of these markets and their role in achieving carbon neutrality, as well as their adherence to the avoid-reduce-compensate hierarchy.

It is in this context, with its opportunities and threats, that the FFEM is today publishing the Note on “FFEM principles for supporting project initiators using “carbon finance”. The Note is intended for project initiators wishing to leverage carbon finance, regardless of the sector in which they operate (energy transition, forestry, agriculture and land use, mangroves, etc.). The aim is to set out the requirements for securing funding from the FFEM.

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