- As host of 2025’s COP30 climate summit, Brazil is working on two complementary finance mechanisms, hoping to reward tropical forest conservation worldwide.
Both rely on the concept of investing money and using profits for forest protection. - Twelve countries, including Brazil, are currently discussing the Tropical Forest Finance Facility (TFFF) framework, which is expected to be concluded by next January.
- Its sister initiative, the Tropical Forest Mechanism (TFM), proposes that highly polluting industries donate a minimum fraction of their annual earnings to forest conservation.
Last month’s COP29 climate summit in Baku, Azerbaijan, left tropical forest countries frustrated yet again at the tepid promises and lack of urgency from the world’s biggest greenhouse gas emitters on tackling climate change. And yet even as this year’s meeting had been dubbed the “Climate COP” because of mounting concerns about climate financing, it failed to bridge the deep disagreements over how to increase the money available to fight and adapt to climate change.
Leaders from developed and developing nations clashed over the scale of contributions, mechanisms for disbursement, and accountability for fulfilling financial commitments. The end result was one that no one seemed happy about: a $300 billion deal, largely in the form of loans, falling far short of the $1.3 trillion that many climate-vulnerable countries had called for.
But there may yet still be a solution, thanks to an initiative by Brazil, host of next year’s COP30 climate summit. The country says it hopes to address the financial gridlock with two initiatives — at least for tropical forest conservation, a key goal for preventing the worst impacts of climate change.
The first was initially launched at COP28, in 2023, as the Tropical Forest Forever Fund, with the aim of rewarding forest protectors through an annual payment per hectare preserved or restored.
The second initiative, the Tropical Forest Mechanism (TFM), was launched in July this year with the same concept: to pay for the maintenance of forests where they are being preserved.
Under both the TFM and the TFFF, tropical countries must maintain deforestation rates below 0.5% of their total forest area to be eligible for funding. Each deforested hectare, in turn, would result in a payment reduction equivalent to what they would have gotten for preserving 100 hectares, thereby providing a hefty disincentive against deforestation.
Both programs were presented at first as a single plan from Brazil. This year, however, as discussions progressed, Brazilian authorities decided to rename the Tropical Forest Forever Fund as the Tropical Forest Finance Facility and limit its funding sources to only sovereign wealth funds, philanthropic foundations, and green-minded international investors. Contributions from polluting industries would be excluded.
“We consider that working with voluntary donations would be a more difficult path. Our proposal is to be financed first by countries,” João Paulo de Resende, undersecretary of economic and fiscal affairs at Brazil’s Ministry of Finance, told Mongabay.
With the change promoted by the government, Tasso Azevedo, one of the creators of the original plan, joined Pedro Moura Costa, from the NGO BVRio, and the Igarapé Institute to launch the Tropical Forest Mechanism. “The two initiatives are not competitors,” Azevedo told Mongabay. “The TFM is expected to be a complement to the TFFF by recovering aspects we consider important in large-scale forest financing.”
“The technical approach to incentives for forest protection and disincentives for deforestation is the same,” said Moura Costa, the BVRio director.
Identical in concept, the major difference between the TFM and TFFF is how money will be raised to pay the participating tropical forest countries.
TFFF
In late October 2024, the TFFF in its current form was pitched to delegates at the COP16 biodiversity summit in Cali, Colombia. The event showcasing the TFFF was packed with high-ranking officials, including the COP16 president, Suzana Muhamad, and ministers from various nations. “This is an idea that came from the country of Brazil and which Colombia supported from Day 1,” Muhamad, Colombia’s environment minister, said at the event. “That’s because it is a way of valuing nature without turning it into a commodity.” The TFFF also got some of the spotlight at the G20 Leaders’ Summit in Brazil last month.
The diplomatic roadshow has been showing results. Twelve countries are currently negotiating the fund’s design and governance: Potential funders (Norway, the U.K., Germany, the U.S., the UAE and France) and tropical forest countries (Brazil, Colombia, the Democratic Republic of Congo, Ghana, Indonesia and Malaysia).
“We believe it is easier to build a consensus around the importance of forests,” Resende said. “It is a nonpartisan issue that brings greater convergence than fossil fuels.”
The multilateral group made some changes to the previously announced figures. Now, its goal is to raise $125 billion, half the original amount. The payment per hectare to forest protectors, in turn, was also reduced, from $25 to $4.
“We realized that if the fund paid $25 per hectare, as originally planned, it would need to raise $800 billion, which would be impossible within the defined deadline,” Resende said. “But nothing prevents the fund from increasing later on through philanthropic foundations. And if the TFM manages to get contributions, the money could eventually be invested in the TFFF.”
There are an estimated 1.2 billion hectares (3 billion acres) of tropical forests, about one and a half times the size of Brazil, spread across 80 countries worldwide. But the fund will pay for conservation in 70 of those nations; countries with high per-capita income, such as Australia, don’t need such payments, unlike middle- and low-income countries, according to TFFF proponents.
This means that if 1 billion hectares (2.5 billion acres) of forest, an area the size of Canada, were preserved in a given year, for instance, the corresponding countries would receive $4 billion. Brazil, whose portion of the Amazon Rainforest spans 328 million hectares (811 million acres), would receive $1.3 billion — a significant boost for the country, whose Ministry of Environment was allocated about $800 million in the 2024 budget.
“Tropical forest countries will be paid according to what they preserve every year. The goal is for the fund to be perennial, as its original name [‘Forever’] says,” Resende said.
To get the facility rolling in 2025, $25 billion is required as an initial amount, to be loaned by industrialized countries. Traditional donors in the West, as well as industrialized Asian nations such as Japan, Singapore and South Korea, and Arabian Gulf countries are some of the fund’s targets for beefing up the sum. Another $100 billion would be prospected from among private investors, such as pension funds and insurance companies.
That money would then be invested by the TFFF in debt bonds of developing countries that offer a return of 6-8% yearly. However, the TFFF would pay sovereign wealth funds and investors a lower 4-4.5% return rate. The profits from these different rates will be used to pay countries for tropical forest conservation. After 20 years, the facility will start to pay back the main debt to lenders.
The TFFF group is currently discussing the format for allocating payments to those countries. “The goal is to complete the fund design by next January,” Resende said. “In 2025, we will work on two fronts: talking to financial supporters, and setting up the legal structure of the fund, so that it can be ready by COP30.”
Asked about the possibility of the U.S. exiting the TFFF discussions under the incoming Trump administration, Resende said it’s still too early to know. “So far [the U.S.] has been present and will likely continue to do so until the end of this year.”
TFM
The TFFF’s spinoff and sister initiative, the TFM, aims to contribute to tropical forest conservation along the same lines but with donors instead of lenders. Donations will be invested and profits from interests will be used to pay countries to protect their forests. Another difference is that it seeks to raise the initial funding from companies rather than sovereign wealth funds and philanthropies. And in particular natural resource-intensive sectors, such as oil, gas, agriculture and mining.
Another key difference between the two funds is the proposed payment for each hectare preserved. While the TFFF aims for $4 yearly per hectare, the TFM expects to raise 7.5 times more: $30 per hectare. Costa, of BVRio, said this ambitious amount would be enough for tropical countries to provide incentives to those who protect the forests at a local level. He noted that when considering the total area of 1.2 billion hectares, $36 billion would be needed each year. The oil and gas sector alone produces about 30 billion barrels (or the equivalent) on an annual basis, and getting companies to contribute just a fraction of the money they make from that would nearly fulfill that amount, he said: “With a contribution of $1 per barrel, the necessary capital would be practically covered.”
The TFM, however, still needs to move forward. “The mechanism foresees the formulation of a global pledge, but it is not up to the proposing organizations alone to launch or carry it out,” Costa said. “Brazil’s government has a crucial role and can propose, for instance, a voluntary contribution from the national and international oil industry.”
How to reward tropical forest conservation: Interview with Tasso Azevedo
What’s the TFFF? A forest finance tool ‘like no other’ shows potential
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