While no country is immune to the impacts of climate change, the world’s poorest countries are the ones most affected by it even though they have contributed least to the problem. This means we at the World Bank must address climate and development together if we are to achieve our mission to end poverty and build shared prosperity on a liveable planet.

To that end, we have introduced numerous initiatives to help governments tackle the challenges they face. Our tools include trust funds that blend our own funds with those of development partners to provide tailored support to countries. These resources are directly mobilised for specific objectives, such as reducing greenhouse gas emissions, and are subject to our rigorous system of checks and balances and due diligence.

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Creating Fair Rewards for Protecting the Planet

Our climate trust funds support low-carbon projects or policies that generate fewer emissions than business-as-usual alternatives: for example, a project to build a solar power plant instead of continuing to operate a coal plant, or to preserve a forest rather than logging it. These emissions reductions are measured, independently verified, and become “carbon credits” to help countries achieve their Nationally Determined Contributions (NDCs) under the Paris Agreement.

They can also be sold to another country or a third party, such as a private company, to offset their own carbon-producing activities, or retired to reflect a net climate benefit. Trading in carbon credits ensures there is a mechanism to provide a financial reward for protecting the planet while also offering a way for countries or industries that are struggling to decarbonise to compensate for their emissions.

Our programmes are designed with longevity in mind. Our climate finance seeks to enable governments to take climate action and reduce poverty, and to maximise the positive impacts on people and communities. Social inclusion is critical so that climate funding goes to the people who need it most and marginalised communities are included in decision-making processes. These two case studies illustrate how climate finance is benefitting both people and the planet.

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Solving Brazil’s Rubbish Problem

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Answering the Waste Challenge

For many in the developed world, waste is an afterthought – an unfortunate fact of life, forgotten once tossed away. But it can have direct and profound consequences for health, safety, and environmental sustainability, particularly in developing countries with limited resources and a lack of infrastructure for treating and storing it.

In Brazil, for example, waste production has increased by about one-third since 2003 and communities collect more than 216,000 tonnes of rubbish every day. Yet only about 59% of municipalities dispose of their waste in sanitary landfills designed to protect the surrounding soil and groundwater and properly collect and treat methane, a powerful greenhouse gas generated by decomposing waste.

The rest deposit their waste in landfills with limited environmental controls or in open dumps, placing community members at risk of disease and increasing greenhouse gas emissions. As a result, Brazil’s solid waste is estimated to generate the equivalent of over 47 million tonnes of carbon dioxide every year, approximately the same as the greenhouse gas emissions from 10 million passenger cars.

One of the key barriers to improving Brazil’s waste management at the local government level is the lack of resources and incentives for landfill improvements. That is where carbon financing comes in.

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The Climate Finance Answer

To solve this problem, the World Bank’s Carbon Partnership Facility  set out to establish a sustainable framework for incentivising improved waste management. The fund partnered with the Caixa Econômica Federal (CAIXA), the second-largest state-owned bank in Brazil, to blend multiple sources of financing in order to offer loans to companies that manage and operate landfills.

To qualify for funding, landfill operators had to agree to fulfil the rigorous requirements of the United Nations Framework Convention on Climate Change’s (UNFCCC’s) Clean Development Mechanism and reduce their greenhouse gas emissions by a specific amount each year. When they met the pre-determined milestones, they would receive a payment through CAIXA. The interest rate of the loans was linked to their performance: under-delivering could trigger an interest rate increase.

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Results in Practice

Between 2012 and 2017, the reduced emissions from the collection and destruction of methane were converted into carbon credits. As certified by the UNFCCC, three landfills serving the metropolitan regions of Rio de Janeiro and Recife have collected and flared over 150 million cubic metres of methane. This has saved the equivalent of over three million tonnes of carbon dioxide.

Building on this success, one of these landfills has continued to earn carbon credits under an agreement signed in March 2020. A new municipal landfill in Pernambuco also plans to sign an agreement with CAIXA to participate in the carbon finance programme. As part of these new agreements, the landfills will take the extra step of producing electricity from collected methane, displacing electricity usage generated from fossil fuels. This builds on a nine-year public-private partnership with CAIXA to support municipal landfills to find better and more productive ways of using the methane.

The financial and technical support provided during the landfill programme also succeeded in inspiring innovation. A landfill in the municipality of Santa Rosa, for example, was able to implement novel waste management technologies, including sensors to monitor groundwater pollution, water recycling facilities, a green belt around the site, and an on-site education centre to inform the local community about environmental issues.

The programme also helped create a pathway to poverty reduction for waste pickers who were affected by the closure of two local sites that were deemed environmentally unsafe. The landfill programme offered them education and vocational training, help with signing up for government assistance programmes, and support in preparing business plans and organising recycling cooperatives.

Brazil’s landfill programme is a good example of how the public and private sector can work together to support new approaches to sustainable urban development using climate finance.

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Setting Industry Standards

The success of the CAIXA landfill programme has established these environmental and social safeguards as the new standard for landfills across the country, and inspired and enabled CAIXA itself to embrace other climate finance initiatives. CAIXA has since become accredited under the Green Climate Fund, providing access to additional development funding, and has expanded to support a national energy efficiency programme.

Brazil’s landfill programme is a good example of how the public and private sector can work together to support new approaches to sustainable urban development using climate finance. The programme continues to generate emission reductions on top of the other benefits for communities in Brazil.

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Protecting Forests in Mozambique

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Using the Power of Nature

The degradation and destruction of forests contributes around 12% of the world’s greenhouse gas emissions. Meanwhile, research has shown that nature-based solutions, including supporting forests, can provide up to 37% of the mitigation needed to keep the global temperature rise to below 2°C. Of the 165 Nationally Determined Contributions (NDCs) plans submitted by national governments under the Paris Agreement, 137 included nature-based solutions.

To maintain and expand global forest cover, the World Bank has developed the Forest Carbon Partnership Facility (FCPF). The FCPF is a global partnership comprising governments, the private sector, civil society, international organisations, and indigenous peoples. It provides financing to developing countries as they work to implement the Reducing Emissions from Deforestation and Forest Degradation in Developing Countries (REDD+) framework. Under this framework, established as part of the Paris Agreement, the countries involved can receive results-based payments when they work to combat deforestation.

The FCPF is currently working with 47 developing countries across Africa, the Asia-Pacific, Latin America, and the Caribbean. Its primary aim is piloting a performance-based payment system for REDD+ activities, delivering financial rewards for countries that contribute to protecting the world’s forests. It is also providing countries with financial and technical assistance, testing ways to sustain or enhance the livelihoods of local communities while also protecting biodiversity and sharing knowledge.

To assist in this work, the FCPF has created a standardised framework for calculating emission results at the jurisdictional scale, meaning that it can cover entire provinces, regions, or states. Emissions reductions programmes operating at this scale are more likely to encompass all the many drivers of and solutions to deforestation. They are also better able to overcome some of the accounting and verification issues that can undermine the environmental integrity of smaller programmes.

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Mozambique: Leading the Way in Forest Protection

Mozambique’s national parks and rich biodiversity are globally renowned. But since the 1970s, the country has lost forest cover equivalent to the area of Portugal. Today, the Mozambique Government and development partners including the World Bank are working together to save the country’s forests and endangered species of plants and animals while helping people benefit from conservation.

In October 2021, Mozambique became the first country to receive payments from the FCPF for reducing emissions. FCPF paid the Government US$ 6.4m for reducing 1.3 million tonnes of carbon emissions, generated through community-based forest protection efforts in nine districts of the Zambezia Province over a 12-month period. The payment marks the first under the Emission Reductions Payment Agreement (ERPA) signed between the FCPF and the Government of Mozambique. Under the terms of this agreement, the FCPF will pay up to US$ 50m for 10 million tonnes of carbon emission reductions generated through 2024.

The programme in Mozambique is about more than just a payment from the FCPF. It is also promoting conservation and climate-smart agriculture in forest communities, helping farmers tap into sustainable supply chains for cash-crop production, restoring degraded land, stimulating more efficient charcoal production and consumption, and improving the management of protected areas. The promise of future payouts promotes buy-in and is reinforced by the benefit-sharing plan – designed through extensive stakeholder engagement – that specifies how funds will be shared with the people who participate in activities on the ground.

Local farmers did not always produce enough food for their families or communities, but guaranteed payments from the ERPA programme have protected farmers from revenue losses, in turn allowing them to grow enough food while mitigating the effects of climate change.

Forest communities reap the most benefits. This agreement allows Mozambique to secure long-term financing to provide alternatives to deforestation and reward efforts to mitigate climate change, reduce poverty, and manage natural resources sustainably.

Mozambique is proving that it is possible to successfully generate real and durable emissions reductions that meet the highest standards of accounting and verification.

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Success Paves the Way for Others

Mozambique is proving that it is possible to successfully generate real and durable emissions reductions that meet the highest standards of accounting and verification. Its receipt of the FCPF payment signalled to international carbon markets that large-scale programmes that reduce emissions from deforestation and forest degradation can produce the high-integrity, high-quality carbon credits that buyers demand.

Since the first FCPF payment was made to Mozambique in 2021, Costa Rica, Ghana, and Indonesia have all received results-based payments for verified emission reductions, and more payments are in the pipeline. FCPF’s 15 agreements have a total combined value of over US$ 720m, which will be delivered as results-based payments for nearly 145 million tonnes of verified emission reductions across 15 countries through 2025.

Financial resources and sound investments are needed to address climate change to both reduce emissions and to build resilience. To that end, climate finance plays a critical role in addressing climate change, a global emergency that goes beyond national borders. Yet we can only change course and beat the climate crisis by working together, by deepening and broadening collaborative efforts between the public sector, private sector, and civil society in order to reach our shared goal of a liveable and prosperous planet for everyone.