NDF - Financing for climate change and development projects

Cloud Forest Blue Energy Mechanism [NDF C113]

Photo: Leonardo Saenz
Photo: Jeff Gale

Regional Latin America
Cloud Forest Blue Energy Mechanism
Ref: NDF C113

NDF grant EUR 300,000 (USD 275,000 plus contingency reserve)
Project Period: 2018 –2020
Partner and Executing Agencies: Conservation International and The Nature Conservancy.

Objective

The Cloud Forest Blue Energy Mechanism (CFBEM) is an innovative “pay-for-success” financing mechanism building a strong linkage between cloud forest restoration, conservation finance and sustainable hydropower production. CFBEM and the proposed project have been conceptualised and developed by Conservation International and The Nature Conservancy. CFBEM was one of three endorsed projects by the Global Innovation Lab for Climate Finance in the 2017 Lab Competition.

The ultimate goal of the proposed project is the commercialisation of CFBEM as a profitable “pay-for-success” mechanism for the financing of natural infrastructure restoration and conservation in the context of private hydropower production. Initial target countries of the project are in Latin America, including Bolivia, Brazil, Colombia, Ecuador and Peru. There is significant scale-up potential for the structure of CFBEM in Africa and Asia, and a high replication potential in other watershed ecosystems both in urban and rural contexts.

The proposed project consists of the selection of three pilot projects and the preparation of the selected pilots for the implementation of the mechanism.

Expected outcomes

Based on project modelling, it has been estimated that the implementation of CFBEM in three sites would sequester up to an estimated 11.4 million tons of CO2 over 20 years through reforestation of 27,000 hectares of cloud forest and avoided deforestation of a further 54,000 hectares. Following the commercialisation of CFBEM, the potential long-term impact in Latin America includes:

  • Climate impact: cloud forest restoration and reforestation of 60 million hectares of degraded cloud forest overlapping hydropower sites equates to 2.4 GT CO2.
  • Socio-economic impact: improvement of water and energy security, local employment opportunity.
  • Financial impact: new green infrastructure opportunities for investors for up to USD 30-40 billion.

Financing

The total project cost estimate is USD 1,000,000. The proposed NDF grant contribution is EUR 300,000, which includes a total commitment to the project of USD 275,000 and a contingency reserve. Committed Stage 1 grant providers include FMO (USD 275,000), IDB/GEF (USD 250,000) and Conservation International (USD 200,000).

NDF Contact

Program Manager Isabel Leroux
Telephone: +358 10 618 002