Initiation of Forest Carbon Trust Fund in Nepal

A pioneering approach by Asia Network for Sustainable Agriculture and Bioresources (ANSAB) along with two other partners International Centre for Integrated Mountain Development (ICIMOD), and Federation of Community Forest Users, Nepal (FECOFUN) has resulted to the establishment of the first Forest Carbon Trust Fund (FCTF), and distribution of the performance-based financial incentive to local communities in Nepal. The pilot FCTF has been established under a NORAD funded REDD+ project being implemented since 2009 in 104 community forests in three watersheds – Kayarkhola of Chitwan district, Charnawati of Dolakha district and Ludhikhola of Gorkha district of Nepal.

FCTF was initiated in 2010 to explore how governance systems can be adapted to implement performance-based REDD+ at the local level within a community forestry setting. The aim is to harness learning that can be applied by policy decision makers and practitioners, and to develop capacity-building systems that can be used to implement REDD+ at the national level. Priority is given to ensuring that payment mechanisms are equitable, respect the rights of indigenous peoples and local communities, and are sustainable in the long run. On June 14, 2011, FCTF was formally established with a US $100,000 seed grant from NORAD by a multi-stakeholder task force that comprised the members from Government’s REDD Forestry and Climate Change Cell, Ministry of Forests and Environment, Nepal Federation of Indigenous Nationalities (NEFIN), ANSAB, ICIMOD, FECOFUN, and Joshi and Bhandari Company.


FCTF governance system and functions are designed by the multi-stakeholder task force and approved by national and local stakeholders through a consultative and feedback process. Structurally FCTF consists of three layers; i) Community forest users’ groups (CFUGs) are functional at the ground level, ii) watershed REDD network (WRN), watershed level FCTF advisory committee (WLFAC) and watershed level FCTF monitoring committee (WLFMC) are functional at the second level; and iii) Project management unit and Central FCTF advisory committee are functional at the central level. Each CFUG fills up the claim invoice form after completing their forest carbon survey with details on forest carbon, social data, and tentative plan for utilizing the claimed fund. The CFUGs then submit their claim to the watershed REDD Network. Watershed REDD network then compile details from every CFUGs of watershed and prepare watershed level claim invoice. After preparing watershed level claim invoice it is presented to the WLFAC. Data supplied by WRN is approved by WLFAC after verifying whether data is correct either by direct monitoring or from recommendation of WLFMC. The approved watershed level claim invoice is then processed at project management unit (PMU) at central level. The PMU collects claim invoice from all watersheds and prepares payment slip, stating the amount of fund that should be released to each watershed. This payment slip is passed to Central FCTF advisory committee (CFTA). CFTA then approves payment slip after ensuring that data submitted by each watershed is correct either from recommendation of verifying agency and/or direct monitoring. The approved payment slips are then forwarded to each watershed. After receiving fund, WLFAC distributes the fund as per the criteria developed and data submitted by CFUGs. Thus, each CFUG receives the amount as per their carbon stock data and social data.