Nepal is likely to receive $45 million from the World Bank’s Forest Carbon Partnership Facility (FCPF) in aid of its forest protection program, but issues are now being raised on whether a considerable part of the funding will reach the grassroots communities who were at the center of efforts in forest protection. Concerns on bureaucratic inefficiencies, administrative deductions, and complex processes for distributing funds are fueling the perception that the payment may have a very small effect on the ground.
The funding is part of a global initiative worth $1.3 billion under the REDD+ programme, aimed at combating deforestation, restoring biodiversity, and fostering sustainable economic growth by encouraging the reduction of carbon emissions. Nepal’s payment reflects the 2.4 million tonnes of carbon stored in its forests between 2018 and 2024, primarily in the Terai Arc landscape—a region home to the iconic Bengal tiger. The calculation, at $5 per tonne of carbon dioxide equivalent, rewards Nepal for protecting its forests.
For Nepal to receive this money, it had prepared a Measurement, Reporting, and Verification (MRV) report showing that emissions had been reduced. The report is being verified by third parties, after which the money will be put into Nepal’s Forest Development Fund (FDF), the entity designated to receive payments for forest carbon trade. However, a multi-layered distribution process among federal, provincial, and local government entities has created transparency and efficiency concerns.
Dilraj Khanal, a lawyer specializing in natural resources, says that this “multiplicity of institutions” – including the Ministry of Finance, the Ministry of Forest and Environment, as well as offices at the provincial level – could absorb funds through administrative deductions and bureaucratic delays. Under the “plan” for benefit sharing just now, the finance ministry will retain 20 per cent of the total amount payable for administrative costs; the FDF will take an additional 10%, thus leaving only 72% for actual beneficiaries.
To add to the complexity, the FDF was five years old without any money having been spent from the $47 million already allocated to it. This stagnation arose from the absence of finalized operational guidelines, which are still under debate with various stakeholders. The broad mandate of the fund is afforestation, research, and human-wildlife conflict resolution, which makes its management and prioritization even more complex.
As provided in the benefit-sharing plan, the funds are to be transferred into accounts of identified beneficiaries such as national parks, private forest owners, community-based forest groups, and forest-dependent communities. Yet, according to a forest expert, Subash Chandra Devkota, the initial estimates of the amount going to local communities are so minimal that they could hardly do much meaningful conservation or restoration work.
Beneficiaries must also develop comprehensive proposals that fit the objectives of the fund. Most local groups lack the capacity to navigate this process. To add insult to injury, government procurement laws require competitive bidding for projects in the fiscal plan, thereby giving private companies a chance to outbid community groups on local projects. This would effectively eliminate community forest user groups, who have been key to forest protection for centuries.
Birkha Bahadur Shahi, senior vice chair of the Federation of Community Forestry Users, Nepal, believes that contracts should be awarded in favor of local user groups over private companies so that the benefits are equitably distributed. But discretion left to provincial forest departments in this matter may put some communities at risk of exclusion, especially if they do not have good relations with local officials.
Despite these issues, stakeholders are pressing the government and the World Bank to put safeguards in place so that the funds would directly reach the forest communities. However, on the issue of measures for the equitable distribution, the World Bank’s office in Nepal was unresponsive.
If the distribution of funds issue is not solved, the money will be a costly experiment with fewer benefits for communities that have been protecting Nepal’s forests since 2018. According to lawyer Khanal and experts, if such communities are ignored, the very basis of REDD+ – a program intended to promote the sustainable management of forests and to engage local communities – may crumble. So far, no one knows where the money—and the communities for which it was meant—has gone.