President Luiz Inacio Lula da Silva described the Tropical Forests Forever Facility (TFFF) as an “unprecedented initiative” at its launch in Belem where Brazil is hosting the upcoming UN climate summit called COP30.
Brazil is eventually seeking to create a US$125 billion fund that would return a share of profits to developing countries for every hectare of forest they keep standing.
Before the launch, Brazil had announced US$1 billion towards the US$25 billion it was seeking from sponsor governments but struggled to attract other investors.
On the eve of the launch, the UK announced it would not contribute while a representative from Finland’s government told AFP it would be “difficult to find new resources”.
But on Thursday, Norway announced it would invest up to 30 billion kroner (US$3 billion) over 10 years in the fund but imposed several conditions on its contribution.
“It is vital to stop deforestation to reduce the impacts of climate change and limit biodiversity loss,” the Norwegian government said in a statement.
Forest-rich Indonesia also made a contribution of US$1 billion while France pledged a conditional €500 million.
Portugal announced a more modest US$1 million, while Germany also made an unspecified pledge.
Worth more standing
Some governments had expressed reservations about the design of the fund, and Brazil has recently revised down its expectations to US$10 billion in initial contributions.
The fund requires governments to accept more risk to attract private financiers, with the combined pot invested mostly in emerging market bonds to generate a return which is spread between investors and tropical countries.
The scheme proposes creating a reliable, long-term revenue stream to undercut the economic incentive in tropical countries to chop down primary forests which are rich in carbon and biodiversity.
“Such a fund, which will help us, comes at just the right time,” Abe Assamoi, an Ivory Coast delegate to COP30 in Brazil, told AFP in Belem, a city at the edge of the Amazon rainforest.
Brazil identified more than 70 developing countries that could be eligible to receive annual payments if they met the eligibility criteria, namely keeping deforestation below a certain rate.
If they were to stamp out deforestation entirely, tropical countries like Brazil, Indonesia and the Democratic Republic of Congo could earn hundreds of millions of dollars a year each.
“Forests are worth more standing than cut down,” said Lula.
“In a few years, we will see the fruits of this fund. We will be proud to remember that it was in the heart of the Amazon rainforest that we took this step together.”