Republic of Mozambique
Ministry of Planning and Development
Direcção Nacional do Financiamento Climático
Financing Sources Climate
The Interface Between Mozambique and the Climate Management Fund
Mobilize Resources for a Future Resilient
Mozambique faces increasing impacts of climate change, from extreme cyclones to prolonged droughts. To meet these challenges and ensure sustainable development, the country has been mobilising different sources of climate finance, both internal and external. This page presents the mechanisms in use, the funds available and the ways to access this strategic support.
+1,3 B USD
Mobilized between 2012 and 2024
+35 Projects
Funded by Multilateral Funds
8 Sources
International Climate Funding
Disaster Management Funding
- disaster insurance (risk transfer);
- support from partners;
- Calamity Management Fund (FGC).
Integration of Climate Change in Planning and Public Budgeting
Challenges in Integrated Climate Funding Management
Despite advances in mobilizing climate finance, Mozambique faces significant limitations in the integration of these resources the national public administration system.
Some of the main challenges include:
- the absence of a standardised climate budgetary tracking system;
- institutional fragmentation between ministries and cooperation partners;
- Lack of national indicators to monitor climate investment impacts;
- Technical and human capacities still limited at central and provincial level.
These obstacles reduce the efficiency of allocation of funds, hinder the evaluation of results and create dependence on non-predictable external funding.
Recommendations for Better Integration
- Development of a national climate finance strategy, linking internal and external resources.
- Implementation of a climate tracking system in the public budget (climate budgeting tag).
- Continuing institutional training in sectoral ministries and decentralized levels.
- Establishment of harmonised reporting mechanisms with development partners and international climate funds.
Insurance
It is an instrument that describes the financing mechanisms for disaster management, aiming to strengthen the capacity of the state to respond financially to disasters, improve post-disaster interventions, relieve the pressure of the state budget and consolidate the construction of resilience as an integral part of the management and reduction of disaster risk.
The PFPD adopts risk transfer instruments whose disaster management is structured according to the frequency and severity of the multiple relevant threats in the country, which allows the optimization of the portfolio of financial instruments, providing agility and flexibility for the allocation of resources according to the needs identified after each event. For low-risk events (high frequency and low severity), risk retention, with the use of quota credits and budgetary instruments, including through the FGC, annual sector budgets and budget revisions.
For high-risk events (low frequency and high severity), such as large floods or cyclones, transfer of risk to the private sector, through instruments such as sovereign insurance, is a viable alternative.
Article 51 of Law No 10/2020 determines that it is for the government to approve instruments for parametric disaster insurance.
In 2022, the Government concluded a contract with two national insurers for a parametric risk insurance based on wind (80%) and precipitation (20%) indices, with a 4 million USD. The insurance was active from 1 December 2022 ed 30 November 2023 and has been renewed to apply from 15 December 2024 (age 2024/2025).
Innovative Mechanisms
Mozambique has been exploring innovative climate finance mechanisms, such as carbon markets, climate debt exchanges and sustainable obligations.
Carbon markets
Carbon markets are a specific type of carbon pricing mechanism through which carbon credits are being generated and marketed (other price fixing mechanisms are carbon taxes, including European Union Carbon Border Adjustment Mechanism).
Carbon markets are emerging as another important instrument to finance low carbon transitions and to contribute to the implementation of the countries' Nationally Determined Contributions (NDCs) to the Paris Agreement.
Carbon credits can be generated in two ways:
- In a system of Cap-and-trade
- Under a basic reference and credit mechanism
The carbon credits generated by projects in Mozambique are all based on reference and credit-based mechanisms. Historically, carbon credit generation in Mozambique has been low, mainly due to lack of institutional resources and lack of specific projects. However, since 2022 there has been a significant increase, with a total of 2.4 million carbon credits generated in the last two years by 41 projects and initiatives.
Although Mozambique has great advances, the potential for carbon credits production is much greater. According to initial estimates of McKinsey, Mozambique has a technical potential to generate between 85-90 million carbon credits per year, with greater potential in the forestry and renewable energy sectors.
Reduction of Emissions by Deforestation and Forest Degradation (REDD+)
A specific type of carbon credits is related to the Reduction of Emissions by Deforestation and Forest Degradation (REDD+). In the last 15 years, Mozambique has invested significant resources in creating systems needed to generate carbon credits from REDD+. This included:
- Development and validation of a national Forest Reference Level;
- Creation of a specific Monitoring and Verification Unit (MRV); and
- Adoption of a dedicated REDD+ Decree (Decree 23/2018) regulating the generation and approval of carbon credits of REDD+ projects in Mozambique.
As a result of these efforts, Mozambique was the first country to receive payments from the World Bank’s Forest Carbon Partnership Fund (FCPF) in 2021 for reducing emissions of approximately 1.28 MtCO2and a REDD+ project in the province of Zambézia.
There are currently more than 36 proposals for REDD+ projects in the portfolio of projects of which 33 are in the feasibility studies phase and 3 in the evaluation phase for approval and authorisation.
Challenges for the exploration of carbon markets in Mozambique
A recent assessment by USAID (2023) identified that the main challenges for the operation of carbon markets in Mozambique include:
- Development of a regulatory framework for carbon markets, with clear guidelines for the sectors of GHG (Agriculture, forests and land use, Energy, Waste and Industry), aimed at creating a favourable environment for carbon investments.
- Limited institutional capacity within the main government bodies at all operational and decision-making levels on carbon processes, emission reduction, data collection and management.
- Limited capacity of measurement, recording and verification systems (MRV) GHG emissions and project monitoring data for all sectors (AFOLU, energy, waste, direct industrial processes).
Climate Debt Exchange
It allows a country to redirect debt payments to finance climate projects. It can occur via bilateral agreements or with intervention by international organizations, combining debt relief with environmental investment.
Sustainable Obligations
Financial instruments intended to finance projects with environmental benefits. They include green obligations (environment and climate) and blue obligations (sea resources). In Mozambique, legal regimes for issuing this type of instrument are under preparation.
International Climate Funds
Mozambique has benefited from International climate funds, supporting projects for mitigation, adaptation and institutional strengthening.
Key operational mechanisms include:
- Green Climate Fund (GCF) ➔
- Global Environment Fund (GEF) ➔
- Adaptation Fund (FA) ➔
- Climate Investment Funds (CIF) ➔
- Fund for Less Developed Countries (LDCF) ➔
- Mitigation Mechanism – previously called NAMA Mechanism (MAM) ➔
- Center and Climate Technology Network (UNCTCN) ➔
From 2010 to 2024, Mozambique mobilised over USD 1 billion for climate projects. Of this amount, around 245 million USD came directly from international funds, with the rest being provided as co-financing.
Projects include from coastal adaptation, food resilience and green infrastructureuntil institutional training and energy transition.
Despite the positive impact, application and access procedures vary between funds and still present technical and coordination challenges at national level.
Disaster Management Funding
- disaster insurance (risk transfer);
- support from partners;
- Calamity Management Fund (FGC).
Integration of Climate Change in Planning and Public Budgeting
Challenges in Integrated Climate Funding Management
Despite advances in mobilizing climate finance, Mozambique faces significant limitations in the integration of these resources the national public administration system.
Some of the main challenges include:
- the absence of a standardised climate budgetary tracking system;
- institutional fragmentation between ministries and cooperation partners;
- Lack of national indicators to monitor climate investment impacts;
- Technical and human capacities still limited at central and provincial level.
These obstacles reduce the efficiency of allocation of funds, hinder the evaluation of results and create dependence on non-predictable external funding.
Recommendations for Better Integration
- Development of a national climate finance strategy, linking internal and external resources.
- Implementation of a climate tracking system in the public budget (climate budgeting tag).
- Continuing institutional training in sectoral ministries and decentralized levels.
- Establishment of harmonised reporting mechanisms with development partners and international climate funds.
Insurance and Risk Management
It is an instrument that describes the financing mechanisms for disaster management, aiming to strengthen the capacity of the state to respond financially to disasters, improve post-disaster interventions, relieve the pressure of the state budget and consolidate the construction of resilience as an integral part of the management and reduction of disaster risk.
The PFPD adopts risk transfer instruments whose disaster management is structured according to the frequency and severity of the multiple relevant threats in the country, which allows the optimization of the portfolio of financial instruments, providing agility and flexibility for the allocation of resources according to the needs identified after each event. For low-risk events (high frequency and low severity), risk retention, with the use of quota credits and budgetary instruments, including through the FGC, annual sector budgets and budget revisions.
For high-risk events (low frequency and high severity), such as large floods or cyclones, transfer of risk to the private sector, through instruments such as sovereign insurance, is a viable alternative.
Article 51 of Law No 10/2020 determines that it is for the government to approve instruments for parametric disaster insurance.
In 2022, the Government concluded a contract with two national insurers for a parametric risk insurance based on wind (80%) and precipitation (20%) indices, with a 4 million USD. The insurance was active from 1 December 2022 ed 30 November 2023 and has been renewed to apply from 15 December 2024 (age 2024/2025).
Innovative Mechanisms
Carbon markets: financial instruments to compensate for greenhouse gas emissions by purchasing carbon credits. In Mozambique, these credits are generated via voluntary and internationally certified mechanisms (e.g. VCS, GS, CDM). A multisectoral task force was created to structure the legal framework and operate this market.
Climate Debt Exchange: allows a country to redirect debt payments to finance climate projects. It can occur via bilateral agreements or with intervention by international organizations, combining debt relief with environmental investment.
Sustainable Obligations: financial instruments intended to finance projects with environmental benefits. They include green obligations (environment and climate) and blue obligations (sea resources). In Mozambique, legal regimes for issuing this type of instrument are under preparation.
International Climate Funds
Mozambique has benefited from International climate funds, supporting projects for mitigation, adaptation and institutional strengthening.
Key operational mechanisms include:
- Green Climate Fund (GCF) ➔
- Global Environment Fund (GEF) ➔
- Adaptation Fund (FA) ➔
- Climate Investment Funds (CIF) ➔
- Fund for Less Developed Countries (LDCF) ➔
- Mitigation Mechanism – previously called NAMA Mechanism (MAM) ➔
- Center and Climate Technology Network (UNCTCN) ➔
From 2010 to 2024, Mozambique mobilised over USD 1 billion for climate projects. Of this amount, around 245 million USD came directly from international funds, with the rest being provided as co-financing.
Projects include from coastal adaptation, food resilience and green infrastructureuntil institutional training and energy transition.
Despite the positive impact, application and access procedures vary between funds and still present technical and coordination challenges at national level.
- Carbon markets;
- International Climate Funds;
- concessional loans and/or grants;
- Green or blue sovereign bonds;
- Insurance, etc.
International climate funds are essential tools to support developing countries in the fight against climate change. These funds provide financial and technical assistance for adaptation and mitigation projects, promoting global cooperation for a more sustainable future.
In Mozambique, several international climate funds operate to finance initiatives in different sectors, such as agriculture, energy, forest, water, biodiversity and resilient infrastructure.
Between 2010 and 2024, 47 projects with a total value of more than USD 1 billion were approved. — of which 245 million correspond to international climate funds, and about 730 million were mobilised as cofinancing.
In Mozambique, several funds are in operation to finance activities linked to climate change, including:
GCF
Green Climate Fund
GEF
Global Environment Fund
AF
Adaptation Fund
CIF
Climate Investment Funds
LDCF
Fund for Less Developed Countries
MAM
Mechanism of Mitigation Actions (MAM – formerly called NAMA Mechanism)
UNCTCN
United Nations Climate Technology Center and Network
Number of projects approved by Climate Fund
Adaptation Fund
| Name | Value (MUSD) | Approval (year) | Status | Climate use |
|---|---|---|---|---|
| Building urban climate resilience in south-eastern Africa | 3.5 | 2019 | In implementation | Adaptation |
| South-South Cooperation Grant (SSC) | 0.05 | 2019 | In implementation | Adaptation |
Green Climate Fund
| Name | Value (MUSD) | Approval (year) | Status | Climate use |
|---|---|---|---|---|
| Formulae Regional Traditional Savanna Fire Management Emissions Reductions | 0.40 | 2022 | Approved | Transversal |
| Global Fund for Coral Reefs Investment Window (GFCR) | – | 2021 | In implementation | Adaptation |
| Participation in Energy Access Relief Facility (EARF) | 3.12 | 2020 | In implementation | Mitigation |
| Linking Climate Adaptation Activities and Social Protection provision through decentralized planning in Mozambique | 25 | 2024 | In implementation | Adaptation |
| Global Subnational Climate Fund (SnCF Global) – Technical Assistance (TA) Facility | – | 2020 | In implementation | Mitigation |
| Global Subnational Climate Fund (SnCF Global) – Equity | – | 2020 | In implementation | Mitigation |
| Blue Action Fund (BAF): GCF Ecosystem Based Adaptation Programme in the Western Indian Ocean | 16.52 | 2019 | In implementation | Adaptation |
| Climate-resilient food security for women and men Mozambique through integrated risk management | 10 | 2019 | In implementation | Adaptation |
| Energy Access for the Hardest to Reach | – | 2023 | Approved | Transversal |
| Strengthening institutional capabilities and coordination mechanisms for accellerating and scaling up the mobility of climate finance in Mozambique | 1 | 2023 | Approved | Adaptation |
| Implementing the NDCs to Promote Low-Carbon Growth in Mozambique | 0.60 | 2020 | In implementation | Transversal |
| Mozambique – Establishing and strengthening the National Designated Authority & Developing strategic frameworks for engagement with the GCF including the preparation of country programs | 0.30 | 2018 | In implementation | Transversal |
| Entity Support for Mozambique | 0.04 | 2018 | Done | Transversal |
Global Environment Fund
| Name | Value (MUSD) | Approval (year) | Status | Climate use |
|---|---|---|---|---|
| Conservation Areas for Biodiversity Conservation and Development II-Additional Financing | 136.12 | 2020 | Approved | Mitigation |
| Piloting innovative financing for climate adaptation technologies in medium-sized cities | 1.0 | 2022 | In implementation | Adaptation |
| Mozambique Conservation Areas for Biodiversity and Development Project | 67.82 | 2014 | Approved | Adaptation |
| Payment for Ecosystem Services to Support Forest Conservation and Sustainable Livelihoods | 41.37 | 2016 | Approved | Mitigation |
| Towards Sustainable Energy for All in Mozambique: Promoting Market-Based Dissemination of Integrated Renewable Energy Systems for Productive Activities in Rural Areas | 12.15 | 2017 | Approved | Mitigation |
| Preparation of Integrated Nationally Determined Contribution (INDC) to the 2015 Agreement under the UNFCCC | 0.20 | 2015 | Approved | Transversal |
| Umbrella Programme for Biennial Update Report to the UNFCCC | 0.36 | 2015 | Approved | Transversal |
| GEF SGP Fifth Operational Phase – Implementing the Program Using STAR Resources II | 4.90 | 2013 | Approved | Transversal |
| Umbrella Programme for National Communication to the UNFCCC | – | 2012 | Approved | Adaptation |
Climate Investment Funds
| Name | Value (MUSD) | Approval (year) | Status | Climate use |
|---|---|---|---|---|
| Mozambique Forest Investment Project (MozFIP) | 47 | 2017 | Approved | Transversal |
| Cities and Climate Change Project—PPCR Additional Financing | 135.75 | 2014 | In implementation | Adaptation |
| Sustainable Land & Water Resources Management Project (SLWRMP) | 24.52 | 2012 | Approved | Adaptation |
| Low Limpopo Irrigation and Climate Resilience | 42.89 | 2012 | In implementation | Adaptation |
| Roads & Bridges Management and Maintenance Project—APL2 | 183 | 2013 | Approved | Adaptation |
| Climate Resilience: Transforming Hydro-Meteorological Services | 20.70 | 2013 | In implementation | Adaptation |
| Building resilience of Mozambique’s power sector through private sector investment | 80 | 2016 | In implementation | Adaptation |
| DGM for Indigenous Peoples and Local Communities | 4.5 | 2017 | Approved | Adaptation |
| Issues Reductions in the Forest Sector Through Planted Forests with Major Investors | 5.66 | 2017 | Approved | Mitigation |
| Climate Change Technical Assistance | 2.27 | 2012 | Done | Adaptation |
| BDRP: Technical Assistance for the Development of a Climate Resilience Policy and Strategy and Drought Insurance Products for the Arid and Semi-Arid Zones of Southern and Central Parts of Mozambique | 0.82 | 2021 | Approved | Adaptation |
| BDRP: Project Preparation for the Climate Resilient Water Services for Cuamba and Lichinga Cities Project | 2.84 | 2023 | Approved | Adaptation |
| Smallholder Irrigation Feasibility Project | 0.78 | 2015 | Approved | Adaptation |
Fund for Less Developed Countries
| Name | Value (MUSD) | Approval (year) | Status | Climate use |
|---|---|---|---|---|
| Strengthening Capacities of Agriculture Producers to Cope with Climate Change for Increased Food Security through the Farmers Field School Approach | 36.34 | 2015 | Approved | Adaptation |
| Mozambique: Building Resilience in the Coastal Zone through Ecosystem Based Approaches to Adaptation (EbA). | 30.90 | 2019 | Approved | Adaptation |
| Adaptation in the Coastal Zones of Mozambique | 14.11 | 2012 | Approved | Adaptation |
Mitigation Mechanism
| Name | Value (MUSD) | Approval (year) | Status | Climate use |
|---|---|---|---|---|
| Mozambique – Sustainable Waste Management – Laying the Foundations for a Circular Economy | 18.8 | 2024 | Approved | Mitigation |
United Nations Climate Technology Center and Network
| Name | Value (MUSD) | Approval (year) | Status | Climate use |
|---|---|---|---|---|
| Development of a Regional Efficient Appliance and Equipment Strategy in Southern Africa | 0.02 | 2016 | Done | Mitigation |
| Feasibility study to use waste as fuel for cement factories in Mozambique | 0.04 | 2015 | Done | Mitigation |
| Implementation of Water-Food-Energy nexus using digital technologies for local communities in Mozambique | – | 2022 | In implementation | Transversal |
| Solar based irrigation for women’s empowerment – "pay as you irrigate" as a means of water management and food security in Mozambique | – | 2021 | In implementation | Adaptation |
| Development of an action plan for rainwater harvesting system and financing proposals for Mozambique | – | 2021 | In implementation | Adaptation |
| Development of energy efficient applications and equipment strategy in Mozambique | – | 2019 | Done | Mitigation |
Carbon markets are emerging as another important instrument to finance low carbon transitions and to contribute to the implementation of the countries' Nationally Determined Contributions (NDCs) to the Paris Agreement.
- In a system of Cap-and-trade
- Under a basic reference and credit mechanism
Reduction of Emissions by Deforestation and Forest Degradation (REDD+)
A specific type of carbon credits is related to the Reduction of Emissions by Deforestation and Forest Degradation (REDD+). In the last 15 years, Mozambique has invested significant resources in creating systems needed to generate carbon credits from REDD+. This included:
- Development and validation of a national Forest Reference Level;
- Creation of a specific Monitoring and Verification Unit (MRV); and
- Adoption of a dedicated REDD+ Decree (Decree 23/2018) regulating the generation and approval of carbon credits of REDD+ projects in Mozambique.
As a result of these efforts, Mozambique was the first country to receive payments from the World Bank’s Forest Carbon Partnership Fund (FCPF) in 2021 for reducing emissions of approximately 1.28 MtCO2and a REDD+ project in the province of Zambézia.
There are currently more than 36 proposals for REDD+ projects in the portfolio of projects of which 33 are in the feasibility studies phase and 3 in the evaluation phase for approval and authorisation.
Challenges for the exploration of carbon markets in Mozambique
A recent assessment by USAID (2023) identified that the main challenges for the operation of carbon markets in Mozambique include:- Development of a regulatory framework for carbon markets, with clear guidelines for the sectors of GHG (Agriculture, forests and land use, Energy, Waste and Industry), aimed at creating a favourable environment for carbon investments.
- Limited institutional capacity within the main government bodies at all operational and decision-making levels on carbon processes, emission reduction, data collection and management.
- Limited capacity of measurement, recording and verification systems (MRV) GHG emissions and project monitoring data for all sectors (AFOLU, energy, waste, direct industrial processes).
Technical carbon potential per year (MtCO2e/year)
| Sectors | Carbon/year credits |
|---|---|
| Forests | 40 |
| Agriculture | 2 |
| Blue Carbon | 4 |
| Enhanced stoves | 7 |
| Renewable Energies | 20 |
| Fire management | 14 |
| Total | 87 |
