Consists of a transfer of public revenue between governments based on ecological indicators. Ecological fiscal transfers (EFT) can compensate subnational governments for the costs of conserving ecosystems and, in principle, can incentivize greater environmental conservation.

Instrument category

National government transfers

Implementation status

Moderate - tried and tested

Enabling conditions and success factors
  • Existing frameworks for intergovernmental transfers should be in place.
  • Mentoring and reporting framework are required to set the baseline and measure progress against indicators.
Instrument benefits
  • Flexible but robust way of improving accountability regarding the use of finance for ecological objectives.
  • Relatively simple means to transfer existing funds to local governments to support the protection and restoration of nature through the reformulation of existing revenues.
  • By implementing the EFT it will also incentivise all levels of government to carry out Reducing Emissions from Deforestation and forest Degradation (REDD+) initiatives.
Challenges and risks to implementation
  • A lack of transparency between Federal and state governments (or central and local governments) and a flawed accountability system are usually the greatest challenges.

Want to share new instruments?

The Alliance is actively seeking updates to the financial instruments library. Please complete the form to suggest additional instruments.

Fill out the form