Incremental Cost Approach
GEF projects are based upon the concepts of baseline and alternative scenarios and the incremental cost of the alternative. These are simple concepts but can appear confusing at first. Clearly enunciating these scenarios and assessing the incremental cost are vital to securing GEF funding. The division between national and global significance may not be clear cut, so some flexibility is allowed.
The baseline is the 'business as usual' scenario. To assess the baseline:
- Identify the principal threats or the principal barriers to forest biodiversity;
- Determine the root causes of the threats;
- Identify who is affected by the problem;
- Assess the existing situation - what are local communities, local authorities, the national government, NGOs, private sector and other donors already doing in the project area.
The alternative scenario can be identified by analysing the baseline and understanding how the root causes to the problem can be eliminated and threats diminished. The alternative is what needs to be done, over and above the baseline, to solve the problem.
The GEF will not consider funding baseline activities. The incremental cost approach requires that the baseline and the alternative scenarios are described and quantified, and that GEF eligible and development-related components of the alternative are distinguished.
Incremental cost refers to that component of the alternative that will not be funded by national development. The GEF will fund only the incremental cost - i.e. the eligible cost of the alternative, which must be matched by the funding from other sources. GEF is therefore a 'co-funder' and adds the incremental cost of a project to make it globally significant - over and above the national interests and commitments that would take place anyway.