The complex interplay between fuelwood consumption, deforestation, and land-use transformation in the Dhankuta district of Nepal is scrutinized in this investigation, concurrently shedding light on the feasibility of securing carbon finance via REDD+ mechanisms. Data derived from household surveys and remote sensing ascertained fuelwood as the primary energy recourse for the majority of households, leading to substantial deforestation, forest degradation, and carbon emissions. In a surprising revelation, a 12.4% augmentation in forest cover was discerned over 21 years, attributable to outmigration and conversion of fallow agricultural lands into forests. The investigation established that households involved in agriculture, particularly those with lower income, demonstrated higher dependence on fuelwood, consequently contributing to forest degradation and deforestation that further resulted in the emission of greenhouse gases. Potential avenues for the district to secure carbon finance include the introduction of clean cookstoves, reducing dependency on fuelwood, and greening barren areas. For effective realization of this potential, it is crucial to formulate a benefit-sharing plan that ensures the provision of suitable incentives for forest-dependent communities that are also responsible for forest conservation. By adopting the result-based payment system of REDD+ and promoting sustainable forest management, the district can mitigate carbon emissions, advocate for forest restoration, and qualify for carbon payments.