GCF Working Group 2: Coordination & Accounting

1. GCF Working Group 2: Coordination & Accounting Governors’ Climate & Forests Task Force Aceh Meeting – May 18-19, 2010 Tony Brunello California Department of Natural Resources William Boyd GCF Secretariat & University of Colorado Law School

2. Overview • Update on WG 3 status and activities • Key issues • Update on 2010 activities • Report from Sacramento technical workshop on REDD regulatory design • GCF action items for 2010-2011

3. Working Group 2 - Update • MatoGrosso was lead in 2009; California is current lead; GCF secretariat has been supporting – need additional support • Sacramento Technical Workshop on REDD Regulatory Design generated options paper and recommendations for WG 2 consideration • Beginning work on nesting & reconciliation of projects-level activities with state/province performance – need more private sector input • Exploring models for multi-stakeholder processes and safeguards

4. Working Group 2 – Key issues • Crediting pathways • State-level accounting • Nesting & reconciliation of project activities with state/province accounting • Monitoring, reporting & verification (MRV) • State-level performance • Nested project performance • Safeguards • Environmental • Protection of interests • Benefit sharing • Multi-stakeholder processes • Enforceability • Linkage agreements

5. Crediting pathwaysTwo potential pathways • Credits issued by approved state/province REDD programs based on performance relative to crediting baseline and accepted into compliance systems • Direct crediting by compliance system to nested projects that are reconciled with state-level accounting – need more clarity on nesting architecture and reconciliation

6. State/Province Baselines • Emissions reference level – starting point based on historical data (5 to 10 years) with adjustments for stocks to account for different circumstances • Crediting baselines – X% reductions from emissions reference level by 2020 with additional requirement to maintain a certain percentage of stocks

7. Monitoring, Reporting, Verification (MRV) • Regulations should not be too prescriptive • Regulations should articulate key principles/criteria for MRV (and baseline determination) • Consistent with IPCC guidance and guidelines • Use of spatially explicit remote sensing • Quantification of uncertainty + conservative approach that uses bottom of uncertainty range • Nested project MRV handled through approved third-party methodologies - Regulations establish some high-level criteria for nested REDD projects • Accounting for leakage at both state/province and nested project levels

8. Safeguards: Principles & Criteria • Need to take account of principles & criteria already under development via stakeholder processes in states/provinces • Environmental: • Maintain flexibility to deal with other REDD+ activities if/when they become eligible • Protection of interests: • Focus on ensuring due regard for rights/interests and full/effective participation in activity design and implementation • Look to ongoing efforts under REDD+/CCBA; UN REDD; FCPF; etc. • Benefit sharing: • Benefits not limited to credits/revenues from REDD activities • Focus on generating direct benefits; participation; transparency on how REDD flows are managed; institutional mechanisms as part of state/province REDD programs

9. Safeguards: Operational • Regulations require MRV for all safeguards; MRV also on the revenue flows (public and private) • Need certainty on review process – too much uncertainty will inhibit investment • Regulations identify safeguards that satisfy regulatory principles and criteria and invite third-party standards organizations to submit standards for approval • Regulations then require independent third-party certification of nested projects and/or programs against the approved standards

10. Enforceability • Focus on reversal risk • Temporary crediting problematic • Liability on covered entities problematic • For sector-based crediting require credit buffers as part of linkage agreements + residual liability rules (liability on state/province issuing credits?), insurance, etc. • For nested projects – potential reversals could be managed under project accounting standard or under sectoral accounting framework

11. WG 2 – Key Objectives for 2010-2011 • Further elaboration of design of subnational REDD programs • Developing recommendations on nesting and reconciliation of project-level activities with state/province performance • Developing model linkage agreement to link state/province REDD programs with compliance markets • Further elaboration of safeguards and benefit sharing frameworks • Enhancing stakeholder input and participation; developing models for multi-stakeholder processes that can be adapted to different jurisdictions

12. Working Group 2Recommended Action Items for Aceh Meeting • Compile design recommendations for subnational REDD programs in report for review and approval at GCF September 2010 meeting to be finalized as GCF Report for COP 16 • Initiate private sector sub-working group on nesting and reconciliation of project-level activities with state/province performance with report ready for September 2010 GCF meeting • Initiate process to develop model linkage agreement (2010-2011) • Initiate process to develop lessons and recommendations from multi-stakeholder processes