Global Climate Change Alliance: Intra-ACP Programme Training Module Climate Change Finance

1. Global Climate Change Alliance: Intra-ACP Programme Training ModuleClimate Change Finance Module 6 – Introduction to REDD Ms Isabelle MamatySenior ExpertClimate Support Facility

2. Module Structure • REDD in international negotiations • REDD implementation challenges • REDD funding resources

3. Role of Forests in Climate change • Forests are causes of climate change through its deforestation and sources of mitigation climate change as sinks of GHGs. • Forest destruction and land use change accounts for 24% of GHG emissions and loss of biodiversity • Forests are a natural store of CO2 • Activities reducing deforestation are cost effective ways of reducing GHG emissions

4. Forests in international negotiations • Emissions from forest and (land use) not included in the Kyoto Protocol • COP 11 in Montreal in 2005: First discussion • COP 13 -Bali Roadmap in 2007: agreement on a decision to reduce emissions from deforestation during COP 15. • COP15 Copenhagen: Accord 2009 • Cancun 2010: recognition on the need to halt (and not only reduce) deforestation • Next COP 2012: Issue still under discussion at international level

5. REDD Concept Evolution + + • Basic idea is to create a financial value for the carbon stored in forest • RED stands for Reduction emissions from Deforestation (Montreal and Nairobi 2005-2006) • REDD stands for Reducing emissions from Deforestation and forest Degradation (Bali, 2007) • REDD+ includes REDD Forest conservation + Sustainable management of forests + Enhancement of forest carbon stocks (Bali & Poznan 2007-2008) • REDD++is for REDD + Land use for agricultural activity • REDD “readiness" concerns efforts made by a country with the support of multilateral or bilateral initiatives to build its capacity to be ready for a REDD + mechanism (Copenhagen , 2009)

6. REDD key Challenges • Reference levels • Leakage • Permanence • Safeguards • Governance • Measuring, reporting and verifying (MRV) • Finance

7. Reference levels • Reference levels issue raises the question of when (and how) to start crediting emission reductions? • There is no agreed formula for how to set reference levels (baseline): • Historical baseline : rate of deforestation and degradation (DD) and the resulting CO2 emissions over the past years • Business as usual (BAU) scenario: how would emissions from DD evolve without the REDD activity • Crediting baseline (i.e like an emissions quota)

8. Leakage • Leakage is the phenomenon in which efforts for reducing emissions in one place shifts them to another location or sector where they are uncounted and perhaps uncontrolled • Many points are under consideration for dealing with leakage such as: • Monitoring impacts within and outside project boundaries • Attribution of market leakage (estimate international leakage) • National versus project-level: how large are the leakage risks?

9. Permanence • Permanence generally addresses the extent to which forest can permanently store carbon • Ways of dealing with the permanence issue: • Under CDM, the issue is currently resolved via the use of temporary credits (t-CERs), that must be replaced at the end of their certified period : This makes land-use based carbon credits comparatively LESS attractive • Joint implementation (JI) and many voluntary instruments do not use this concept of tCERs but address permanence through insurance, or requirements to set aside an amount of permanent credits

10. Safeguards (1) • 7 safeguards have been listed under the Cancun agreement for the REDD + implementation: • consistency with existing forest programmes and international agreement • transparent and effective national forest governance structures; • respect for the knowledge and rights of indigenous peoples and local communities; • full and effective participation of relevant stakeholders; • protection of natural forests and biodiversity; • addressing the risk of reversals (‘permanence’); • and addressing the risk of displacement of emissions (‘leakage’)

11. Safeguards (2) • New policies and approaches have been or are being developed by institutions such as Forest Carbon partnership facility, GEF and UNREDD based on world Bank policies • However, there is a need for harmonised and strengthened standards based on: • the effective protection of knowledge and rights of, and clear benefits for, indigenous peoples and local communities, and the implementation of the FPIC principle; • the effective protection of natural forests and native biodiversity • measurable progress towards transparent and effective governance; and • compliance with relevant international conventions and agreements

12. Governance • Governance raises the question: “How do you ensure that REDD will not adversely impact the rights and livelihoods of the millions of people who live in or around forests, especially in poorly governed states? “ • Sound governance is highly linked to the successful implementation of the safeguards • Guidelines and frameworks for monitoring governance have been developed by many institutions such as World Band, FAO, UNREDD but there is a need for harmonisation of policies and common indicators • Experiences from other initiatives could be useful: • EU FLEGT process has developed expertise in strengthening and assessing forest governance and in promoting participatory approaches • World Resources Institute developed indicators to monitor and assess forest governance

13. Measuring, reporting and verifying (MRV) (1) • MRV raises the following questions: • How do you measure, report and verify emission reductions from forests? This is especially challenging for measuring reductions in forest degradation • What mechanisms are needed – and who will operate them – to measure changes in rates of deforestation, leakage, permanence, the implementation of safeguards and the impacts on governance? • Carbon emissions from deforestation and degradation are estimated from changes in two important variables: (i) area of deforestation and degradation; and (ii) carbon stock densities per unit area which needs to: • Use remote sensing technologies combined with ground measurements • Establish a forest inventories • Constraints in developing countries : • Limited availability of technical equipment but also of know - how • Limited knowledge of carbon stocks contained in alternative forest types and forest uses

14. Finance • The Eliasch Review estimated that $17–33 billion a year was required by 2030 to halve emissions from the forest sector • The general assumption is that finance of this magnitude could only be generated through the inclusion of forest carbon credits in a global carbon trading scheme, thus providing enterprises (or countries) with the opportunity of offsetting their own emissions by purchasing (cheaper) credits for forest carbon emission reductions • it is virtually impossible to see a global forest carbon market emerging before a new global climate agreement enters into force • Forest carbon markets currently in place, however – a mixture of national and voluntary schemes – are growing, and provided an estimated $178 million for REDD+ activities in 2010

15. Implementing REDD + • The aim of REDD+ is a national programme addressing forest sector emissions as a whole, thus minimising any risk of leakage • however, that in many cases it will be more practicable to begin REDD+ in only part of the country (sub-national actions) as an interim strategy. • Given the complexity of developing programmes to manage a country’s entire forest sector, a three-phase approach has evolved, and was codified at the Cancun UNFCCC conference in 2010

16. Steps for REDD Implementation proposed in Cancun • Three - phase approach agreed at Cancun: • Phase 1: ‘development of national strategies or action plans, policies and measures, and capacity-building’ (‘REDD readiness’) • Phase 2: implementation of strategy, including further capacity-building, testing MRV, payments for ‘results-based demonstration activities’ • Phase 3: fully implemented programme with a pay-for-performance system • Countries can start anywhere they like along the spectrum • The steps should include local and national stakeholder consultations and may require other measures such as the clarification of national land, forest and carbon tenure rights • All steps are likely to need institutional, technical and human capacity-building.

17. REDD funding sources • A wide range of multilateral and bilateral initiatives have been established to channel finance to the REDD activities, mainly to fund REDD readiness activities

18. Major multilateral Initiatives • World Bank’s Forest Carbon Partnership Facility (FCPF) Readiness Fund and Carbon Fund • World Bank’s Forest Investment Programme (FIP) • UN-REDD Programme (FAO, UNDP, UNEP) • Congo Basin Forest Fund (CBFF) • Amazon Fund • Indonesia Climate Change Trust Fund • Global Environment Facility

19. Major bilateral Initiatives • Australia’s International Forest Carbon Initiative • Norway’s International Climate and Forest Initiative (also main donor to Amazon Fund, UN-REDD) • Other donor funds not only REDD+, including Germany’s International Climate Initiative and UK’s International Climate Fund*

20. REDD in practice (1): results of assessments studies • Number of assessments and comparative studies on REDD initiatives came to the following conclusion: • Proliferation of different initiatives and funds • Lack of coordination, between the multilateral initiatives • Long lead times and complicated procedures result in low disbursement rate of the majority of these funds • Difficulty in addressing the three-phase approach agreed in Cancun: particularly there is a wide divergence of opinion on when the country are likely to be “ready”. • Safeguards and governance: improving standards of forest governance should be considered as a process that involved all stakeholders

21. REDD in practice (2): results of assessments studies • Stakeholders engagement: difficulty at national level in identifying and coordinating civil society and forest community representatives on the ground • Knowledge transfer : beneficiary countries reported the difficulty in identifying reliable and up-to-date sources of information • Low engagement of private sector • National ownership: limited ownership of the REDD + process to a very small staff within particular ministries in many developing countries

22. REDD in practice (3): summary funding • All sources of REDD+ finance together from 2008 - November 2011 account for 13% total climate finance with $446 million approved and $252 million disbursed (disbursement rate of 56.5%) • Eliasch Review recommendations: • ‘REDD readiness’ – $4 billion over five years for forty forest nations ($20m / country / year) • $17–33 billion a year by 2030 for fully fledged REDD+ mechanism achieving a 50% reduction in deforestation

23. REDD in practice (4): Multilateral initiatives funding ($m)

24. REDD in practice (5): regional distribution

25. REDD in practice (6): Lack of Coordination • Lack of coordination between the multilateral initiatives in terms of communication and developing common approaches on : • safeguards • MRV • Administrative processes • Few efforts of coordination are made such as: • Establishment of the REDD+ Partnership in 2010 as a global platform to improve effectiveness, efficiency, transparency and coordination of REDD + initiatives and financial instruments (e.g. a Voluntary REDD+ Database) • FCPF and UN-REDD share a common template for national proposals for funding but still follow different processes in many cases

26. REDD in practice (7): Market-based Instrument • Forestry projects under CDM • Forestry projects limited to afforestation or reforestation, REDD project not eligible • Time-limited credits due to concerns over permanence and given that wood eventually decays and releases its carbon into atmosphere • Less than 1% of CDM projects • most of the CDM forestry credits have been generated (and purchased by ) projects proposed by the BioCarbonFund (public-private initiative) • Forestry projects under Voluntary Market • REDD projects represented the highest volume of voluntary projects in 2010 with 29% of projects. • Methodologies for REDD exist in the voluntary carbon market • Forest-only standards made up one third of all active standards in 2010

27. Brief presentation of Major bilateral Initiatives

28. Forest Carbon Partnership Facility (FCPF)

29. Forest Carbon Partnership Facility (FCPF) • World Bank programme, operational in 2008 • FCPF has dual objectives through • Readiness Fund: FCPF aims to build capacity for REDD + in developing countries • Carbon Fund: FCPF aims to test a programme of performance –based incentive payments in a small pilot performance-based payments in a small number of pilot countries • 37 forest developing countries are participants to FCPF • 11 candidate countries • Participants Committee: main decision-making body which includes: 14 donors, 14 REDD+ countries, observers

30. FCPF Readiness Fund • Main activity : REDD+ readiness • Eligibility: • IBRD/IDA member in tropics/sub-tropics • Significant forest area / carbon stock • High relevance of forests in economy • High current/project deforestation

31. FCPF Readiness Fund: activities • FCPF readiness fund supports participating country in: • Developing national reference scenarios for REDD+. • Adopting a national REDD+ strategy that reduces emissions, conserves biodiversity and enhances the livelihoods of forest-dependent indigenous peoples and other forest dwellers. • Designing and implementing accurate measurements and MRV systems to enable reporting on emissions from deforestation and forest degradation.

32. FCPF - Readiness fund -Application process – Step 1 • Step 1- Preparation of the Readiness Plan Idea Note (R-PIN) includes: • Background information on forestry, deforestation, current policies • Potential further programmes: forest governance, land tenure and land use regulations, building institutional capacity for REDD+ • Other relevant cross-sectoral policies: poverty reduction, agriculture • Stakeholder consultation processes • Challenges to implementation • Potential monitoring and implementation systems • Plan and tentative budget

33. Application process - Step 2: Readiness Preparation Plan (R-PP) Document template: • Component 1: Organise and Consult • 1a. National Readiness Management Arrangements • 1b. Stakeholder Consultation and Participation • Component 2: Prepare the REDD Strategy • 2a. Assessment of Land Use, Forestry Policy and Governance • 2b. REDD Strategy Options • 2c. Arrangement for REDD Implementation • 2d. Social and Environmental Impacts • Component 3: Develop a Reference Scenario • Component 4: Design a Monitoring System • Component 5: Schedule and Budget • Component 6: Design a Program Monitoring and Evaluation

34. Application process - Step 3: Readiness Package • Preparation of a country’s Readiness Package (R-Package) occurs when the majority of activities proposed in the R-PP have been implemented • R-Package is designed to move the country on to phase 2 of REDD + (e.g. implementation of strategy, including further capacity-building, testing MRV, payments for ‘results-based demonstration activities’ based on Cancun three-phase approach) • The scope of the R-Package is aimed to encompass the complete set o activities performed in the context of readiness, not just FCPF -funded ones. • R-PPs have not been exclusively funded through the FCPF • However in the context of FCPF, endorsement of the R-Package is required before • However the content and assessment of the R-Package is still under development

35. FCPF carbon fund - objectives • Operational - May 2011 • Payments for verified emission reductions – i.e. part of REDD+ phase 2 activities • Aims to leverage private finance – though difficult in lack of a compliance market that accepts forest carbon or REDD credit

36. FCPF Carbon fund: selection • About five participants will be qualified initially, after the review of the FCPF Participants Committee based on: • Potential for sustainable emissions reductions • Scale of implementation • Consistency with compliance standards • Potential to generate learning value • Benefit-sharing mechanisms, broad community support • Transparent stakeholder consultations • 30m – $40m / country over five years • Procedures for the selection, of the participants and the disbursement of funds are still being drawn up • Endorsement of a country’s Readiness Package will be a prerequisite for participation to the Carbon Fund

37. FCPF Carbon fund activities • Support in four main categories: • General economic policies and regulations (taxation, subsidies, rural credit, certification, law enforcement). • Forest policies and regulations (taxation, subsidies, certification, concession regimes, securing land tenure and land rights, forest law, governance and enforcement, zoning, protected areas, payments for environmental services (PES)). • Forest management (forest fires, reduced impact logging, reforestation). • Rural development (community development, rural electrification, community forestry).

38. FCPF Carbon fund: applying for funds • Country programme proposal will be assessed based on the following criteria: • Potential for generating high-quality sustainable emissions reductions and social and environmental benefits; • Scale of implementation; • Consistency with emerging compliance standards under the UNFCCC and other regimes; • Potential to generate learning value for the FCPF and other participants; • Clear and transparent benefit-sharing mechanisms with broad community support; and • Transparent stakeholder consultations. • Process is still under way and will be similar to the Readiness Fund with Emissions reductions Programme Idea Notes (ER-PINs) and Emission Reduction Programme Documents leading to Emission reduction Programme Agreements (ERPAs)

39. Forest Investment Programme (FIP)

40. Forest Investment Programme (FIP): background • One of World Bank’s Climate Investment Funds (CIFs), operational July 2009 • Aim: financing to developing countries for readiness reforms and public and private investments; much larger sums than FCPF • Will close when new UNFCCC financial architecture is finalized

41. FIP membership and governance • FIP Sub-Committee is the main decision-making body: • 6 donor countries • 6 eligible recipient countries • Observers • Eight pilot countries: • Brazil, Burkina Faso, DRC, Ghana, Indonesia, Lao PDR, Mexico, Peru • Three potential further pilots: • Philippines, Mozambique, Nepal

42. FIP: applying for Funds • The FIP’s eight pilot countries were identified from 45 expressions of interest; • Selection of pilot countries based on: • Programme potential to contribute and adhere to FIP objectives and principles • Country preparedness and ability to undertake REDD initiatives • Existing pilot programme distribution across regions and biomes, ensuring that pilot programmes generate lessons on scaling up activities • Five investment plans approved by FIP Sub-Committee – for Brazil, Burkina-Faso, DRC, Lao PDR and Mexico in 2011

43. UN-REDD

44. UN-REDD: Background • FAO / UNDP / UNEP initiative, operational 2008 • 42 partner countries : • 16 of them with national programmes: Bolivia, Cambodia, DRC, Ecuador, Indonesia, Nigeria, Panama, Papua New Guinea, Paraguay, Philippines, Republic of Congo, Solomon Islands, Sri Lanka, Tanzania, Viet Nam and Zambia. • The remaining are engaged with the programme in different activities such as observers to the Programme’s Policy Board, and through participation in regional workshops and knowledge sharing: Argentina, Bangladesh, Benin, Bhutan, Cameroon, Central African Republic, Chile, Colombia, Costa Rica, Cote d’Ivoire, Ethiopia, Gabon, Ghana, Guatemala, Guyana, Honduras, Kenya, Mexico, Mongolia, Myanmar, Nepal, Pakistan, Peru, South Sudan, Sudan and Suriname. 

45. UN-REDD: Governance and activities • Programme Policy Board: main decision-making body • 3 full members from donor countries • 3 full and 6 alternate from programme countries • NGOs, indigenous peoples, UN agencies • Global programme – common approaches, analyses, methodologies, tools, data, best practices • National programmes available only to selected countries

46. UN-REDD- National programmes • Aims: • Develop and implement MRV systems • Credible, inclusive national governance systems • Systems for management of REDD+ funding strengthened • Indigenous peoples, local communities, civil society organisations and other stakeholders participate effectively • Multiple benefits of forests promoted and realised • REDD+ strategies and related investments catalyse shifts to a green economy • Knowledge is developed, managed, analysed and shared

47. UN-REDD – Applying for Funds • Must be UN-REDD partner country • Regional balance of investment • Prioritise according to: • Contribution of UN-REDD to national readiness process • Effective engagement of UN agencies at country level • REDD+ potential of the country (forest cover, annual rate of change, potential importance of forests to poor) • Also must display commitment to UN-REDD principles: • Human-rights based approach to development • Engagement of indigenous peoples • Social and environmental principles and criteria • Consistency with REDD+ safeguards…. • Submission of the national program document: First review by the Secretariat and final decision by the Policy Board

48. Application process – the national programmes template Document template of the national programmes template (same as the FCPF Readiness Plan) : • Component 1: Organise and Consult • 1a. National Readiness Management Arrangements • 1b. Stakeholder Consultation and Participation • Component 2: Prepare the REDD Strategy • 2a. Assessment of Land Use, Forestry Policy and Governance • 2b. REDD Strategy Options • 2c. Arrangement for REDD Implementation • 2d. Social and Environmental Impacts • Component 3: Develop a Reference Scenario • Component 4: Design a Monitoring System • Component 5: Schedule and Budget • Component 6: Design a Program Monitoring and Evaluation

49. Turning words into action

50. Discussion Are you a REDD partner? Do your country could benefit from REDD funding ? If yes what are the institutional and capacity needs in your organisation to do so? • Questions and answers • Discussion and sharing of experiences concerning REDD