Duncan Brack | Climate Funding Opportunities: REDD+ Funds1
Briefing Sessions on Climate Funding
Opportunities
Organised by the ACP Secretariat /
Intra-ACP Global Climate Change Alliance (GCCA) Programme
Under the 10th EDF Intra-ACP Financial Framework
Session 2:Funding activities related to Reducing Emissions from Deforestation and Forest Degradation (REDD+)
July 19th, 2012 – ACP Secretariat, Brussels
Handouts by Duncan Brack, , +44 (0) 20 8673 8101 / + 44 (0)7703 582 219; 54 Midmoor Road, London SW12 0EN, UK
Contents
1Introduction: the REDD+ concept
1.1Forests and the climate negotiations
1.2What is REDD+?
1.3Key challenges
1.4Implementing REDD+
1.5Finance for REDD+
1.6 Coordination
2Forest Carbon Partnership Facility
2.1Background
Membership and governance
Readiness Fund
Carbon Fund
2.2Applying for funds: Readiness Fund
Readiness Plan Idea Note
Readiness Preparation Proposal
Readiness Package
2.3Applying for funds: Carbon Fund
2.4Key links and documents
3Forest Investment Programme
3.1Background
Membership and governance
Activities
3.2Applying for funds
3.3Key links and documents
4UN-REDD
4.1Background
Membership and governance
Activities
4.2Applying for funds
4.3Key links and documents
5Congo Basin Forest Fund
6Australia’s International Forest Carbon Initiative
7Clean Development Mechanism
8REDD+ Funding in Practice
Role and structure of the multilateral initiatives
Coordination, overlaps and gaps
Finance
When are countries ‘ready’?
Safeguards and governance
Stakeholder engagement
Knowledge transfer
Private sector
National ownership
Misperceptions and uncertainty
9What Does the Future Hold?
Tables
Table 1 Summary of REDD+ funding to date
Table 2 Geographical distribution of REDD+ funding to date
Table 3 Developing country participation in multilateral REDD+ initiatives
1Introduction: the REDD+ concept
‘Reducing emissions from deforestation and forest degradation, plus conservation’ – REDD+ – is a simple concept which is proving difficult to implement. Since the introduction of the idea to the climate change negotiations in 2007, it has spawned a huge range of studies, discussions and projects. Donor countries have pledged billions of dollars to forest-rich developing countries to help them prepare for a fully fledged REDD+ mechanism – yet the emergence of that mechanism still seems many years off. Nevertheless, the funds now available are of importance to developing countries seeking to tackle deforestation.
1.1Forests and the climate negotiations
Deforestation is one of the biggest sources of greenhouse gases, estimated to account for about 17 per cent of global emissions, rivalling levels from transport or industry. Without tackling forest loss, it is difficult to see how stabilisation of greenhouse gas emissions in the atmosphere can be achieved. Furthermore, compared to other means of reducing emissions, tackling deforestation is – at least in theory – relatively cheap. The Eliasch Review, a report published by the UK government in 2008, estimated that the cost of halving global emissions from 1990 levels could be reduced by up to 50 per cent in 2030 and by up to 40 per cent in 2050 if the forest sector was included.[1]
Emissions from forestry (and land use) were not originally included in the Kyoto Protocol primarily because of difficulties over measuring and verifying changes in emissions. With the hope of including developing countries in climate targets, however, it clearly made sense to address forest-related emissions. The Bali Road Map, adopted by the UN Framework Convention on Climate Change (UNFCCC) conference in 2007, highlighted its importance and began a programme of work tooperationalise it. The Copenhagen Accord, adopted in 2009, recognised the crucial role of REDD+ and saw several countries commit financial support to its implementation. UNFCCC conferences in 2010 and 2011 made further progress on elaborating various components of the eventual mechanism.
It seems unlikely, however, that the final REDD+ mechanism can be fully operational until a new climate treaty is adopted, with all countries undertaking commitments to reduce their climate impact. Since the Durban conference in 2011 reached agreement to negotiate a new protocol or other legally binding instrument by 2015, and for it enter into force no later than 2020, it is difficult to see how a fully-fledged REDD+ mechanism can appear for another decade or so.
Nevertheless, it is widely recognised that countries need to carry out a significant amount of preparatory work before a full REDD+ mechanism could be made operational – and this is what current funding streams are primarily aimed at.
1.2What is REDD+?
The basic concept of REDD+ is simple: that financial incentives should be made available to increase the value of standing forests to forest owners. At present, in most countries, greater rewards can be earned from logging forests or clearing them for agriculture than for keeping them standing. These financial calculations do not, however, recognise the value of forests to humankind as a whole in terms of absorbing carbon (and in providing other environmental services, such as watershed management or protection of biodiversity). REDD+ aims to deliver finance to forest owners to reward them for these services and compensate them for the foregone benefits of logging or clearing the forest.
Over several years’ worth of discussion, the concept has developed beyond its original simple model. ‘REDD+’ now covers five different but related activities that preserve carbon stored in forests:
- Reducing emissions from deforestation requires new programmes, policies, or actions to slow or stop deforestation in high-risk areas where forest clearing occurs or is likely.
- Reducing emissions from forest degradation incorporates actions that minimise negative effects on forest carbon storage in trees or shrubs within a forest, such as through logging or harvesting standards.
- Forest conservation implies permanently protecting forests in zones not immediately threatened by deforestation, but which may be at risk in the future for economic or social reasons.
- Sustainable management of forests ensures that forests being used for economic gain are managed sustainably and can continue to be used, thus lowering the emissions associated with their use.
- Enhancement of forest carbon stocks denotes adding forest carbon, such as through tree planting.
1.3Key challenges
Implementing REDD+ is not proving straightforward. Key issues under discussion, both within the UNFCCC and outside, include:
Reference levels. What will the reduction in emissions be measured against? Current emissions levels, historical deforestation rates or business-as-usual scenarios? Will countries with different forest covers and historic deforestation rates hold different interests in the way the reference levels are constructed?
Leakage. A reduction in deforestation in one area may simply lead to an increase in deforestation in another.
Permanence. Unlike many other forms of climate mitigation – replacing a coal-powered station with a wind farm, say, or a petrol-using vehicle with an electric one – trees only absorb carbon as long as they are alive and growing. Simply planting new trees is not enough; they need to be protected throughout their growing lifespan.
Safeguards.World-wide, more than 1.6 billion people depend on forests for their livelihoods, including for fuelwood, foodstuffs and medicinal plants, while at least 60 million indigenous people are highly dependent on forest resources for their livelihoods.[2] Forests provide cultural, spiritual and recreational functions, and are some of richest biological areas on Earth, offering habitats for a huge variety of plants, animals and micro-organisms. How can all these interests be protected, and how can any benefits be distributed, under the major changes required by a successful REDD+ mechanism?
Governance.In many countries the forest sector is highly associated with corruption and poor law enforcement. How can significant flows of additional finance to the sector be well managed?
Measuring, reporting and verifying (MRV). What mechanisms are needed – and who will operate them – to measure changes in rates of deforestation, leakage, permanence, etc.? And, similarly, how and who will monitor the implementation of safeguards and the impacts on governance?[3]
Finance.The Eliasch Review estimated that $17–33 billion a year was required by 2030 to halve emissions from the forest sector.[4]It seems highly unlikely that donor countries will provideanything like this scale of funding from government budgets. The general assumption, at least in the early years of the process, 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.
The principles both of offsetting and of deriving funding from markets are, however, controversial with several developing countries and NGOs, who have argued instead for public funding for REDD+, including from the new Green Climate Fund currently being established. In any case, 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.[5]
1.4Implementing REDD+
The aim of REDD+ is a national programme addressing forest sector emissions as a whole, thus minimising any risk of leakage (see above). It is recognised, 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 approachhas evolved, and was codified at the Cancun UNFCCC conference in 2010:[6]
- Phase 1includes ‘the development of national strategies or action plans, policies and measures, and capacity-building’.
- Phase 2is the implementation of the REDD+ strategy, including any further capacity-building. This includes development and testing of the emissions measurement (or MRV) system, and could include initial payments for ‘results-based demonstration activities’, but is not a full pay-for-performance system.
- Phase 3is a fully implemented programme with a pay-for-performance system. This includes accurate and detailed accounting of emissions reductions, with payment only for ‘results-based actions that should be fully measured, reported and verified’.
Countries can start anywhere they like along the spectrum.
The term ‘REDD readiness’ is often used to describe the efforts a country undertakes – usually with the support of multilateral or bilateral initiatives – to build its capacity to be ready for a REDD+ mechanism – i.e. broadly what is covered by Phase 1 above. This includes activities such as:
- Preparation of national strategies to reduce emissions.
- Designing and implementing national forest carbon accounting, including baselines and reference emissions levels and MRV systems.
- Developing benefit-sharing mechanisms.
- Developing safeguards and grievance mechanisms to protect the interests of forest communities, indigenous people, biodiversity, etc.
Most, if not all, of these steps should include local and national stakeholder consultations, and may often require other measures such as the clarification of national land, forest and carbon tenure rights. All are likely to need institutional, technical and human capacity-building.
1.5Finance for REDD+
A wide range of multilateral and bilateral initiatives have been established to channel finance to these REDD activities; so far, this has mainly been aimed at the ‘REDD readiness’ activities described above.
The major multilateral initiatives on REDD+ are:
- The World Bank’s Forest Carbon Partnership Facility (FCPF), launched in 2007, comprises a Readiness Fund, designed to fund readiness activities, and a Carbon Fund, intended to provide payments for verified emissions reductions.
- The World Bank’s Forest Investment Programme (FIP) became operational in 2009. One of its broader suite of Climate Investment Funds (CIFs), the FIP is designed to support REDD+ activities, including sustainable forest management, in a small number of focus countries.
- The UN-REDD Programme is a multi-donor trust fund established in 2008 through a collaboration by the Food & Agriculture Organisation (FAO), UN Development Programme (UNDP) and UN Environment Programme (UNEP), aimed at supporting national governments in preparing and implementing national REDD+ strategies.
- The Congo Basin Forest Fund(CBFF), a multi-donor fund managed by the African Development Bank and established in 2008 to protect forests in the Congo Basin.
- The Amazon Fund, created by the government of Brazil in 2009 to combat deforestation and promote sustainable forest management in the Amazon biome.
- The Indonesia Climate Change Trust Fund, created by the government of Indonesia in 2009.
In addition, the Global Environment Facility (GEF) has adopted a sustainable forest management / REDD+ strategy for the fifth GEF replenishment period, 2010–14. GEF is providing $250 million from its own resources, and hoping to mobilise a further $750 million. The Clean Development Mechanism of the Kyoto Protocol provides another route for funding afforestation and reforestation projects (see further in Section 7).
A number of donors have also established bilateral REDD+ funds; the major ones are:
- Australia’s International Forest Climate Initiative, which focuses primarily on building monitoring capacity for REDD+, mainly in Indonesia and Papua New Guinea.
- Norway’s International Climate and Forest Initiative, which has provided significant funding for multilateral initiatives (including being the major funder of the UN-REDD programme and the Amazon Fund) and a large bilateral programmes with Brazil, Guyana, Indonesia and Tanzania.
A number of other donor funds, including Germany’s International Climate Initiative and the UK’s International Climate Fund, are important sources of finance for REDD+ activities, but are not solely focused on REDD+. In mid 2011, a report for the UK government estimated that 67 per cent of REDD+ donor funding was committed to bilateral programmes.[7]
Table 1 below summarises the funding made available through the initiatives listed above. Taking all sources of REDD+ finance together, including bilateral funds not listed here, it has been estimated that from 2008 to November 2011, $446 million was approved and $252 million disbursed – representing 13 per cent of total climate finance.
This can be compared with the Eliasch Review’s recommendations of $17–33 billion a year by 2030 for a fully fledged REDD+ mechanism achieving a 50 per cent reduction in deforestation. The report also estimated that capacity-building to prepare for entry into forest carbon credit schemes – more or less what later became known as ‘REDD readiness’ – would cost about $4 billion over five years for forty forest nations – $20 million per country (on average) per year.
Similarly, a report for the REDD+ Partnership in 2010 estimated average country-level needs for financing of REDD+ phase 1 activities varying from $4.3 million – $39.6 million, depending on country conditions and methods of estimation.[8] Financing needs for implementation of phases 2 and 3, aiming to reduce current deforestation levels by 25 per cent by 2015, were in the range of $20 billion – $24 billion globally.
The geographical distribution of spending of REDD+ finance so far is summarised below in Table 2.
Sections 2 to 5 of this paper examinethe four main multilateral REDD+ initiatives in more detail: FCPF, FIP, UN-REDD, and CBFF.Table 3 lists the countries receiving funding through these four initiatives (correct as at June 2012).
Section 6 looks at the Australian IFCI, and Section 7 discusses CDM funding for afforestation and reforestation projects. Section 8 summarises some of the evidence of the effectiveness of the various REDD+ initiatives to date, and Section 9 provides some conclusions.
1.6 Coordination
One issue should be obvious from the list of multilateral and bilateral initiatives above: there is a need for coordination of the various organisations and funds. In 2010, the REDD+ Partnership was established as a global platform ‘for the Partners to scale up REDD+ actions and finance, and to that end to take immediate action, including improving the effectiveness, efficiency, transparency and coordination of REDD+ initiatives and financial instruments, to facilitate among other things knowledge transfer, capacity enhancement, mitigation actions and technology development and transfer.’It was established as an interim organisation, expecting to be replaced by, or folded into, a UNFCCC mechanism for REDD+ once it is established. Membership of the Partnership is open to any country willing to support or undertake REDD+ actions; 73 countries have so far done so.[9] In general the Partnership is seen as a useful organisation, providing, among other things, a relatively informal forum for UNFCCC participants to discuss REDD+ issues outside the formal negotiations.
The Voluntary REDD+ Database was established by the REDD+ Partnership in 2010, with the aim of becoming a key provider of information to the global community on REDD+ financing, actions and results. The objectives of the database are to improve transparency and coordination around REDD+, support efforts to identify and analyse gaps and overlaps in REDD+ financing, and help share experiences and ideas on REDD+ among Partners and with other stakeholders. As of June 2012, 40 countries had reported a total of 652 ‘arrangements’, with a total funding over the period 2006–16 of $5.74 billion (as reported by funders) or $2.72 billion (as reported by recipients).[10]
Table 1 Summary of REDD+ funding to date
Initiative / Pledged / Deposited / Approved / DisbursedMultilateral initiatives
FCPF Readiness Fund / 229.6 / 229.6 / 27.2 / 9.1
FCPF Carbon Fund / 204.5 / 179.3 / 1.44 / 0.2
Forest Investment Programme / 644 / 459 / 51.0 / 3.2
UN-REDD / 150.8 / 118.2 / 108.1 / 90.9
Congo Basin Forest Fund / 165 / 165 / 75.0 / 12.1
Amazon Fund / 1032.2 / 57.5 / 141.6 / 42.5
Indonesia Climate Change Trust Fund / 18.6 / 8.9 / 6.3 / 5.5
Total / 2444.7 / 1217.5 / 410.6 / 163.5
Total per cent of pledged / 100 / 49.8 / 16.8 / 6.7
Major bilateral initiatives
IFCI (Australia) / 216.2 / 67.1 / 185.5 / 31.7
ICFI (Norway) / 1607.8 / 0 / 1607.8 / 454.4
Notes
All figures in US$ million.
Bilateral funds are not included in the totals, as most of the Norwegian ICFI is used to support multilateral initiatives, including all those listed above; it provides almost all of the Amazon Fund’s finances.
Pledges: represent verbal or signed commitments from donors to provide financial support for a particular fund. All pledges are cumulative.
Deposits: represent the funds that have been transferred from the donor into the account(s) of the fund. Also known as committed funds. All deposits are cumulative.