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TWN Info Service on Climate Change (Sept13/01)
9 September 2013
Third World Network  

REDD-plus finance workshop addresses wide range of issues

London, 9 Sept (Kate Dooley) – The second workshop for the ‘Reducing Emissions from Deforestation and Degradation-plus (REDD+) Finance Work Programme’ under the UNFCCC was held in Bonn from August 21-22. It saw better understanding on some issues but in many key areas, issues remained unresolved.

The workshop was co-chaired by Ms Christina Voigt (Norway) and Mr Agus Sari (Indonesia).  Voigt in introducing the workshop, reminded Parties that the Conference of Parties (COP) established the work programme on results-based finance for REDD+ to deal with 3 specific topics: ways and means to transfer results-based payments (RBP), ways to incentivize non-carbon benefits (NCB), and coordination of results-based finance (RBF). The outcome of the two workshops will be a report to COP 19, with a view to adopting a decision on REDD+ finance in Warsaw.

At the conclusion of the two-days, the co-chair's presented a summary, saying there was a lot of common ground between Parties, but not on everything.

They identified the main points of convergence as: the need to increase the accessibility of information to all actors through an information hub/registry; the principles of effectiveness, efficiency, environmental integrity, and a coherent and consistent system that avoids overlap with other decision making bodies; a central role for the Green Climate Fund (GCF); the need for a domestic/national REDD+ entity; non-carbon benefits (NCBs) that are linked to safeguards, and are crucial for REDD+ sustainability.

Issues that need further elaboration or where views were not aligned included:  the importance of mobilizing finance from the private sector; the need for clarity of adequacy and predictability of REDD+ finance; the need to further elaborate the modalities of transfer of payments; the need for a new REDD+ governance body that would fulfill a number of functions (i.e. guidance to financial institutions, coordination of finance, disbursement of finance). Some Parties did not want decision-making delegated to a smaller group. Others wanted to look at roles of existing bodies before setting up something new; whether to elaborate on incentive levels or not; the eligibility of subnational level actions in phase 3 of REDD+ activities; concerns over whether NCBs could increase complexity and lead to delays; uncertainties about ways and costs of measuring NCBs and appropriate scale of focus for NCBs.

A key issue which kept recurring throughout the workshop was the need for equity in the distribution of financial resources. Also raised was why focus was on payments for results (phase 3 actions) when many developing countries have yet to finish the preparation and readiness phase for REDD+ (phase 1 and 2).

Guyana noted that about 10% of the rainforest countries have attracted 90% of financing. It said that scaling up REDD+ finance within the current system would mean acceleration of the undesirable disbursement landscape.

Togo said that discussions are focusing on payments for results, yet many developing countries have not finished the first stage –preparation and readiness. It questioned why Parties have jumped to the results stage when the two readiness phases are not yet accomplished?

Cote d’Ivoire and Dominica noted the importance of the readiness phases for delivering results, and said we must recognize the large number of developing countries who have no support for these phases. Cote d’Ivoire noted that while the focus of this workshop is on payment for results, for many countries there is no support to get results. Dominica said that without an institutional architecture which can address these issues we do not see any light at the end of the tunnel.

UNFCCC Executive Secretary Christiana Figueres opened the workshop by remarking on the progress on REDD+ discussions since Cancun. Yet in the real world deforestation continues to increase, she added. Figueres quoted UNEP estimates that USD 17 to 40 billion is needed to achieve the mitigation that REDD+ can deliver, noting that at the moment, there is only USD1.7 billion in the major REDD+ multilateral initiatives. Figueres noted that the architecture of the global REDD+ mechanism is what will allow more money to flow, and urged Parties to use the workshop to provide the basis for further work in Warsaw.

Mark Storey (Sweden), co-chair of the Work Programme on Long-term Finance, reported on the outcomes of the final two-day workshop under this work programme which was held in Bonn from August 19-20. He said the key issues discussed were: enabling environments (including the role of the private sector); how to measure results; and the different situation for adaptation vs. mitigation; and the need for transparency - for developed country Parties' commitments and contributions, and the need to assess effectivness of financing (results). He noted that the subject of REDD+ finance has only come up in the margins, saying “the topic is so complex that it sometimes scares people”. He underscored the links between the work under the Long-term Finance Work Programme and the REDD+ discussions on results-based finance, noting that the report from this workshop will feed into the high-level Ministerial dialogue in Warsaw.

The workshop began with presentations from Brazil, the Coalition for Rainforest Nations, Bolivia and Colombia.

Brazil presented 3 elements for a simple and effective architecture to provide a meaningful decision on results based finance: (1) a central role for the Green Climate Fund (GCF); (2) national REDD+ coordinating entities; and (3) an international online repository of REDD+ results. The central role of the GCF would be to provide assurances that REDD+ results will be paid, and to ensure equitable distribution of resources through ex-post payment of grants (a ‘non market-based’ approach). The two main functions of the national REDD+ coordinating entity would be to establish and sign agreements to obtain and receive payments for results at the international level, and to ascribe results to other entities and sub-national actors at the national level.

Brazil noted that in order for REDD+ to be an effective tool to contribute to climate mitigation, appropriate market based results must exclude the use of offsets, saying that there is no point in REDD+ from a mitigation perspective if Annex 1 countries use this to continue emitting. It said that payment of results can be used by developed countries to fulfill their financial obligations under the Convention, but not their mitigation obligations.

Papua New Guinea (PNG) gave a presentation on behalf of the Coalition for Rainforest Nations (CfRN), noting that REDD+ is losing credibility due to lack of finance, lack of coordination, and a lack of real funding. PNG suggested that a REDD+ governance body is needed at the international level to review eligibility for results and coordinate support for REDD+ countries. The goal would be to provide a concise set of modalities on ways and means to distribute finance.

Bolivia highlighted that the carbon-centered mitigation approach to REDD+ is only one of the possible approaches. It outlined 3 different approaches in the context of results based finance for REDD+: carbon centered; non-carbon benefits; and the Joint Adaptation and Mitigation (JAM) approach, which is designed to effectively advance non-market and non-carbon based approaches. It said that all approaches to forests and climate change fall within a spectrum between mitigation and adaptation. REDD+ focused on carbon looks exclusively at mitigation, while the JAM approach focuses on the integral and sustainable management of forests. Bolivia suggested a continuum of ex-ante and ex-post finance for performance would be needed based on a number of criteria, proposing "variable tranches" for ex-ante financing and "fixed tranches" with fixed amounts for ex-post finance if specific goals are met, with each approach using different combinations of finance.

Colombia noted that the REDD+ negotiations have finished or are close to finishing a number of methodological elements, as well as the linkages between them, yet there is no linkage to results-based finance. It suggested the purpose of this work programme is to build bridges from REDD+ to other bodies and tracks in the Convention (such as the NAMA registry) and to provide guidance to the GCF, as the vehicle identified as one of the main conduits of REDD+ finance.

Colombia suggested establishing a REDD+ unit tracking log, with linkages to the financing entities. It noted links with other bodies, such as the Standing Committee on Finance (SCF), with a mandate to improve coherence and coordination of finance and measuring, reporting and verification (MRV) of results-based finance, and the GCF. Colombia noted it is now time to build 'our side of the bridge', by sending a strong signal to the GCF Board that they should use the methodologies and modalities developed for REDD+ and consider establishing a specific REDD+ window, to allow results based REDD+ activities to access the fund.

Ian Henderson from the UNEP Finance Initiative stated that if the incentive structure is right, then private-sector capital will flow at scale, but policy must be long term and predictable, with long investment timescales. He noted the importance of results based finance, but suggested to not lose sight of the bigger picture – what is driving finance and investment into business as usual (BAU) activities? Do these drive deforestation? He said that private sector capital for REDD+ is most easily mobilized in a nested approach. The private sector thinks in terms of risk and return, and wants to be able to understand the risks and measure things. From this viewpoint he said the business case for REDD+ is not particularly robust at the moment – there needs to be more focus on the benefits of REDD+, rather than the risks.

The Forest Carbon Partnership Facility (FCPF) of the World Bank gave a brief update, saying that 10 years of experience in carbon finance shows RBP can be powerful incentive for stimulating actions on mitigation, but clear agreements are needed on the definition of results, well designed MRV, and management that can oversee implementation and adherence to safeguards. Countries that receive payments need appropriate systems in place, and a regulatory framework that fosters RBP.

UN-REDD supported this, saying that feedback from its pilot programme showed that a solid institutional arrangement is required to facilitate RBP, which takes a long time to establish. Credible results based on MRV are taking longer than expected and countries need more time to build the institutional framework. It said there were challenges to coordinate many different actors in country, and national level coordinating mechanisms were needed to ensure coherence. It emphasized the need for continued readiness finance, saying that the readiness process was underestimated.

Co-chair Christina Voigt introduced the plenary discussions by outlining the information countries have already agreed they will provide on REDD+, and asking how this information countries have provided will connect with finance. She said principles are needed for the deployment of finance, and more concrete methodological questions, such as scope and extent of payment will need to be determined.

She proposed an "information hub" to provide the link between information countries are providing and financial streams, to gather and track information, including distribution of finances and actions, and avoid gaps in finance. She suggested this was similar to a registry (Colombia's proposal), an online tool (Brazil's proposal), or something bigger (CfRN proposal). She noted that the COP cannot give guidance to external institutions (such as existing multilateral funds), and it was an open question whether the COP would give guidance to existing UNFCCC mechanisms such as the GCF, but that the COP could give broad guidance on establishing an information hub. She invited views and comments on the fundamental questions which needed to be discussed, including where information on all elements from REDD+ countries should go, how does the information provided by REDD+ countries turn into RBP, and who decides that and how?

Coordinating body?

In the plenary discussion which followed, there was general consensus that some form of coordinating body was needed for REDD+ finance, but disagreement over whether this should be a new body or institution, or something closer to an online repository of information (such as the NAMA registry).  Norway and Switzerland expressed concern that there should not be overlap with existing institutions, with Switzerland suggesting an information hub, unit tracking log, repository, etc. is a good neutral step without making finance decisions, and Norway noting the need to build a REDD+ architecture that can be useful for the financial mechanisms already existing under the Convention, and possibly those outside the Convention.

The United States said there was value in the idea of collecting information in one place, but it is the role of the financial institutions to take this information and make decisions. China, PNG, Ghana, Uganda and Guyana emphasised the need for a formal body to make decisions on REDD+ finance eligibility and disbursements.

Uganda noted that enabling environments are needed at the global level, while some of the barriers (to transformational change) are at national level; they need global support in order to be removed.

Ghana and Guyana agreed that a streamlined architecture is needed for RBP to reduce transaction costs, and suggested combining the proposals of Brazil and CfRN, so that a committee or REDD+ body can provide consistent standards to guide eligibility and disbursement and safeguard equity. Guyana said we need to agree in principle on the functions a body which can evaluate proposals and take finance decisions at Warsaw.

China said that to address the mandate from Doha, Parties need a picture of the elements of the long-term finance architecture, which should include sufficient finance and channels for transferring finance and predictability, noting the need to fulfill the Copenhagen pledge on long-term finance. Regarding the role of the private sector, China asked what opportunities and models can be used for engaging the private sector if not using offsets?

Sudan noted that many REDD+ terms had not been defined, including the use of results based. It said that results are delivered by the implementation of REDD+ activities, whichever phase they are in. It said this workshop should address investment in the drivers of deforestation, which is the main issue to tackle deforestation.

While Norway disagreed with Sudan on the definition of results based payments, saying the Cancun decisions were clear that phase 3 of REDD is results based payments for emissions reductions, the European Union agreed that to a certain extent Sudan is right that Parties do not yet have a clear decisions of results; these are detailed in draft decision on MRV, which assesses results against reference levels and will hopefully be completed in Warsaw.

The European Union said that a quantifiable baseline for the provision of support is needed. It stated that not all results beyond BAU should be paid for (some countries have indicated they can deliver results without finance, and this should be accounted for).

Brazil responded that regarding quantified baselines for support (incentive levels / crediting thresholds), this is a touchy issue which could block negotiations, as it goes down the path of establishing targets for developing countries. Brazil said that elements of guidance should include ex-ante finance for the development and implementation of paragraph 71 (readiness activities). In order to create results and monitor these, a lot of things will require ex-ante finance. This is important to allow everyone to receive RBP; it is not a matter of either/ or; in order to get one you need the other.

Several other countries also commented on the need for upfront investment.

Ethiopia noted that RBF must be defined in a broader way – the narrow interpretation of results based means investment is made up front by the host country, with payments coming long after. This definition will exclude developing countries that are not in a position to do up front investment.

Thailand said that some countries will need up-front finance for implementation. Sudan called for additional funds and a complete decision on REDD+ finance, not just on phase 3.

Private sector role

On the issue of sources of finance, Brazil opposed the use of offsets for climate mitigation, and China questioned what role there was for the private sector beyond offsets.

Switzerland noted the private sector is interested in projects and nested REDD.  It said we need them to move to the commodity or supply-chain level to not get stuck in the modality of projects. The US said it saw multiple roles for the private sector – demand for emissions reductions are one, risk reduction tools are another which directly relate to phase 3. It said engaging private sector as an ally in sustainable land use and mitigation is a sustainable way forward.


Safeguards

On safeguards, there remained disagreement over what level of information would need to be provided for countries to access RBP.

The EU emphasized that the draft decision on provision of safeguards information should be linked to RBP. It stressed the need to have not just a system for providing information, but to actually have provided the information.

Norway agreed that reporting on safeguards was a prerequisite for receiving RBP. It asked how Parties know safeguards have been addressed and respected, and said this should be part of a finance decision.

Brazil said that it has already been agreed that safeguard information systems are a requirement for RBP, but a decision only needs to reflect whether safeguard information systems exist or not. It said countries will not pay for results where they feel safeguards have not been met. It said that putting safeguards into the finance decision is not the right place, suggesting that it belongs in the safeguard decision being forwarded by SBSTA to the COP.

The Philippines added that reporting on safeguards is one of the key elements needed in a REDD+ finance decision. It said the draft conclusion from Bonn reiterates the need for a ‘summary of information’, but is vague as to when the first summary should be provided. Given the importance of the link to finance and the safeguards information, the Philippines suggested at least one summary should be provided before RBP can be accessed, which should be reflected in a decision.

Non-carbon benefits

Day 2 of the workshop kicked off with expert presentations, followed by general discussions on non-carbon benefits (NCBs) and elements of a REDD+ finance architecture.

Professor Arild Angelson from the Norwegian University of Life Sciences gave a presentation outlining the difference between safeguards and NCBs. He said that it is extremely difficult to measure NCBs, with a big difference between MRV of emissions and measuring the impact of REDD+. He said the lack of comparable measurements make it impossible to create a price index, for trading of credits on a market. He said that the promotion of NCBs is necessary and in most cases instrumental to achieving carbon benefits.

Professor Angelson questioned how comprehensive the REDD+ mechanism should be, saying it was challenging enough to achieve real emissions reductions, and to resolve challenges such as reference levels without overloading the REDD+ mechanism with further indicators on social and environmental performance.

Peter Minang
from the World Agroforestry Centre (ICRAF) outlined different options to quantify NCBs such as land-use system based or area based. He explained that ICRAF already uses participatory tools to quantify benefits such as water and biodiversity. He cautioned that safeguards as a conditionality on eligibility may not be sufficient to incentivize performance and suggested considering financing ‘bundled’ or ‘stacked’ services, to translate into market and price incentives. He outlined a difference between financial and non-financial incentives, where non-financial incentives could incentivize a wide range of policy instruments. He concluded by pointing out that REDD+ projects are not viable based at current carbon prices.

Pham Quoc Hung from VNFOREST in Vietnam gave a presentation on NCBs in Vietnam’s national REDD+ programme. He explained that NCBs are part of Vietnam’s national forest policy framework, which covers both ecosystem based and social benefits. Vietnam has considered NCBs in both theoretical research and piloting.

Discussions on NCBs centered on the viability of monitoring, with China pointing out that while REDD+ is about emissions, measuring and monitoring can be quantitative or qualitative. It questioned who would pay to measure NCBs? China suggested that one way to incentivize NCBs would be to deduct a proportion of carbon payments if a country cannot fully respect safeguards.

Bolivia said they fully support NCBs but they cannot see carbon as the centre and NCBs in the margins. It said that taking a holistic approach on the multiple benefits of forests can help to measure trade offs between food security, energy needs, income generation and other benefits of forests.

Brazil pointed out that we are not discussing REDD+ under a multilateral forest convention, but under the UNFCCC. In that context it does not see co-benefits as results, and feels that measuring NCBs would come as an additional burden on top of the gigantic effort to MRV carbon.

The US said that NCBs are critical to the long term sustainability of REDD+, but saw these as being already codified in the safeguards decisions, and agreed with Brazil that as this is the UNFCCC, the focus is on reducing emissions. It noted that public and private sector investment is already seeking out programmes which maximize NCBs, as this reduces risk. It said that if we see NCBs and safeguards as a continuum, it is hard to separate out these two discussions, and noted that additional guidance on monitoring of safeguards and identifying NCBs will both be discussed under SBSTA next year.

Indonesia supported this, saying that there cannot be a decision on NCBs at COP19, as there will be submissions on this in 2014. The Philippines also agreed that detailed guidance on NCBs is not needed in Warsaw, but a clear recognition of the impact of NCBs on the sustainability of REDD+ should be part of a COP 19 decision on results based finance. It also noted that NCBs should be nationally defined, but at international level we need a common understanding of what they pertain too.

Ethiopia said that they interpret NCBs as development benefits, to recognize the contribution of carbon benefits to the global common and that these are not an individual benefit, but a collective benefit for communities. It said that NCBs cannot be defined at the international level, but defining procedural steps can help identify these on a case-by-case basis. Thailand said that opportunities are needed at the international level to make it more attractive for countries to provide co-benefits.

In observer interventions, the Accra Caucus noted that there are already COP decisions stating that countries must address and report on safeguards to access results-based finance, and that defining results narrowly as carbon would not ensure finance for readiness activities. They said that recognition of customary rights and land tenure is the best way to conserve forests and that RBP can address drivers by rewarding tenure based on changes in national laws and policies. They said simple indicators for NCBs can be developed at the national level, and that carbon markets are not a reliable source of finance or a means of reducing emissions.

The Climate Action Network (CAN) said that they see safeguards and NCBs as complementary, not as competing tracks, and that monitoring of REDD+ should encompass more than carbon. The REDD+ Safeguards Working Group said that NCBs are crucial to the long-term success of REDD+ and cannot be separated from carbon benefits.

Financing architecture

The final session of the workshop considered design elements for a results-based financing architecture for the full implementation of actions relating to REDD+.

The EU thought the principles already presented in the Chair’s summary at the start of day two would be useful elements for a COP decision and supported the suggestion from the Philippines to include recognition of the importance of NCBs for the long term sustainability of REDD+ in a COP decision.

Brazil highlighted that the information hub they proposed was for the purposes of transparency, but not to create additional burdens; results that are already MRV’d would not have to be reproduced. Its proposal for a national coordination entity would address issue of missing governance at the national level, but is not supposed to replace national inventories, which include the forest sector and are already a requirement under the Convention. It outlined key elements of a REDD+ finance decision as pointing to the central role of GCF, designation of national authorities, and the idea of repository.

China outlined 3 key elements of a decision on long-term finance, including a clear picture on sources of finance, guidance on the governance of financial transfers, and approaches for determining payments – a carbon price or other approaches?

Malaysia agreed with China that provision of finance for REDD+ needs clarifying. It noted the costs to developing countries associated with providing environmental integrity, and said it was difficult to continue REDD+ discussions when all indications show that finance may be very inadequate. Ghana said that without sustainable sources of funding the proposed REDD+ architecture will just be on paper – it will not be a reality.

PNG emphasized that the governance structure needs a body under the COP, which goes beyond information sharing. Providing guidance to financial institutions like the GCF and coordination with bodies outside the UNFCCC will also be an important role

Norway said it would like reference in the decision to the concept of an incentive level or compensation level. Bolivia highlighted the need to open a window in the GCF, but not only related to REDD+, but related more broadly to Adaptation and Mitigation in forests, so the window should not be designated as a REDD+ window, but as a forest mitigation and adaptation window, incorporating the range of approaches.

Colombia said that the elements of a decision must consider the need for payments of ex-ante finance to countries that would need this. Indonesia agreed with Colombia and Brazil that ex-ante finance is needed to support readiness for results based and to cover the costs to produce the results. Uganda noted that the commitments of developed countries to support REDD+ results based actions must be reflected in any REDD+ finance decision.

Brazil again flagged the red line of the idea of an incentive level proposed by the EU and echoed by Norway, noting that attempts to condition results were premature in the absence of enough funds to pay for all the results. It noted that it did not see the consideration of a specific window under the GCF as necessary, and possibly counter productive in terms of the level of finance available. It considered the existing mitigation window sufficient.

On the process for Warsaw, the co-chairs announced they will prepare a report for the COP to consider, with the objective to adopt a decision there. They noted the general sentiment that Parties would like to see consolidation of REDD+ finance discussion in this group with the processes in the subsidiary bodies, and closed the workshop, announcing that a summary of the workshop will be made available online.

The agenda, presentations and an informal summary by the co-chairs can be found here: http://unfccc.int/methods/redd/redd_finance/items/7729.php

 


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