TWN Info Service on Climate Change (Jul17/05)
13 July 2017
Third World Network

GCF discuss funding of projects in the forestry sector

13 July, Delhi (Indrajit Bose) — The Board of the Green Climate Fund (GCF) discussed matters related to funding activities in the forestry sector aimed at reducing emissions from deforestation and forest degradation (REDD-plus) in developing countries during its 17th Board Meeting in Songdo from 5-6 July.

(The funding of REDD-plus activities is seen as a crucial matter for developing countries, with many awaiting finance for such activities in the forestry sector. Progress on the matter in the GCF would be an indication as to whether they are moving any closer to getting funds to protect forests.)

According to a document prepared by the Secretariat on the matter which was presented to the Board on the matter, the Board had at its 14th Board meeting, tasked the GCF Secretariat to develop a request for proposal (RfP) for REDD-plus results-based payments. Thereafter, the Fund proposed to begin with a ‘pilot RfP’ and test its efficacy and learn from the experience.

The document states that “the current GCF policies and procedures were designed for upfront investments, whereas the REDD-plus RBP (results-based payments) pilot programme will include payments for results from investments which were made in the past.”

Discussions at the Board on this matter have been progressing under the two Board members who were selected as ‘champions’, viz. Tosi Mpanu Mpanu (Democratic Republic of Congo) and Caroline Lecrec (Canada), who were tasked to lead consultations on the issue.

At the Board meeting, discussions on the issue happened under the agenda items on  ‘pilot programme for REDD-plus results-based payments’, and ‘further guidance for national designated authorities (NDAs) and focal points (FPs) on how to engage with the GCF in the early phases of REDD-plus’.

Pilot programme for REDD-plus results-based payments

The discussion under this item centered on how to implement phase 3 of REDD-plus through the GCF modalities.

(REDD-plus has three phases: phase 1 is on providing readiness and preparatory support (PPF); phase 2 relates to implementation and transformation; and phase 3 is results-based actions or payments for the results achieved.)

(According to the document issued by the Secretariat on pilot programme for REDD-plus results-based payments, countries are at different stages of readiness with respect to REDD-plus. Most countries are in the early phases of REDD-plus and the GCF sees a role to support these countries become REDD-plus results-based payments ready. For countries that are in more advanced phases, “timely mobilization of results-based payments for REDD-plus would help to incentivize action, generate lessons and knowledge, and inform a longer-term approach”, according to the document.) 

In relation to the pilot programme, the matters up for consideration at the Board meeting included:
Size  of the pilot programme: According to the Secretariat’s document, the proposed size of the pilot programme should be between USD 300 million and USD 500 million. 

Eligibility date for results (from actions taken in the forestry sector): This is about defining the start date for eligible results under the pilot programme. According to the Secretariat’s paper, “the eligibility date of results, past or future, for payments has implications on the range of countries eligible for results-based, it affects the potential volume of emissions reduction, possible requirements for informing how the GCF environmental and social safeguards and Cancun Safeguards for REDD-plus were considered in the process of achieving the results, the programming process, and timing of payments.”

The Secretariat proposed three possible dates as the eligibility period: 2013, the year of the agreement of the Warsaw Framework for REDD-plus under the UNFCCC; 2015, where REDD-plus was recognized in the Paris Agreement; and other dates, which could include “a two-year period prior submission of the concept note or milestone-based according to the achievement of all requirements for accessing results-based payments”.

Possible distribution of payments for the verified emission reductions achieved among successfully evaluated proposals: The distribution of payments follows a certain calculation, which ascertains which country will get how much money. The Secretariat’s document proposes that that no single country can receive more than 30 per cent of the total available envelope. Here, the size of the pilot will also have a bearing on the distribution. For instance, according to the document, considering that the proposed size of the pilot is USD 300-500 million, and the valuation of per tonne of carbon dioxide equivalent emissions reduction is valued at USD 5 per tonne (5/tCO2eq), the GCF would be able to pay for up to 100 million tCO2eq emission reductions (ERs). (Valuation indicates assigning a price for the results.)

Application of the criteria for evaluating the proposals as described in the scorecard: A scorecard comprises the criteria for evaluating whether a proposal merits funding from the GCF. The proposed scorecard presented in the document is divided into a ‘concept note stage’ and a ‘funding proposal stage’, each of which has its own criteria for evaluation.

In its presentation to the Board, the Secretariat reiterated that all of the elements were inter-linked. The eligibility date would have a bearing on the volume of emissions reduction, which along with the size would impact how payments are distributed and how proposals are assessed through the scorecard. The Secretariat stressed that they were only testing a pilot RfP at this stage.

During the discussions at the Board, several differences emerged on the size of the pilot, also called the size of the envelope, the eligibility date and the scorecard.

On the size of the pilot, while some Board members said that it should be a minimum of USD 500 million, some said that they could not agree on a size until other aspects of the RfP were agreed upon.

On the eligibility date, some Board members were of the view that it should be either 2010 or 2013. (The reference to 2010 is when the Cancun Safeguards on REDD-plus were adopted during the UNFCCC Conference of the Parties (COP) in Cancun in 2010. A set of seven safeguards was agreed to as part of the Cancun Safeguards. The reference to 2013 is when the Warsaw Framework on REDD-plus got adopted during the COP in Warsaw in 2013.) Some Board members, however, were of the view that the eligibility date could be between 2015 and 2018.

Also, some members specifically said that REDD-plus was about ex-post payments or results-based, while some said that the request for proposals for REDD-plus should incentivize future action as well.

These issues could not be resolved at the meeting and the Board decided to pursue the matter at its 18th Meeting and requested the Secretariat to undertake further analysis of existing GCF policies and to finalize the draft request for proposals for the pilot programme for REDD-plus results-based payments at its 18th Meeting.

The draft decision proposed setting the valuation of results at USD 5 per tonne of verified emissions reductions of carbon dioxide equivalent (CO2eq). However, reference to this was removed in the final decision adopted.

According to Lecrec, the reason to remove the reference was because size of the RfP, the eligibility dates and pricing were inter-related and it would make sense to take a decision on all of these together.

Framing the discussion, Lecrec said that the discussions had not matured to a stage where all the parts of the RfP could be agreed upon at the 17th Board meeting, but that the Board should give enough clarity to the Secretariat so they could finalize the RfP and the scorecard and assess GCF policies.

She also said that GCF policies and processes were built for traditional activity-based projects but with REDD-plus they would have to do something completely different, which is results-based payments. Lecrec also said that the pilot programme for REDD-plus results-based payments was looking at mobilizing finance for REDD-plus, and to generate lessons for the future.

Mpanu, the other co-champion, in his remarks stressed on the work they were undertaking was a “pilot” and that “the perfect not be made the enemy of the good.” The Board should come up with a good decision to help initiate a learning process, said Mpanu. He also said that for the GCF to pay ex-post will demand certain adjustments because, for instance, the accredited entities would not have been involved when the results were produced (at the country level.) He requested that the policy issues (requiring adjustments) should not be held hostage to progress and that the Secretariat should be given the mandate to come up with a revised document and work on the policy issues.

Speaking to the price per tonne of CO2eq, Mpanu said that the price was USD 5, but that they also need to realize that some countries had spent more than that per tonne of CO2eq. He added that even though USD 5 is the price that is in practice in various funds, since the GCF is to be transformational it could think of a price premium.

Mpanu also said that the size of the RfP is important but it would depend on things such as structuring of the RfP, and the Board needs to ensure a certain degree of equity among countries so that not just a small group are eligible but that they need to include other countries as well, which would require some flexibility.

Azimuddin Bin Bahari (Malaysia) stressed that results-based payment must be results-based payment and not for future payments. On the size of the envelope, Bahari said it should be USD 500 million, and then this could be worked backwards to see how the envelope would be distributed. On the pricing, he said that USD 5 per tonne of CO2eq is something they could look into. He stressed that the emissions reductions generated could not be transferred to any entity but must be for the country itself.

Bahari also said that the results period needed to be fixed. “If you go for 2010 it is because the Cancun Safeguards came into place under the UNFCCC. If we go for 2013 there is a justification for Warsaw Framework on REDD-plus. But apart from that, there is no justification at all for any other date,” he said. On the scorecard, Bahari said there is need to relook at the elements of the scorecard to establish equity among the countries.

Larry McDonald (US) said that he could support the Secretariat’s paper, contingent upon verifying that the actions that led to the results were consistent with GCF policies, particularly the Environmental and Social Safeguards and Indigenous Peoples’ Policy. He added that he foresees the Secretariat to develop a robust methodology for retroactive assessments. McDonald also said that the US was not in a position to agree on the size of an envelope until they saw the RfP and the finalization of the scorecard.

Stephan Kellenberger (Switzerland) said that despite it being a pilot programme, the fundamentals should be in place, which according to him were not to make any concession on safeguards nor on any of the UNFCCC requirements and to ensure equity. He said that it is important to ensure environmental integrity and transparency all through the RfP and added that allocation of funds would not be acceptable if there were only one or two countries eating up the whole cake. He added that Switzerland was fine with the proposed valuation of results at USD 5 per tonne of CO2eq. On the size, he said that they see USD 300 million as the floor. On eligibility, his preference would be to consider future action and help countries move up from the initial phase 1 and 2 to phase 3. He was be prepared to consider ex-post results only if the past actions were recent and thoroughly documented was willing to consider various options on the date, but not beyond 2013. 

Silvia Charpentier (Costa Rica) said that the proposed value of the envelope and the value of carbon assigned per tonne were not adequate but that these could be revisited in the future. She also said that the size of the RfP should exceed the size of the previous RfPs issued by the GCF.

Hans Olav Ibrekk (Norway) said he agreed with the suggested valuation of results and that payments for future results should also be included, but that the size of envelope would depend on this. He said the Board could consider an eligibility period from 2015 to 2018. He also said that results-based payments should be used to transition to low greenhouse gas economic development and transformation of the land sector.

He said that he supported the scorecard approach. “For us the volume of funding for the RfP depends on the conservativeness and robustness of the criteria contained in the scorecard,” said Ibrekk, and called for an independent assessment of the funding proposal besides the scorecard. He said that the scorecard should be revised with a view to ensuring high environmental integrity, preference for support to conservative reference levels as well as coherence with other financing entities and mechanisms.

Ludovica Soderini (Italy) said that on the size of the RfP, it should be a maximum of USD 500 million and the range of USD 300 million to USD 500 million would be acceptable. On the eligibility date, she said that it should pay for lower share of past performance and larger share for future performance and the RfP should refer to future payments. She added that she preferred the year 2015 or the year of the submission of the concept note. She also called for equitable and geographical balance in distribution of payments. On the scorecard, she said consultations should happen prior to the 18th Board meeting.

Merete Pedersen (Denmark) said the pilot would not cater for the private sector and had been designed for governments and that at a later stage they need to think through how to engage the private sector in REDD-plus. She also suggested being firmer on the Indigenous Peoples’ rights and added that there were references to Cancun Safeguards, which were strong but not as strong enough as the Paris Agreement or the UN Declaration on the Rights of Indigenous Peoples. On the scorecard, she said more of the upfront criteria should not just be about whether there has been information provided on Cancun Safeguards to the UNFCCC but also how the process around some of those elements has been conducted in the countries.

Cyril Rousseau (France) said that he would be ready to go from 2013 to 2018 with respect to the eligibility period. On the volume, he said they would need to assess it once proposals are defined.

Sally Truong (Australia) said she would consider the size of the RfP in the context of the full RfP and would need stronger guarantees of the application of safeguards. She also said that the GCF should not only be supporting past actions or ex-post payments, but should be supporting future results that encourage additional actions.

Kate Hughes (UK) said that she was keen to see the GCF incentivizing further action and the size of the envelope would depend on the scorecard and the eligibility period.  She said that she needed to be sure of some of the criteria in the scorecard. She also said that the use of proceeds must be reinvested in activities of the nationally determined contributions (referring to the Paris Agreement obligations) and in line with the GCF investment framework.

Lars Roth (Sweden) said he preferred the timeframe from 2015 to 2020 for the eligibility period because it is important to test the results-based payments as it applies to longer-term forest protection and doing so would open it for a larger geographical spread. On the size of the envelope, Roth said that his preference was USD 500 million. He also underscored the importance of safeguards. Roth said he understood the rationale for the price of  USD 5 per tonne of CO2eq but he wanted to know if it would set any precedent for the future RfPs.

Karsten Sach (Germany) called for more discussions on the exact parameters of the scorecard. He also said that he was fine with the fixed price of  USD 5 per tonne of CO2eq. The size of the envelope would depend on the quality and the number of countries that qualify, he said, adding the USD 250 million to USD 500 million was the right size. He also said that the start date of the eligibility should not be set before 2015.

Speaking for the civil society organisations (CSOs), alternate active observer from the south, Kimaren Oleriamit (who is an indigenous person), said the draft scorecard would be an important component of the RfP and should be considered in detail in advance of the 18th Board meeting. Highlighting the recommendations from the CSOs, Oleriamit said that having no reference to the forthcoming Indigenous Peoples’ (IP) policy, in the (Secretariat) paper was a gap and it must be ensured that the IP policy is integrated in the scorecard.

“The draft scorecard incorporates UNFCCC guidance on REDD-PLUS in a good way, especially the requirements on Cancun Safeguards. However, it suggests rating elements of safeguard compliance…Since the Cancun safeguards are mandatory requirements, reviewing the elements in the scorecard regarding these must be a pass or fail exercise,” said Oleriamit. (Some of the criteria in the scorecard have points and some have a ‘pass’ or ‘fail’ rating.)

Oleriamit also said that the UNFCCC guidance requires countries seeking support present a summary of information presented by the country seeking results-based payments to show how all of the Cancun Safeguards have been addressed. “To ensure compliance with Cancun Safeguards, an independent third party should assess and verify the summary of information presented,” he said further.

Oleriamit also said that the CSOs welcome the recognition in the Secretariat’s document that there may be gaps between the Cancun Safeguards and the GCF interim Environmental and Social Safeguard standard, which also applied to REDD-plus results-based payment proposals. When overlaps are identified in assessing these gaps, the highest standard should apply, he added further.

He also stressed that UNFCCC guidance recognizes that the successful implementation of REDD-plus require that non-carbon benefits be incentivized for the long-term sustainability and co-benefit of REDD-plus implementation. This may lead to both increased mitigation potential and in most cases deliver adaptation benefits, he said and added that the CSOs would like to see the scorecard designed in a way that gave more weight to non-carbon benefits in the total score of the project.

He underscored that a benefit sharing plan and clarity on land tenure should be required when REDD-plus would be implemented in indigenous peoples’ territories and forest dependent communities, and that this must be included in the scorecard.

Following these exchanges and after further consultations, in the decision adopted, the Board requested the Secretariat to “undertake a further analysis of existing GCF policies and procedures adopted by the Board and reflect in the draft request for proposals…in…the manner in which such policies and procedures would need to be applied or otherwise considered in order to operationalize GCF REDD-plus results-based payments proposals”.

The Board also requested the Secretariat “to finalize the draft request for proposals for the pilot programme for REDD-plus results-based payments and the related draft scorecard in the light of the final analysis…and the discussions of the Board at its seventeenth meeting on this matter and present it to the Board for its consideration at its eighteenth meeting”.

Further guidance for NDA and FPs on how to engage with the GCF in the early phases of REDD-plus

In the decision adopted, the Board encouraged NDAs and FPs “to access readiness support directly, or to collaborate with readiness delivery partners and accredited entities to submit readiness requests, for the early phases of REDD-plus, using the existing modalities for accessing readiness and preparatory support”.

The Board also encouraged NDAs and FPs “to collaborate with accredited entities to submit concept notes, Project Preparation Facility requests and funding proposals that will facilitate support for the early phases of REDD-plus”.

The Board took note of the “document provided to support efforts by national designated authorities and focal points to engage with the GCF in the early phases of REDD-plus using existing modalities, tools and programmes, and seeking complementarity and coherence for REDD-plus finance with other funds and initiatives”.

(The document in reference is titled Green Climate Fund support for early phases of REDD-plus, which was prepared by the Secretariat.

For instance, for the first phase, the paper states that GCF support could be in the areas of development of a national REDD-plus strategy or action plan and investment plans; designing a national forest reference emission level; designing and establishing the national forest monitoring system; and designing and developing a system for implementing the Cancun REDD-plus Safeguards.

For phase 2, the paper states that the GCF could support preparing REDD-plus strategies and plans as well as analyzing the funding sources and needs from countries in the process of implementing REDD-plus programmes.

For phase 3, in line with the Governing Instrument, the paper states that the GCF will provide financing in the form of grants and concessional lending, and through other modalities, instruments, or facilities as may be approved by the Board.)

The Board also requested the Secretariat to “prepare appropriate communication material in order to facilitate access to the information…and update the information provided in the light of future decisions when needed”.

Edited by Meena Raman