Global fund would provide effective means to fuel REDD+ climate program: experts

REDD+ assigns financial value to carbon stored in trees, creating a disincentive to cut them down. CIFOR/Marco Simola

OSLO, Norway (11 June 2013) – Efforts to stop an increase in global temperatures can succeed if policymakers put in place a broad governance structure to oversee REDD+ from which money would trickle down through state-level funding to local projects, according to a new research paper.

How best to govern REDD+ — a U.N.-backed framework for reducing emissions caused by deforestation and forest degradation — is politically disputed, particularly over what role financial markets and governments should play in the scheme.

National Governance Structures for REDD+”, co-authored by Norwegian University of Life Sciences professors Arild Vatn and Paul Vedeld, examines four potential national REDD+ architectures that could be funded directly by a compliance market or by a global fund supported by both public and private sources.

The options outlined in the research paper consider strengths and weaknesses of channeling economic support from the global to the country level through financial-market directed intermediaries, a separate national fund, a fund in a national state administration, or conditional budget support that would direct resources into local projects, national programs or sector policies.

“The main idea is to open up the box and start to think about wider governance structures, rather than just thinking about it as a market, which has been the preferred mechanism up until now,” said Vatn at the “Options for National REDD+ Architectures” conference in Norway.

“The way funding is organised will have a decisive impact on its capacity to deliver reduced carbon emissions, improved local livelihoods and protect biodiversity.”

LAYING THE GROUNDWORK

REDD+ assigns financial value to carbon stored in trees, creating a disincentive to cut them down.  If policymakers were to set up a global fund paid for by carbon markets, it would mean that countries and businesses could receive carbon credit payments as Certified Emissions Reductions (CERs), by an issuance from the fund as an alternative to the international carbon market, Vatn said.

Currently, carbon credits in the form of CERs are issued by the Clean Development Mechanism (CDM) Executive Board, approved under the rules of the Kyoto Protocol to the United Nations Framework Convention on Climate Change (UNFCCC), an international treaty that sets binding obligations on industrialised countries to reduce emissions of greenhouse gases (GHG). They pave the way for investments in emission-reduction projects in developing countries.

So far, because REDD+ is still in preliminary stages — referred to as the “readiness phase” — most of the $17.2 billion funding pledged for projects to protect standing forests has been made available to developing countries through the Forest Carbon Partnership Facility (FCPF) of the World Bank and the UN-REDD Programme.

The funds are meant to create national capacity and strategies for REDD+ based on country-specific causes of deforestation.

However, the scheme, intended to establish global climate policy, faces many challenges, according to Vatn.

“In early discussions, everybody thought about developing compliance projects financed by firms like in the CDM,” Vatn said. “While we see some strengths with that, there are also some clear weaknesses, so we need to think about alternatives.”

TRICKLE DOWN FUNDING OPTIONS

The authors propose that REDD+ could be based on a CDM-like system, becoming in part a market-based carbon-trading system made up of buyers in the form of firms that need to reduce emissions and sellers who own — or have the right to use — tropical forests.

“Given that a post-Kyoto agreement includes substantial cuts and accepts trade in emission permits, the market could raise significant revenues to invest in forest protection — this is seen as one of the strengths of a market-based solution,” Vatn said.

“However, there are many problems with CDM, concerning such issues as additionality (the net positive difference resulting from economic development interventions) and transparency.”

An international fund agreed by governments that would issue CERs to firms responsible for emission cuts, could be at least as effective in raising funding, he said, adding that it could also do away with problems encountered in the market-based solution by increasing transparency and including measures directed at lessening potential for fraud.

Using an international perspective, several alternatives for a national REDD+ architecture could take shape.

One alternative would be to set up a national fund outside of the state administration, where resources would flow from a global fund to national funds based on the level of reduced emissions from forests in each individual country.

The national fund could be governed by an independent administrative board that would operate as an intermediary between forest owners — or users — and the international fund. The board could include representatives from the private sector, civil society and public authorities.

Another option would involve a fund managed by the state administration. The money received would be allocated by a REDD+ -designated board made up of members from government, civil society and the business sector. It would function independently of a government budget, but have the capacity to use existing state administration to organize programs and coordinate among different sectors of society.

While it has several of the strengths of the independent fund, an added advantage is that it would have the capacity to use existing public systems, and could ensure that such important sectors as agriculture and energy also get involved, Vatn said.

The final option proposed by the authors would channel money from a global fund in the form of conditional budgetary support. While this solution would use existing administrative systems – it could also offer resources to make them more effective, and is expected to reduce transparency compared to both of the proposed national fund options.

“While principally the best system for democratic accountability and potentially best at intersectorial coordination, the present situation concerning public misuse of money, may hamper its functionality in many countries,” Vatn said, adding that a separate fund within the present state administration may seem to offer the best solution in many contexts.

“What stands out are the many challenges that organizing REDD+ at the national level will face,” the authors conclude, adding that their analysis of all options indicates the weakest option is the market-based system.

ENHANCING TRANSPARENCY

The main appeal of such a system has been its capacity to attract private funding, but it also raises the question as to whether international trades over government-owned forest lands are appropriate. In the market-based system, transparency can be reduced because traders can claim that information must be protected for business reasons, according to the paper.

The analysis showed that it seems problematic to establish a system for combating deforestation and forest degradation that is separated from state decision-making and administrative bodies, leading the authors to suggest that considering local conditions is of paramount importance when choosing a feasible option.

“We still need to define who are the carbon buyers, who are the sellers and define the relationships between them,” Vatn said, adding that all four funding models are open to corruption due to REDD+ delivering large amounts of money to developing countries, which could attract organizations and people who are after the money, rather than supporting the REDD+ ideals.

“Obviously governance issues and rent-seeking behaviour — characterized by pursuit of the money — aren’t only important when it comes to the actual set up of a REDD+ system, but these factors are at play in most forest resource-rich countries, and can hinder any kind of major policy changes if actors from state bureaucracy and business profit from current business-as-usual, said Maria Brockhaus, an economist and policy analyst in forestry and agricultural sciences at the Center for International Forestry Research (CIFOR).

For more information on the issues discussed in this article, please contact Maria Brockhaus at m.brockhaus@cgiar.org

This research is part of the Global Comparative Study on REDD+, which forms part of the CGIAR Research Program on Forests, Trees and Agroforestry. It is supported by the Norwegian Agency for Development Cooperation, AusAid, the UK Department for International Development and the European Commission.


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