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Financing the World's Forests: integrating markets and stakeholders

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Fourth keynote speaker presentation by Jessica Brown (Overseas Development Institute) …

Fourth keynote speaker presentation by Jessica Brown (Overseas Development Institute)

3rd August 2009 - Imperial College (CEP)

Published in Economy & Finance , Business
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  • 1. Options for REDD and for reducing the financial gap
      • Presentation by Jessica Brown (ODI)
      • Imperial College conference: Financing the World’s Forests
      • 3 August 2009
  • 2. Presentation overview
    • Setting the context for REDD finance
    • Phased approach for REDD
    • Matching the phases with finance options
    • Filling the financing gap for REDD
    • New and innovative revenue raising mechanisms for REDD
    • Challenges ahead
  • 3. Setting the context
    • A financing mechanism for REDD is under negotiation, to take effect after 2012.
    • Mechanism will draw on public and private financing sources to respond to diverse needs of different developing countries.
    • Examples of financing needs include:
        • capacity building
        • monitoring system
        • forest inventories
        • land tenure reform
        • policies and measures (e.g., incentives to encourage forestry, regulated infrastructure expansion)
        • ongoing emission reductions
    • Financing for upfront capacity building (‘readiness’) is likely to rely on public funds; financing ongoing emission reductions is likely to come from funds and/or carbon markets
  • 4. Phased approach to implementation Phase 1: National REDD strategy development, including national dialogue, institutional strengthening, and demonstration activities. Phase 2: Implementation of policies and measures (PAMs) proposed in those national REDD strategies. Phase 3: Payment for performance on the basis of quantified forest emissions and removals against agreed reference levels. Recommendations from the Norwegian government’s REDD Options Assessment Report (REDD-OAR)
  • 5. An initial support instrument that allows countries to access immediate international funding . A fund-based instrument that allows countries to access predictable REDD finance . Continued funding under would be results-based, but performance would not necessarily be monitored only on basis of emission reductions. A GHG-based instrument that rewards performance on the basis of emissions reductions .
    • Phase 1: National REDD strategy development, demo activities
    • Phase 2: Implementation of PAMs proposed in national REDD strategies.
    • Phase 3: Payment for emissions reduction performance
    Matching the phases with finance
  • 6. An initial support instrument that allows countries to access immediate international funding .
    • Phase 1: National REDD strategy development, demo activities
    Matching Phase 1 with finance
    • Activities should continue to be supported by voluntary contributions that are immediately available
      • Ex: World Bank’s FCPF, UN REDD, bilateral arrangements.
    • Eligibility for access to funds should be based on a demonstrated national commitment to REDD strategy development.
  • 7. A fund-based instrument that allows countries to access predictable REDD finance .
    • Phase 2: Implementation of PAMs proposed in national REDD strategies.
    Matching Phase 2 with finance
    • Activities should be supported by predictable funding from a global facility supported by an internationally binding finance instrument with enforceable commitments
    • Eligibility based on demonstration of cross-sectoral commitment to REDD strategy implementation within national government
    • Continued access to funding based upon performance
  • 8. Matching Phase 3 with finance A GHG-based instrument that rewards performance on the basis of emissions reductions .
    • Phase 3: Payment for emissions reduction performance
    • Could be financed on large scale
    • Transition from global funding facility to integration with compliance markets (or non-market compliance mechanism)
    • Eligibility contingent on compliance-grade monitoring, reporting and verification (MRV) and accounting of emissions.
  • 9. How do we fill the financing gaps? Most promising avenues for meeting financing shortfalls in post-2012 context is from ‘new and innovative’ forms of finance.
  • 10. Innovative financing options for REDD
    • Revenue raising options
    • Auctioning of emission allowances;
    • A uniform global levy/tax on CO 2 emissions;
    • Levies/taxes on emissions from international maritime and air transport;
    • A levy on market-based mechanisms under the Kyoto Protocol;
    • Bonds
    • Currency transaction tax
    • Hybrids
  • 11. Proposals on the table Proposal Source of funds Amount of funds generated AUCTIONS OF EMISSIONS ALLOWANCES Norway’s auctioning of AAUs Annex I allowances withheld, auctioned internationally $20-30 Bn annually A UNIFORM GLOBAL TAX ON CO2 EMISSIONS Swiss Global Carbon Tax Tax ($2/t CO 2 ) on emissions; ≤1.5/t CO 2 per capita exempt $30-40 Bn annually LEVIES ON EMISSIONS FROM INTERNATIONAL MARITIME AND AVIATION International Air Passenger Levy, International Maritime Emission Reductions Scheme, Tuvalu’s Burden Sharing Mechanism, Oxfam International, etc $6 per ticket fee (economy class), $62 per ticket fee (business/first class); or a straight charge on emissions (not based on ticket); or levy on international airfares, maritime transport charges $8-10 Bn annually, for first five years of operation
  • 12. Proposals on the table (cont’d) Proposal Source of funds Amount of funds generated CARBON MARKET-BASED LEVIES Extending the levy to JI and/or IET Levy on JI and/or IET 2008–2012: $5.5–8.5 Bn p.a. 2013–2020: $3.5–7.0 Bn p.a. Pakistan’s CDM levy 3-5% levy on CDM $0.2–0.5 Bn p.a. at levy of 5% BONDS EC GCFM High rated bonds $1.3 Bn annually for next five years CURRENCY TRANSACTION TAX Currency transaction tax small levy (0.005%) on foreign currency exchange transaction $15-20 Bn annually HYBRIDS Mexico’s World Climate Change Fund Multiple sources Initially $10, scaling up to $95 in 2030
  • 13. Other considerations for REDD finance
    • Funding integrated into the overall financing architecture developed under UNFCCC
    • International REDD financing should be predictable, verifiable, with firm funding commitments
    • International finance should complement domestic funding
    • Disbursement based on five-year national REDD implementation plans, or left to the responsibility of national decision-making processes
  • 14. Challenges ahead
    • Uncertainty over how much of the new finance sources would be channelled to REDD – many competing priorities for other sectors and mechanisms (adaptation, technology transfer, etc)
    • Challenges depending on the structure of the international financing facility
    • Challenge of vertical funds –
      • Difficult to maintain national ownership
      • Difficult to align international fund support with national strategies and institutions.
  • 15. Thank you Contact: Jessica Brown [email_address] Visit: www.climatefundsupdate.org www.odi.org.uk/climatechange