REDD: Policy and Implementation Issues Frances Seymour Director General Center for International Forestry Research (CIFOR) Jakarta, March 28, 2008

Presentation outline: What is CIFOR? Forests, climate change, and governance Causes of deforestation and degradation Policy options REDD opportunities and challenges

What is CIFOR?

Forests, climate change, and governance

Causes of deforestation and degradation

Policy options

REDD opportunities and challenges

A quick introduction to CIFOR: One of 15 centers in the CGIAR Focus on forest policy research Headquarters in Bogor, Indonesia Extensive collaboration with partners in Indonesia Staff also based in Brazil, Bolivia, Burkina Faso, Cameroon, Ethiopia, and Zambia Research activities in more than 40 countries throughout the tropics

One of 15 centers in the CGIAR

Focus on forest policy research

Headquarters in Bogor, Indonesia

Extensive collaboration with partners in Indonesia

Staff also based in Brazil, Bolivia, Burkina Faso, Cameroon, Ethiopia, and Zambia

Research activities in more than 40 countries throughout the tropics

CIFOR’s global research agenda: Forests and climate mitigation Forests and climate adaptation Small-scale and community forestry Sustainable management of production forests Conservation and development at landscape scale Impacts of trade and investment on forests

Forests and climate mitigation

Forests and climate adaptation

Small-scale and community forestry

Sustainable management of production forests

Conservation and development at landscape scale

Impacts of trade and investment on forests

Forests and climate emissions Deforestation and degradation accounts for approximately one-fifth of global emissions – more than the transport sector Emissions from Indonesia’s forest fires globally significant Disproportionate emissions from peatlands Fire on Peat Land

Deforestation and degradation accounts for approximately one-fifth of global emissions – more than the transport sector

Emissions from Indonesia’s forest fires globally significant

Disproportionate emissions from peatlands

Significance of forest-based emissions (Among top five emitters) Source: Adopted from PEACE (Pelangi Energi Abadi Citra Enviro) report, 2007.

Significance for adaptation to climate change Healthy forests more resistant to forest fire as drought becomes more frequent and severe Forest cover helps to anchor and bind the soil as intensive rainfall events become more frequent and severe

Healthy forests more resistant to forest fire as drought becomes more frequent and severe

Forest cover helps to anchor and bind the soil as intensive rainfall events become more frequent and severe

Governance poses key challenges: Property rights: Who owns forest carbon? Procedural rights (information, participation, and accountability): Who decides? Decentralization issues: At what level? Institutional choice issues: Who implements, and with what authority, legitimacy, and capacity?

Property rights: Who owns forest carbon?

Procedural rights (information, participation, and accountability): Who decides?

Decentralization issues: At what level?

Institutional choice issues: Who implements, and with what authority, legitimacy, and capacity?

Direct causes of deforestation and degradation: Conversion due to agricultural expansion Unsustainable wood extraction Infrastructure development

Conversion due to agricultural expansion

Unsustainable wood extraction

Infrastructure development

Underlying causes of deforestation and degradation: Market failures Misguided policy interventions Governance failures

Market failures

Misguided policy interventions

Governance failures

Market failures: Source: Don G. Roberts, Managing Director, CIBC World Markets Inc. Paper For The MegaFlorestais Working Group Meeting In St. Petersburg, Russia Commodity prices continue to rise Forest biodiversity and ecosystem services remain unpriced

Commodity prices continue to rise

Forest biodiversity and ecosystem services remain unpriced

Misguided policy interventions: Direct and indirect subsidies to key drivers of deforestation and degradation Infrastructure development (mining, roads) in forest areas

Direct and indirect subsidies to key drivers of deforestation and degradation

Infrastructure development (mining, roads) in forest areas

Governance failures: Unclear property rights Overlapping jurisdictions Non-transparent decision-making Weak law enforcement and judicial systems

Unclear property rights

Overlapping jurisdictions

Non-transparent decision-making

Weak law enforcement and judicial systems

Example: oil palm development on peatlands Market doesn’t value biodiversity or carbon sequestration Governance failures allow misallocation of land Perverse subsidies to biofuels drive investment Despite significant negative impact on emissions – 840 years to repay “carbon debt”

Market doesn’t value biodiversity or carbon sequestration

Governance failures allow misallocation of land

Perverse subsidies to biofuels drive investment

Despite significant negative impact on emissions – 840 years to repay “carbon debt”

Example: Structural overcapacity in the pulp and paper sector Investors fail to do due diligence on legal and sustainable supply of feedstock Governance failures allow mills to run on illegally-sourced wood Bailout of companies following financial crisis

Investors fail to do due diligence on legal and sustainable supply of feedstock

Governance failures allow mills to run on illegally-sourced wood

Bailout of companies following financial crisis

What replaced natural forests? 1982-2007 WWF Land Cover Database Riau, Indonesia

Policy Options: Economic and financial instruments Remove perverse subsidies Provide positive incentives Strengthen direct regulation Strengthen governance mechanisms and institutions Can REDD funds support these options?

Economic and financial instruments

Remove perverse subsidies

Provide positive incentives

Strengthen direct regulation

Strengthen governance mechanisms and institutions

Can REDD funds support these options?

Eliminate perverse subsidies: … to agricultural expansion that replaces natural forests (including bioenergy and pulpwood) … to forest industry without a legal and sustainable supply of wood

… to agricultural expansion that replaces natural forests (including bioenergy and pulpwood)

… to forest industry without a legal and sustainable supply of wood

Create positive incentives for sustainable forest management: Access to markets through certification Access to finance through increased transparency and compliance with safeguards Access to payments for ecosystem services

Access to markets through certification

Access to finance through increased transparency and compliance with safeguards

Access to payments for ecosystem services

Strengthen direct regulation: Reroute roads and mining activities away from forest areas vulnerable to conversion or degradation Provide adequate support to protected area management Improve regulation of production forests and conversion Strengthen law enforcement (without harming the poor)

Reroute roads and mining activities away from forest areas vulnerable to conversion or degradation

Provide adequate support to protected area management

Improve regulation of production forests and conversion

Strengthen law enforcement (without harming the poor)

Improve management of concession areas: Significant carbon storage and biodiversity benefits can be achieved through improved planning and operational practices

Significant carbon storage and biodiversity benefits can be achieved through improved planning and operational practices

Illegal logging “crackdowns” tend to focus on the little guy with the chain saw rather than the big guy with the bank account Need to use law enforcement tools more targeted to the “big guys”, such as anti-money laundering and anti-corruption laws Strengthen law enforcement (without harming the poor):

Illegal logging “crackdowns” tend to focus on the little guy with the chain saw rather than the big guy with the bank account

Need to use law enforcement tools more targeted to the “big guys”, such as anti-money laundering and anti-corruption laws

Strengthen governance mechanisms and institutions: Clarify tenure and strengthen property rights Improve the transparency and inclusiveness of decision-making Improve intersectoral coordination Build capacities of local communities and governments

Clarify tenure and strengthen property rights

Improve the transparency and inclusiveness of decision-making

Improve intersectoral coordination

Build capacities of local communities and governments

Strengthening the rights and responsibilities of local communities Strengthening the capacities and accountabilities of local governments Example: Community-based fire management Community-based fire brigade Controlled fire for land clearing – community action

Strengthening the rights and responsibilities of local communities

Strengthening the capacities and accountabilities of local governments

REDD opportunities

Outcome of UNFCCC COP13: “Road map” to including REDD in the global climate protection regime

“Road map” to including REDD in the global climate protection regime

Reduced Emissions from Deforestation and Degradation

Why might REDD succeed? Volume of finance sufficient to shift the political economy of drivers of deforestation and degradation Political attention and engagement at the national level Performance-based finance

Volume of finance sufficient to shift the political economy of drivers of deforestation and degradation

Political attention and engagement at the national level

Performance-based finance

How much money are we talking about for Indonesia? Assume a baseline of 3 billion tons of carbon emissions per year Assume a reduction of 20% below the baseline Assume a price of $5/ton of avoided carbon = $3 billion per year By comparison: Development aid to the forestry sector in Indonesia over the last two decades = $1 billion cumulative Loss to the Indonesian economy from “undocumented” timber extraction = $3 billion per year

Assume a baseline of 3 billion tons of carbon emissions per year

Assume a reduction of 20% below the baseline

Assume a price of $5/ton of avoided carbon

= $3 billion per year

By comparison:

Development aid to the forestry sector in Indonesia over the last two decades = $1 billion cumulative

Loss to the Indonesian economy from “undocumented” timber extraction = $3 billion per year

Good investments available: Research shows much forest conversion provides limited economic return In some cases, <$1 per ton of carbon emitted

Research shows much forest conversion provides limited economic return

In some cases, <$1 per ton of carbon emitted

Potential for “win-wins”: With local livelihoods With biodiversity conservation With improved forest governance

With local livelihoods

With biodiversity conservation

With improved forest governance

15,430 plant records > 2,100 species 3,642 specific uses 1,449 species 119 non-substitutable Field survey results from 200 plots in East Kalimantan: Example: Forest biodiversity

Low-risk investment options: Leveling the playing field through awareness-raising and consensus-building Building capacity of local communities and governments Clarifying property rights Research and analysis

Leveling the playing field through awareness-raising and consensus-building

Building capacity of local communities and governments

Clarifying property rights

Research and analysis

Higher risk investment options Buy time? (e.g., payments for moratoria on road-building or concessions) Buy down demand? (e.g., payments to mothball current and planned processing capacity) Bet on the effectiveness of policy reform? Construct new PES mechanisms?

Buy time? (e.g., payments for moratoria on road-building or concessions)

Buy down demand? (e.g., payments to mothball current and planned processing capacity)

Bet on the effectiveness of policy reform?

Construct new PES mechanisms?

… but serious challenges ahead Need for “REDD readiness”: governance mechanisms and institutional capacity Decide on payments Transfer payments Need to manage risks and trade-offs Need to establish legitimacy Inclusive process Equitable outcomes

Need for “REDD readiness”: governance mechanisms and institutional capacity

Decide on payments

Transfer payments

Need to manage risks and trade-offs

Need to establish legitimacy

Inclusive process

Equitable outcomes

The most efficient investments are not necessarily the most equitable Managing trade-offs: Lessons from PES

The most efficient investments are not necessarily the most equitable

Managing REDD risks: …of leading to human rights violations …of making poor people worse off …of corruption …of ineffectiveness

…of leading to human rights violations

…of making poor people worse off

…of corruption

…of ineffectiveness

“ REDD Readiness” will require: Technical components baselines and monitoring Changes in the political economy of Indonesia’s forests Not just the forestry sector

Technical components

baselines and monitoring

Changes in the political economy of Indonesia’s forests

Not just the forestry sector

Baselines: The forest transition

Baselines: National? Provincial?

Aceh/Papua Initiatives Irwandi Yusuf Aceh Governor Barnabas Suebu Papua Governor Abraham Atururi West Papua Governor

Indonesia’s REDD process Led by the Ministry of Forestry in preparation for the Bali COP

Led by the Ministry of Forestry in preparation for the Bali COP

REDD still controversial: Concern about market mechanisms Concern about risks, especially to indigenous peoples

Concern about market mechanisms

Concern about risks, especially to indigenous peoples

Discussions at “Forest Day” illuminated areas for consensus-building and research: Better data and methods Role of markets Managing trade-offs

Better data and methods

Role of markets

Managing trade-offs

Looking ahead: Poznan and Copenhagen

http://www.cifor.cgiar.org