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Assessing redd+ readiness to maximize climate finance impact


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Originally presented by Christopher Martius at "Does money go to trees?: Assessing finance flows to maximize the impact of REDD+", an official SBSTA48 side event, presented by CIFOR, ICRAF and Wageningen University.

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Assessing redd+ readiness to maximize climate finance impact

  1. 1. Assessing REDD+ readiness to maximize climate finance impact Christopher Martius, Stibniati Atmadja, Anne Siemons, Hannes Boettcher, Asger Olesen Side event, Bonn 3 May2018
  2. 2. Phases and elements of REDD+ Sourceofgraphic:
  3. 3. Financing mechanisms for REDD+ › ODA › Global REDD+ programs managed by multilateral institutions (e.g. FCPF, UNREDD) › Recipient governments and CSOs, directly or through trust funds › Domestic (ODA + national budget) › on or off budget › Private sector › investment in REDD+ activities, carbon credit purchases REDDFIT A study of how REDD+ readiness benchmarks can be linked to REDD+ finance, to improve the impacts of available funding 2016-2017
  4. 4. Financing sustainable development through REDD+ › Million Euro › Donors: › EU Institutions and Member States (MS) › Non-EU donor countries › Other public donors › Aggregate 2008-2015 › Direct = REDD+ › Indirect = Deforestation › Classification based on algorithms using keywords › Based on OECD-DAC Donor Commitments Disbursements Direct Indirect Total Direct Indirect Total Total EU 824.8 6,275.3 7,100.1 736.7 5,213.2 5,949.9 EU institutions 59.1 1,319.3 1,378.5 42.8 1,169.1 1,211.9 28 MS 765.7 4,955.9 5,721.6 693.8 4,044.2 4,738.0 Total non- EU (countries) 1,803.1 4,910.4 6,713.6 1,337.8 4,790.9 6,128.7 Other public donors 78.3 5,495.2 5,573.4 23.2 5,131.0 5,154.2 Total public funding 2,706.2 16,680.9 19,387.1 2,097.7 15,136.8 17,234.4 0 500 1,000 1,500 2,000 2,500 3,000 3,500 2008 2009 2010 2011 2012 2013 2014 2015 disbursementinEURmillion Direct REDD+ Indirect REDD+ Annual disbursement
  5. 5. Modes of finance Million Euro EU MS and Institutions Non-EU countries Committed Disbursed Committed Disbursed ODA Grants 5,526.9 4,830.5 5,947.6 5,164.7 ODA Loans 1,374.9 969.4 738.1 936.5 Equity Investment 176.4 148.2 9.9 9.6 Other Official Flows 21.7 1.8 18.0 18.0 Total 7,100.1 5,949.9 6,713.6 6,128.8 • Direct REDD+ still overwhelmingly funded in the context of development aid • Almost all (99%) funds are provided as ODA grants • Thus, REDD+ has not yet developed a strong business case • Indirect REDD+ activities receive a mix of grants (62%), loans (15%), equity investments (1%) and other official flows (22%) • Loans go into indirect REDD+ • Top donor countries whose total REDD+ funding portfolio is dominated by loans (France: 70%; Japan: 60%) also provide less than 3% of their total REDD+ funding to direct REDD+ activities
  6. 6. REDD+ funding for Indonesia: Overview Indonesia's foreign funding profile (2008- 2015, EUR, committed, all sources) Equity Investment 0% ODA Grants 20% ODA Loans 19% Other Official Flows 61% Total: EUR 43.5 billion Other official flows • official direct export credits • subsidies (grants) to the private sector to soften its credits to developing countries • funds in support of private investment Data source: OECD’s Creditor Reporting System; values are in constant EUR millions (2014)
  7. 7. Climate change mitigation funding for Indonesia 2008-2015* EU Non-EU Multilate rals Others Mitigation 19,182.2 10,146.6 7,117.4 Not mitigation 1,390.2 6,826.7 17.1 - Not marked 630.3 7,270.1 21,315.7 41.9 - 5,000.0 10,000.0 15,000.0 20,000.0 25,000.0 EURMillion,Committed * Based on Rio markers for climate change mitigation actions used by OECD
  8. 8. REDD+* funding for Indonesia, 2008-2015 EU Non EU Multilater als Other REDD+ 180.4 380.6 131.1 - Non-REDD+ 3,758.3 16,712.8 22,303.0 41.9 - 5,000.0 10,000.0 15,000.0 20,000.0 25,000.0 EURMillion,Committed * Identification of funding for REDD+ is based on a keyword-based algorithm
  9. 9. Committed REDD+ funding for Indonesia from ODA across the years 0 20 40 60 80 100 120 140 160 180 2008 2009 2010 2011 2012 2013 2014 2015 EURMillion,committed Year Indirect REDD+ Direct REDD+ Total REDD+ * Identification of funding for REDD+ is based on a keyword-based algorithm Data source: OECD CRS
  10. 10. Direct REDD+ funding for Indonesia from ODA across the years Disbursement vs. commitment 0 10 20 30 40 50 60 2008 2009 2010 2011 2012 2013 2014 2015 EURMillion Year Direct REDD+ Disbursed Commited * Identification of funding for REDD+ is based on keyword-based algorithm Data source: OECD CRS
  11. 11. Approach to select “priority REDD+ geographies” • Pre-selection of 41 countries out of 109 potential REDD+ countries based on forest coverage and political relevance for REDD+ • Estimating the technical potential of emission reductions and increased removals (ER) • Estimating the effectiveness to realise emission reductions and increased removals (“e” factor) • Estimating the likelihood of emission reductions to be internationally supported (“f” factor) 41 pre-selected countries comprising 80% of total tropical REDD+ eligible forest Estimated emission reductions that can effectively be realized and expect international support in 41 countries • Forest characteristics • Drivers and risks • MRV capacities of a country • Policy and engagement • History of international public funding in REDD+ • National safeguard circumstances • Local safeguards circumstances REDDFIT A study of how REDD+ readiness benchmarks can be linked to REDD+ finance, to improve the impacts of available funding 2016-2017 • Historic emissions and removals • Reference levels emissions and removals • Projected emissions and removals 2030
  12. 12. • Different ways to prioritize REDD+ funding are possible: • Effectiveness to realize emission reductions • Capacity to receive international financial support • Highest amount of emission reductions that can be achieved and are likely to be (internationally) funded • Equity • Or a mixture of those • Established REDD+ countries score highly in this analysis (top of list) • Several countries still lag behind to realize emission reductions, sometimes basic capabilities missing  more readiness support needed before results- based payments can be made Priority REDD+ geographies: Conclusions
  13. 13. Benchmarking in the context of transformational change What is transformational change? ‘a shift in discourse, attitudes, power relations, and deliberate policy and protest action that leads policy formulation and implementation away from business as usual policy approaches that directly or indirectly support deforestation and forest degradation’ *) *) Brockhaus, M., Korhonen-Kurki, K., Sehring, J., Di Gregorio, M., 2015. Policy progress with REDD+ and the promise of performance-based payments: A qualitative comparative analysis of 13 countries. Center for International Forestry Research. REDDiness 2. Policy design &Implementation 3. Results-based payments (RBP) International public funding Domestic public funding Private funding Potential sources of financing emission reduction across REDD+ phases
  14. 14. REDD+, climate finance and the global economy Policy alignment across sectors of economy is important Million US$ 41 Billion US$ 323 Million US$
  15. 15. So: does money go to trees? ?
  16. 16. What did we learn about REDD+ funding? • Some countries with strong potential to realize emission reduction from REDD+ are not high on donors’ lists • Brazil, Indonesia, Colombia  Argentina, Chile, India, Malaysia (examples) • Support for REDD+ across countries may need to balance effectiveness and equity • Some countries with high emission reduction potential have low technical or financial capacity to realize these emission reductions (Gabon, Ivory Coast) • Support needs to be differential and recognize national circumstances • Funding needs and gaps of the selected REDD+ countries vary: MRV, policy and engagement, governance, access to funding, National and local safeguards circumstances • Support for readiness is waning, but many countries still need it • Two major readiness donors, UN-REDD and FCPF, are nearing the end of their terms, yet they provide essential support for many countries with high ER potential, but low capacity • Mechanisms to realize Results-Based Payments (RBPs) for REDD+ are being funded and tested • Multilateral funding mechanisms (Forest Carbon Partnership Facility’s (FCPF) Carbon Fund, BioCarbon Initiative for Sustainable Forest Landscapes (ISFL), Green Climate Fund (GCF) • Still very little is known about scale and type of flows of private finance to REDD+ countries • In spite of growing private sector responsibility, and recent commitments to reduce deforestation and improve transparency • There is market information on a limited number of REDD+ projects in the Voluntary Carbon Market, but the scale of equity investments, lending and trade finance is unknown
  17. 17. How does this promote transformational change? towards reduced emissions from deforestation and forest degradation • A too narrow fixation on fund sizes and flows misses the point of what is and what triggers transformational change • Countries continue to need readiness support • Institutions for accountability, transparency etc. • Assessment and policy learning: Support needed for better data, better approaches, better capacity • Mainstreaming climate objectives for finance across sectors is essential • Need to integrate equity/participation, development and climate objectives for conflict-free, lasting results
  18. 18. Böttcher, H., Herrmann, L.M., Herold, M., Romijn, E., Román- Cuesta, R.M., Avitabile, V., de Sy, V., Martius, C., Gaveau, D.L.A., Fritz, S., Schepaschenko, D., Dunwoody, A. (2018): Independent Monitoring: Building trust and consensus around GHG data for increased accountability of mitigation in the land use sector. 112 pp. Publications Office of the European Union, Luxembourg. FAO, FTA and CIFOR (2018): Exploring guiding elements of transformational change in integrated landscape management. Joint policy brief. 2 pp. Study on EU financing of REDD+ related activities, and results-based payments pre and post 2020: sources, cost-effectiveness and fair allocation of incentives. study report to be published by European Commission in 2018
  19. 19. With support from the CGIAR Fund Donors: Supported by: