Overview of REDD+ Financing Landscape, Sources and Types of Funds. Charlie Parker

Transcription

1 Overview of REDD+ Financing Landscape, Sources and Types of Funds Charlie Parker

2 Presentation overview 2 What are the main sources of REDD+ finance? What is the magnitude of REDD+ finance? What is the role of the public finance? What is the role of the private finance? Conclusions

3 What is REDD+? 3 Distinguish between REDD+ as an outcome versus REDD+ as an international mechanism There are multiple ways to achieve REDD+ as an outcome Very few activities receive finance from one source A broad definition of REDD+ helps us to understand the range of activities that can achieve REDD+ outcomes and address the drivers of forest loss.

4 Main sources of REDD+ finance 4 Private sector Public sector Direct markets Voluntary and compliance carbon markets Payments for watershed services Biodiversity offsets Earmarked budget PES mechanisms Carbon taxes and fees Other markets Green commodities Certified timber Clean Cookstoves Other Budgetary International climate finance allocations Domestic budgetary allocations

5 Current scale of REDD+ finance 5 28% 1% 7% US$15 Voluntary markets Domestic 64% Sustainable supply chains ODA billion Domestic budgetary finance is the main source of finance for REDD+ Combined, public finance constitutes over 90% of REDD+ finance

6 1. Public Finance

7 Budgetary finance: domestic and international 7 Private sector Direct Voluntary and compliance carbon markets Payments for watershed services Biodiversity offsets Indirect Green commodities Certified timber Public sector Earmarked Auctioning of allowances Financial transaction tax Carbon taxes and fees Budgetary ODA and international climate finance allocations Domestic budgetary allocations US$ 14 billion Made up of domestic and international ODA Donors and domestic governments have different (competing) priorities

8 Domestic REDD+ finance 8 US$ 10 billion Data on domestic REDD+ finance is lacking Brazil Mexico Indonesia China Does not include Brazil s ABC programme, PA management, etc.

9 Brazil s Low Carbon Agriculture (ABC) Programme 9 Federal credit and capacity building program founded in 2010 and coordinated by the Agriculture Ministry (MAPA) and the Ministry of Agrarian Development (MDA) Sustainable intensification / land reclamation, especially in the context of freeing up land through productivity increase and recovery of degraded pasture Initial on-set was slow, with zero disbursement during the first year Strict environmental provisions, when compared to abundant sources of finance for traditional agriculture, and to uncertainties associated with the Forest Code revision. To increase funding uptake, the government increased their marketing efforts and broadened eligibility by including additional activities A recent government press release reported disbursements of $2.3 billion by April 2013, equivalent to 80% of total funding and 15,000 concluded contracts

10 International REDD+ finance US$ Asia and Pacific Africa Other LAC Global billion pledged LAC is the largest recipient of international REDD+ finance Source: ODI (forthcoming) The State of REDD+ Finance

11 International REDD+ finance Pledged Deposited Disbursed 0 Amazon Fund FCPF Carbon Fund FCPF Readiness fund FIP NICFI UN-REDD IFCI CBFF Disbursements are still very slow. Just US$ has been disbursed from (equivalent to <10% of total pledges) and < US$ 100 million per year. Source: ODI (2012) Climate Finance Thematic Briefing: REDD+ Finance

12 Bilateral REDD+ Finance 12 Norway Germany Japan Major bilateral initiatives include: Norway s Amazon Fund contributions: USD 402 million to date Japan s Grant aid for forest preservation programmes: USD 159 million to date Norway s GRIF contributions: USD 67 million to date Germany s Forestry Programme in Indonesia: USD 32 million to date UK s Forests, Governance, Markets and Climate initiative: USD 25 million to date US Tropical Forest Conservation Act (TFCA): USD 32 million to date

13 International REDD+ finance: other sources US$ million 56 Many non-redd+ funds finance REDD+ activities PPCR Adaptation Fund LDCF SREP Source: ODI (forthcoming) The State of REDD+ Finance

14 PPCR: Lurio Sustainable Forestry Project. Mozambique 14 The PPCR will provide USD 11 million concessional loan from its private sector set-aside, in addition to an equity contribution and loans from the AfDB and EIB. Species from the genera Eucalyptus, Acacia and Melina are being tested to determine the best fit between commercial viability and environmental and social sustainability. The Lurio trial plantation will identifying species with higher potential and more resilience to droughts

15 Scaling Up Renewable Energy (SREP): Nepal biogas investments 15 Nepal is seeking USD 40M in grant funds from SREP to scale up renewable energy in the country. SREP investments will support on-grid Small Hydro Power, and off-grid Mini and Micro Energy Initiatives. Nepal is targeted to install 160,000 biogas plants (mostly domestic) under the investment plan. Biogas uses a readily available waste product as feedstock, and therefore does not depend on firewood that may be sourced indiscriminately which leads to deforestation and related environmental damage.

16 Earmarked REDD+ finance 16 Private sector Direct Voluntary and compliance carbon markets Payments for watershed services Biodiversity offsets Indirect Green commodities Certified timber Public sector Earmarked Auctioning of allowances Financial transaction tax Carbon taxes and fees Non-market ODA and international climate finance allocations Domestic budgetary allocations US$ 170+ million Mexico s PES (>USD 100 million) Vietnam s PES (USD 58 million) Costa Rica s PES (>USD 12 million)

17 Costa Rica s PSA program 17 Fuel tax is fixed according to the 2001 Law of Tax Simplificatio and Efficiency and adjusted four times a year for inflation 3.5% allocated to FONAFIFO 66.4% to Ministry of Finance 29% to National Road Council Equivalent to ~ $11,300,000/yr in 2007 FONAFIFO disburses to small and medium forest producers Every year, both FONAFIFO and MINAE (Ministry of Environment and Energy) publish a PES budget, procedures and criteria for selection of priority areas. FONAFIFO allocates PES funds to landowners through forest conservation contracts, sustainable management contracts, and reforestation contracts.

18 2. Private Finance

19 Magnitude of REDD+ finance Direct market mechanisms 19 Private sector Direct Voluntary and compliance carbon markets Payments for watershed services Biodiversity offsets Indirect Green commodities Certified timber Public sector Market-linked Auctioning of allowances Financial transaction tax Carbon taxes and fees Non-market ODA and international climate finance allocations Domestic budgetary allocations US$ 140+ million Currently through voluntary markets Potential to scale up under a future compliance market

20 REDD+ carbon markets 20 3,000,000 2,500,000 2,000,000 1,500,000 1,000, ,000 Low Mid High 0 VCS FCPF Australia ETS NZ ETS California Japan German REM UNFCCC Under High Scenario, REDD+ demand could reach 2.5 Gt over 7 years. Equivalent to 350 Mt / year or 7% of emissions from tropical deforestation Under a Mid Scenario this would be just 1% of emissions Source: FCMC (2012) Emerging compliance markets for REDD+: an assessment of supply and demand

21 Magnitude of REDD+ finance Other market mechanisms 21 Private sector Direct Voluntary and compliance carbon markets Payments for watershed services Biodiversity offsets Other markets Green commodities Certified timber Clean cookstoves Public sector Market-linked Auctioning of allowances Financial transaction tax Carbon taxes and fees Non-market ODA and international climate finance allocations Domestic budgetary allocations US$ 1+ billion US$ 1 billion through FSC and other certification systems Cookstoves for REDD+ could be applicable in some countries

22 International Trade Flows in Agriculture USA Japan: $3.0bn USA - China: $11.9bn Brazil - China: $8.2bn Argentina China: $5.2bn NZ China: $1.5bn Australia Japan: $3.0bn SOY USA - China: $11.9bn Brazil - China: $8.2bn Brazil EU: $5.2bn MAIZE USA Japan: $3.0bn USA - Mexico: $1.6bn USA China: $0.9bn BEEF Aus Japan: $3.0bn Canada - USA: $1.6bn Brazil Russia: $1.0bn DAIRY NZ China: $1.5bn Belarus - Russia: $1.2bn EU Russia: $1.1bn RICE Vietnam - Phil: $0.9bn India S. Arabia: $0.7bn India UAE: $0.6bn Source: authors caculations using FAOStat

23 Cookstoves and REDD+ 23 Cookstove finance offers a way to achieve REDD+ outcomes in some countries with high emissions from cookstoves compared to REDD+ Dominican Republic: 109% Honduras,53% El Salvador,36% Guatemala,28% Chile:18% Mexico,11% GACC have raised USD 38 million, and leveraged over USD 200 million Source: authors caculations

24 Reframing REDD+ finance 24 MITIGATION ADAPTATION / RESILIENCE ENHANCING CARBON STOCKS CONSERVING CARBON STOCKS REDUCING EMISSIONS SUSTAINABLE WOODFUEL LOTS SOIL CARBON PROTECTED AREAS BIODIVERSITY CONSERVATION SFM AGROFORESTRY SOIL CONSERVATION PEAT LAND REHABILITATION CONTROLLING FOREST FIRES CLEAN COOKSTOVES AGRICULTURAL PRODUCTIVITY ECOSYSTEM BASED ADAPTATION COASTAL MANGROVE CONSERVATION EXPANSION OF RESISTANT CROP VARIETIES We are too narrowly focused on finance that is labeled as "REDD+. Instead we should focus on Climate Smart Land Use Finance When we talk about the landscape of CSLU finance, we need to include activities like agroforestry, cookstoves, commodity certification etc. We should align adaptation / mitigation and energy / land use policies Our understanding of this landscape is limited

25 Conclusions 25 Short term finance is available but disbursements are slow, at the same time there are no adequate long term strategies to meet the financial needs of REDD+ In the absence of ambitious climate change mitigation goals, for the foreseeable future most REDD+ finance will be mobilised through public finance It will be important during this phase to test a variety of financing options that leverage private sector finance and directly address the drivers of deforestation Wealthier REDD+ countries may opt to self-finance a significant part of REDD+, for which they may receive results-based finance The more fragile states are likely to rely on official development assistance (ODA)-type finance

26 Thank you 26 Climate Focus Netherlands Sarphatikade 13, 1017 WV Amsterdam, The Netherlands Climate Focus US 1730 Rhode Island Avenue NW, Suite 601, Washington, DC USA Climate Focus Colombia Calle 95 #l 0-50, Bogota, Cundinamarca, Colombia LEAF Project Office Liberty Square, Suite 2002, 287 Silom Road, Bang Rak, Bangkok 10500, Thailand Charlie Parker