International Workshop REDD after Copenhagen The Way Forward Hue City, Vietnam 8-10 March, 2010 IISD, ASB-ICRAF, Government of Norway, MARD Vietnam

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1 International Workshop REDD after Copenhagen The Way Forward Hue City, Vietnam 8-10 March, 2010 IISD, ASB-ICRAF, Government of Norway, MARD Vietnam Econ. Jorge Torres Technical Unit Head SFM BAM SAC

2 Peru is, after Brazil, the second largest country with Amazon Rainforest surface (around 80 millions of hectares, from which 10% has already deforested and 0.25 millions are annually added, mainly because of small agriculture expansion. In that sense, REDD is being seen as a balsam for the solution of this situation that threats to aggravate in future years. Peru supports the nested approach and a combination of markets and funds mechanisms. And, with comments (that will submitted later), Peru has adhered to Copenhagen Accord. It has stimulated private and public organizations (NGO s, private companies, indigenous communities, etc.) to promote REDD initiatives in different types of land tenures (forest concessionaries, protected areas, indigenous lands, conservation concessions, etc.).

3 Most of the initiatives are located in Madre de Dios region (south east of Peru) where a major road, that will join Brazil with Asian markets, is being built. Up to now, only a forest concession has got CCB Gold and is planning to sell offsets in CCX market. Peru has been chosen for World Bank for FCPF program and is now doing internal consultations and participative workshops to develop the R-PP, conducted by Environment Ministry. With the support of Moore Foundation and other cooperation agencies, regional workshops will be organized. An environmental services law and a forestry law is in Peruvian Congress waiting for approval. Previous consent of indigenous people is required to this approval.

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5 Brazil nut tree grows naturally in tropical rainforests of Madre de Dios. The BN is harvested and exported since 50 s. Peru represents around 10% of total market, after Brazil and Bolivia. The activity is seasonal (Jan-Mar). In Peru, forests are property of State, who gives in concession for 40 years periods, to individuals who access to areas of 1000 hectares in average (for BN concessions). There are around 1000 concessions (1 million of hectares), what makes this activity very important for the local economy. Families who dedicate to this activity are mostly poor rural that every year in rainy season go into the forest to collect the pods, after being funded by exporting companies or intermediaries, in an agreement that implies a commitment for their product, that is not commonly equitable.

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7 As a consequence of the paving of Inter-oceanic road, internal migration has grown significantly, increasing the threat of deforestation on the concessions, mainly for agricultural or cattle ranching purposes. Slash-and-burn practices are common in Peruvian Amazon as a cheaper way to clear the forest land. In that context, our company has achieved an agreement with BN harvesters federation to develop a REDD project. The agreement establishes that the company will invest at least 1 million dollars in the first 18 months and an amount to be defined for the following 30 years.

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9 The core of the strategy is based in the improvement of incomes perceived by BN harvesters from their main activity and their capacity to protect their concessions from external risks. In that sense, a BN processing and exporting facility will be implemented for harvesters associated to the project (who will be the owners of 70% of shares). By doing that, they will receive a higher price (export price) than now (local market price). In addition, they will participate in profit distribution. The agreement also includes a participation of BN harvesters with 30% of net incomes from carbon offsets sales. Other components are organizational strengthening, technical & legal advisory, forest enrichment, training and a plan to prevent fires and invasions, among others.

10 ELEGIBILITY: In Peru, there is scarce information about deforestation rates and trends and what exists comes from different sources, done with different methodologies, not compatible. It implies that for a same region and year, there are differences in deforested area. For this reason, we have promoted a consortium with participation of main institutions (including government at its different levels) that is developing an agreed meth to generate land use maps, with the highest technical standards. It is based on ENVI and CLASSLITE. The meth should be in accordance with national definition of forest and the results for most recent year will be confirmed with field assessment.

11 PROJECT ACTIVITY The strategy of the project is based on the principle that deforestation is caused by agricultural expansion of small producers and limited capacity of BN harvesters to protect their area. So, strategy is designed to increase the profitability of sustainable productive activities and the permanence of concessionaries in their forest. BN harvesters will receive extra incomes from: Export price against local market price Participation in profits of processing plant Participation in net incomes from carbon sales Incomes from reforestation component Permanence will be guaranteed from: Other forest resources exploited Control and vigilance plan

12 ADDITIONALITY Based on a combination of barrier and financial analysis, we need to demonstrate that BN activity does not generate enough conditions to avoid the expansion of agriculture and cattle ranching activities without the inclusion of carbon incomes. We will calculate incomes of concessionaries in with / without project scenarios. We will demonstrate that BN harvesters by their own wouldn t have been able to implement this level of investment, necessary to break the circle of subsistence-low added value. And, complementarily, that this investment is not enough profitable for any private company without the carbon incomes.

13 BASELINE SCENARIO Since its creation, MDD has been an isolated region (before road paving). For this reason, historical deforestation rate cannot be considered reliable for future trend. In that sense, a modeling baseline scenario is being developed by using DINAMICA software with expert international advisory. This modeling will be based on maps produced under the consortium umbrella and results of this work also will be validated with local actors (including governmental agencies) and expert review in order to produce a unique agreed baseline scenario. As required by methodologies, results will be validated with a recent year map and input variables will be monitored in order to analyze, in the future, if predictions are within an acceptable margin of error.

14 Preliminary results show that deforestation is best explained with a cost-benefit approach than with a demographic growth approach.

15 LEAKAGE As many REDD initiatives are in progress in this region, we are planning to work with regional government and project developers to design and implement a REDD regional program, in accordance with standards technical requirements. CARBON STOCKS Field forest inventory will be carried out and database will be used as input for biomass equations (from IPCC guidelines and other scientific studies) to estimate carbon stocks in project area. Satellital images and field assessment will be combined to monitor, using the methodology officially agreed, the annual deforested area in order to compare it with baseline forecast. A laser system LIDAR is being proved by Carnegie Institute as an optional method to estimate carbon stocks.

16 LEGAL ISSUES A long term agreement has been hired with BN harvesters federation, where SFMBAM commit an investment in exchange of a participation in BN processing company and the carbon trading rights. Complementarily, the Federation has signed another contract with each concessionaire where he transfers its rights over the carbon stock from his concession. MARKETS Project is planning to be validated under VCS and CCBA standards but American market is also being explored and UNFCCC negotiations are being closely followed.

17 Tambopata National Reserve and Bahuaja Sonene National Park are two natural protected areas, that are part of biological corridor Vilcabamba-Amboro, one of Myer s hotspots. The areas cover a surface of hectares, from which ha where launched in a international contest, coorganized by World Bank and national forest office and national office in charge of protected areas in Peru. Traditionally, Peruvian State has been responsible to take care of their protected areas, usually by implementing an office with forest guards patrolling the boundaries (normally with limited resources).

18 But in recent years, a new mechanism has been designed where non-profit organizations can sign contracts with State to be in charge of some areas. This is an implicit acknowledge that private actors can play a role, as they have experience in accessing to extra funds from cooperation and/or they can achieve a higher performance. In this case, a local NGO obtained the highest score, thanks to this innovative financial mechanism, and has signed a contract for 7 years with option to increase to 20 years. The proposal includes a financial support of project activities for US$ 5.2 millions for the first 7 years and around US$ 0.5 millions per year (to be agreed with State) for the last 13 years in exchange of carbon trading rights.

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20 PROJECT ACTIVITY As many of the protected areas, they are inhabited. Preexisting activities as logging were suspended when the area was given. Only a few BN concessions (very controlled) and an ecotourism lodge are allowed. Indigenous groups are also permitted to hunt and harvest forest products for noncommercial purposes. But external pressure is higher over time. Illegal gold mining, illegal logging and agricultural expansion from migrants are the main threats. In that sense, the project strategy is focused to find and promote, between families who live in buffer zone, economic activities based on sustainable use of natural resources. It is complemented with extra resources to install control points and patrol rivers and roads.

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22 ADDITIONALITY There are voices who claim that legally protected areas should not be eligible for REDD, it s clear in most of our developing countries, that laws are not enough to keep them free from deforestation. A weak enforcement and subsistence needs of neighbor population make unlikely that ideal scenario. Historic analysis show that protected areas slow but not stop deforestation advance. Specifically, mining activity is already occurring in Malinowsky River, a natural frontier of Tambopata Reserve.

23 LEGAL ISSUES A contract has been signed between Peruvian State and the company, where trading rights of carbon offsets will be transferred as soon as a legal framework allows the State to do that, for a 20 years period, even if the administration contract between the State and the local NGO is not renewed. In the agreement, there is a pre-condition that this law will occur during first year and that the taxes associated to this activity will not put in risk the feasibility of the activity.

24 In a sub-national approach, it is key the coordination between private and public players to create consensus on methodological issues. Multiple results will affect negatively the credibility of the system. For it, private-public communication is critical since the beginning stages of the technical work. REDD eligibility criteria should include the creation of alternative sources of incomes for deforestation agents and not strictly protection actions. Even more, this should be part of costs and not part of profit shares. Independently of funds or market approach, a result-based payment is key to be sure that resources are really contributing to slow deforestation processes. Probably, the main advantage of market approach is that it allow the participation of private sector, who will do its best to avoid an unwanted bankruptcy. This is probably to best incentive to stop deforestation.

25 The crucial discussion here is if adequate strategies and efforts achieved in one region of the country should be affected by inadequate ones developed in other regions (by local actors) or general national strategy (implemented by governments). In actual conditions, probably small landowners are forbidden to access to this opportunity as costs are too large for operation scale. Government could design and implement systems and initiatives that over pass this restriction. The role of the government could also be the monitoring that leakage and baseline scenarios are adequately measured and land cover maps are well generated. Capabilities development is crucial and it should be done in concordance with int l methodological agreements.

26 Last, but not least, a PES mechanism should combine direct payment with providing seed capital for improvement of sustainable activities. Forest only will be protected if it increases its profitability (for relevant actors) against alternative land use.

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