Early Reflections on the Implications of the Paris Agreement for REDD+ Josefina Brana-Varela and Donna Lee

Transcription

1 Early Reflections on the Implications of the Paris Agreement for REDD+ Josefina Brana-Varela and Donna Lee June

2 Executive Summary What will be the impact of the Paris Agreement on REDD+? A series of interviews with government officials just months after the December 2015 United Nations Framework Conference on Climate Change (UNFCCC) 21 st Conference of Parties (COP21) meeting in Paris, revealed that few have fully processed the implications of the Paris Agreement, not least for REDD+. Those closest to the REDD+ negotiations see the Paris Agreement as a major achievement for forests. However, those further from REDD+ negotiations had mixed views while noting the symbolic nature of Article 5, which specifically mentions REDD+, they were often unsure or unclear about its impact. Some went further to suggest it was the non-redd+ specific provisions that will have the strongest impact on forests, not Article 5. Since 2007, REDD+ has been distinguished from other sectors in the climate negotiations. While this separation has been helpful in elevating forests as a mitigation opportunity, many are starting to wonder if now is the time when forests should be more fully integrated into both international and national climate architectures. Some question whether perpetuating forests as separate from other sectors could have negative consequences down the road. Developing countries tend to perceive REDD+ as a financing mechanism, while developed countries see it as a mitigation tool. This red line, which has existed since REDD+ was formally recognized at COP13, continues to thread itself through views on the Paris Agreement and its impacts on the forest sector. Those who view REDD+ as a financing instrument do not see a strong connection between REDD+ and nationally determined contributions (NDCs), while those who see REDD+ as a mitigation tool expect a closer relationship or even full integration. Others are somewhere between, forming a continuum of views on how, and to what extent, REDD+ should be integrated into NDCs. Regardless of these varying views, the fact is that nearly all major forest countries (by forest area, deforestation rate, or restoration potential) have included forest-related mitigation in their NDCs with varying levels of ambition. How these countries may achieve their NDCs, however is less clear. A number of those interviewed questioned the level of ownership and robustness of stated contributions. Intended nationally determined contributions (INDCs) submitted pre-paris were a mixed bag and most not clear enough to be fully understood. As NDCs come forward, they are likely to highlight (as did INDCs) a need for technical support and capacity building. Particularly for the forest sector, there is a critical need to improve data and monitoring capabilities, and to identify synergies among land-use policies and efforts to reduce emissions in other sectors. Compounding these issues is a lack of clarity on the meaning of conditional commitments. The Paris Agreement s silence on conditional versus unconditional contributions leaves many countries confused as to the means and flexibility available to achieve a conditional NDC, including the potential use of market mechanisms or results-based payments. Over the past several years, a number of countries have developed mechanisms to pilot REDD+ results-based payments (e.g., through the Forest Carbon Partnership Facility (FCPF) Carbon Fund, REDD Early Movers program or bilateral agreements). These programs have been largely funded by official development assistance, and have blurred the lines between market and nonmarket transactions, making the situation even murkier. Furthermore, with the advent of obligations for all countries under the Paris Agreement to contribute to global mitigation, developing countries are starting to worry about selling off their cheapest abatement options. Several forest countries ponder whether accessing results-based finance is in their national interest, given obligations to achieve (in particular, unconditional) NDCs. 2

3 Many countries are only starting to consider how to achieve their NDC, including contributions from each sector. There is a risk that REDD+ implementation is slowed by such national processes. At the same time, NDCs offer an opportunity to mainstream REDD+, and climate efforts more broadly, into national planning processes, which is important for their success. How REDD+ is integrated into NDCs is likely to vary from country to country, but as countries progress in developing strategies for integrating forest mitigation into broader climate strategies, such models will be helpful to the broader REDD+ community. Sharing lessons and approaches to achieving NDCs and integrating REDD+ actions and finance into them will be useful in the coming years. Another perennial challenge for forest countries is the predictability of finance which remains unresolved by the Paris Agreement. Despite the provision that over $100 billion annually would be mobilized by 2020 and beyond, no donor has yet committed to a particular scale of finance, nor specified delivery channels or how it may prioritize such funding in the future (with the exception of Norway s pledge to continue its International Climate and Forest Initiative to 2030). At the same time, donor governments hint at expectations of seeing concrete forest country action, or that forest countries do a certain amount of work to achieve results, and show they can do more with international support in order to obtain future financing. Forest countries, meanwhile, are concerned about whether finance will flow only after a country achieves its unconditional target; or whether, post-2020 (or after the Paris Agreement enters into force), only results-based finance may be available. Furthermore, if they achieve results, will performance-based payments as envisioned by a series of 17 hard-won COP decisions and confirmed by the Paris Agreement even be available? If we build it, will they come? An equally important issue exists around how reporting of support might develop under the new transparency framework. Better donor communication on the expected scale, channels, and types of finance that will be available, as well as providing a clear understanding on how financing decisions are made, can help address forest country challenges related to the opaqueness about, in particular, bilateral finance. Many interviewees suggested that the Green Climate Fund could improve its communication and processes related to how a country may access REDD+ funding. Another challenge for forest countries is whether there may be a future market for forest-related emission reductions. Most of those we interviewed are taking a wait-and-see approach to how markets develop under the UNFCCC. While many countries remain interested in the potential for markets to increase the scale of finance for REDD+ results, the overall interest in markets seems noticeably lower than in years past. Enthusiasm may be somewhat suppressed by developing countries realization that they will soon need to demonstrate own effort in contributing to global mitigation efforts. The forest sector could play a significant role for many countries in this regard. Most countries, therefore, have not yet decided whether or how, they may use market-based mechanisms, if they were to exist. Finally, when asked What is the most urgent need in the near term to ensure REDD+ reaches its full potential and contributes high ambition for the Paris Agreement? there was a consistent response: Implementation. Nearly all respondents stated a need to show REDD+ can work, and to do so quickly not only to secure a place for REDD+ in new regimes that will be spawned from the Paris Agreement, but also to begin correlating finance with performance to, at last, provide the incentive system REDD+ was envisioned 10 years ago to deliver. A number of countries also mentioned a need to build capacity (in country, not through consultants) and that the Paris Agreement as well 3

4 as REDD+ implementation require strong capacities, not only to measure and monitor forest-related greenhouse gas fluxes, but also new institutions and skills to deliver emission reductions. The Paris Agreement legitimizes REDD+ and offers potentially new opportunities for forest protection and restoration. However, success is not a foregone conclusion. The Agreement is not sufficient to ensure that action will occur, finance will flow, and emissions will be reduced in the forest sector. In order for this to occur, all countries will need to seize the opportunity the Paris Agreement provides whether as leverage to promote domestic support for a forest agenda, or to ensure its full integration into the international architecture. The REDD+ community should endeavor to demystify forests and land use still a poorly understood sector to those outside and demonstrate, through concrete actions and partnerships, how it can contribute to Paris Agreement goals. 4

5 Contents Executive Summary Introduction Overall implications of the Paris Agreement for REDD Mitigation and REDD Finance and REDD Transparency of Action and Support Market mechanisms and REDD Conclusions: How do we ensure REDD+ leads to the highest possible ambition? ANNEX: Provisions in the Paris Agreement that impact REDD

6 1. Introduction This paper synthesizes early thinking on the implications of the Paris Agreement for REDD+, including potential impacts on global mitigation efforts as well as the development and implementation of national REDD+ strategies. It is informed by, and attempts to communicate, a range of views collected through a series of not-for-attribution interviews with REDD+ experts and key stakeholders and a gathering of government officials for an informal workshop. These discussions included 20 forest country officials, 15 developed (donor) government officials, and 5 representatives of nongovernmental organizations (i.e., multilateral institutions and civil society). Our interviews suggest that only months after the completion of COP21 in Paris most stakeholders had not yet fully processed the implications of the Paris Agreement for REDD+. There were more questions than answers on this topic. At the same time, many stakeholders believed the Agreement does have significant implications for forest-related mitigation. Specifically, most believed that REDD+ is affected by the need to achieve nationally determined contributions (NDCs: Section 3) and potential changes in climate finance (Section 4). All stakeholders interviewed suggested there are many outstanding issues on how the Paris Agreement might operate that will impact the implementation and financing of REDD+. Many suggested that while no additional REDD+ specific decisions are needed, a range of issues in the broader climate agreement that affect REDD+ require subsequent discussion and negotiation. These include provisions on transparency, accounting, and the development of market mechanisms. The linkages, and varying views on how they might impact REDD+ implementation, are covered in Sections 5 and 6. Several stakeholders suggested that resolving details related to the Paris Agreement may take several years to negotiate. The UNFCCC Secretariat counted around 50 tasks for the Ad Hoc Working Group on the Paris Agreement (APA) to negotiate that relate to clarifying how to take forward the Paris Agreement. 1 However, the Agreement itself may enter into force much earlier than the formerly expected 2020 date some suggest this could occur as early as this year. At the same time, a number of both forest and donor countries think there will be an interim period prior to the time when all countries will have new obligations under the Agreement to achieve and report progress toward national contributions. This paper begins a discussion on these issues. It attempts to lay out the range of views about how the Paris Agreement may impact REDD+ and the questions raised by those involved in both the implementation and financing of forest-related mitigation. 2. Overall implications of the Paris Agreement for REDD+ The Paris Agreement creates a new environment for both developing and developed countries. Under the new agreement, all countries, with flexibility for least developed countries (LDCs), are to contribute to global climate mitigation by achieving nationally determined contributions (NDCs). The Agreement also includes new financing objectives, global goals, and establishes a new transparency framework that includes reporting requirements for all Parties, as well as a new mechanism for international cooperation that will contribute to mitigation and support sustainable development. 1 UNFCCC Secretariat, Taking the Paris Agreement forward: Tasks arising from decision 1/CP.21, found at: 6

7 A variety of views were expressed on the overall impact of the Paris Agreement on REDD+, including benefits, opportunities and concerns. Those closest to the REDD+ negotiations (e.g., REDD+ negotiators and stakeholders focused on forests) mostly saw the Paris Agreement as a win or major achievement for REDD+. In particular, Article 5 was most often cited by this set of stakeholders as a strong political signal that elevated the importance of forests as a sector important not least for domestic reasons and confirming the existing framework for REDD+ under the United Nations Framework Conference on Climate Change (UNFCCC) 2 as a basis for both action and finance. Many feared that 10 years of negotiations on forests that led to 17 hard-won REDD+ COP decisions might have been lost in the context of a new agreement. This community of REDD+ champions see Article 5 as validating, or locking in those decisions for some time to come considering that the nature of the Paris Agreement (as a bottom-up structure) was created for longevity. In addition, many were pleased that Article 5 mentions results-based payments, and that the finance provisions in the accompanying decision (1/CP.21) specifically recognize the importance of finance for REDD+. The Paris Agreement does not make the future of REDD+ clear, although it opens up possibilities. The very explicit mention of REDD+ in the Paris Agreement is politically important. Now it is impossible to argue against the importance of forests for combatting climate change. Those further from the REDD+ negotiations had mixed views on whether the Paris Agreement was a success for forests, and some were unsure of its impact. Those with broader climate change responsibilities suggested that while Article 5 recognizes forests, it s hard to understand its added value or it s not operational and doesn t give Parties anything to do, which is unusual for treaty text. Some of those interviewed saw the largest win for REDD+ in the adoption of new, and more ambitious, global goals including the 1.5 C goal and reaching carbon neutrality by the second half of the century. Their argument was that these demanded an all in strategy, which therefore must include land use and forests. Several noted that what matters most to REDD+ is whether countries put forward economy-wide contributions. One respondent pointed to provisions that countries must strive to include all categories of emissions in their NDCs (or justify any omissions) 3 and that it is this requirement, not Article 5, that will make REDD+ take off. Another suggested that the most important aspect of the Paris Agreement is the common expectation that all Parties must do their fair share, and that to the extent REDD+ is seen only in the conditional context, this may result in lower overall ambition. While most of those interviewed saw mostly benefits for REDD+ in the Agreement, a few questioned whether it is good for REDD+ to be distinguished from other sectors. These voices questioned whether perpetuating forests as somehow separate or different than other sectors could have negative consequences, including how REDD+ may be funded in the longer term. Several suggested REDD+ needs to better integrate into the broader streams of the climate change regime. Another concern raised largely by forest countries was that the elevated focus on REDD+ can distract from a focus on mitigation in other sectors. Several mentioned a fear that the focus on REDD+ is causing a free rider problem wherein other sectors are not pressured to reduce 2 Hereafter, we refer to the existing framework on REDD+ under the UNFCCC as the Warsaw Framework, but note it also includes decisions on REDD+ take after the Warsaw COP. 3 Decision 1/CP.21 paragraph 31(c),(d) states that Parties strive to include all categories of anthropogenic emissions or removals in their NDC [and] provide an explanation of why any categories are excluded. 7

8 emissions, due to a perception that the country may rely largely on emission reductions from forests to achieve their NDC. Finally, nearly all respondents suggested that there is no need to negotiate any additional REDD+ specific decisions. At the same time, many suggested that a number of decisions in the broader negotiations need to be taken to help to define how REDD+ may operate in the future; for example, decisions on NDCs, transparency, and market mechanisms. These topics are covered in subsequent sections of the paper. Takeaways The Paris Agreement legitimizes REDD+ and offers opportunities for forest protection and restoration. However, success is not a foregone conclusion. The Agreement is not sufficient to ensure that action will occur, finance will flow, and emissions will be reduced in the forest sector. While Article 5 is positive for forests, given that the Paris Agreement is for the most part sector-neutral, it creates a sense that forests are separate. Forests should be integrated into broader processes. o o At the international level, forests should be seen as integrated into all streams of the negotiations (even if not mentioned explicitly). At the national level, they should be integrated into low carbon development strategies. Countries should take the opportunity to use the Paris Agreement and its specific provisions on forests as leverage to promote domestic support for a forest agenda. Countries should seek to demystify land use and clarify how it can contribute to Paris Agreement goals, while also communicating how it can uphold the environmental integrity of the climate regime. REDD+ should be viewed as valuable (or even more valuable given cobenefits) as other mitigation efforts. 3. Mitigation and REDD+ For many countries, Articles 3 and 4 on nationally determined contributions and mitigation have the strongest impact on REDD+. In particular, Article 4 of the Paris Agreement states that all countries are to prepare and communicate successive nationally determined contributions (para 2), but also to account for the NDC (para 13); the accompanying decision (1/CP.21) requests the APA to elaborate guidance for such accounting. This puts forest-related mitigation into a new national context for developing countries one in which many countries have both unconditional and conditional mitigation obligations. Many countries are just beginning to consider how to achieve their NDC including how each sector contributes to the national target. Views diverged on the relationship between REDD+ and NDCs. They ranged from there is no relationship to those who believed REDD+ should be fully integrated into NDCs. These views illustrate differences in how REDD+ is defined: as a financing mechanism or as a mitigation tool. Most stakeholders hold a view that it is both (a means to access finance and achieve mitigation) and therefore falls somewhere in the middle. They saw a need to establish a For developed countries, REDD+ is about mitigation, while for developing countries it is about finance. relationship between NDCs and REDD+, but were unclear as to how REDD+ will fit into NDCs. For many countries this discussion is part of a larger national conversation on how all sectors might 8

9 contribute to the NDC one that is only just emerging. Some stakeholders raised the question of whether a more explicit inclusion of REDD+ efforts in NDCs could be conducive to strengthening REDD+ implementation. Is REDD+ in or out of NDCs? A quick analysis of the top 20 countries by tree cover loss (based on Global Forest Watch data) indicates that nearly all specify or imply that all forest-related emissions are included in their intended nationally determined contribution (INDC). Forest removals (i.e., the plus in REDD+) is less clear. Of the top 20 countries with forest restoration opportunities (based on IUCN s country ranking), 17 are developing countries and of these, 15 put forward forest restoration contributions. While the intent stated in many forest-country INDCs is often comprehensive coverage of forestrelated emissions, in practice this is not likely to occur for some because of a capacity gap in many countries ability to measure and monitor some activities (e.g., degradation and regrowth), pools (e.g., dead organic matter, soil) and non-co 2 gases. Many of the plus contributions were couched in terms of hectares (not tco 2 e), highlighting the difficulty that many countries have in measuring forest-related removals. Another analysis of 75 INDCs submitted by developing countries with forest coverage, shows the wide variety of categories in which these countries have included forests-related targets or activities. Afforestation/ reforestation, as well as improved cook stoves are the most common targets, followed by activities or targets to increase and/or protect forest cover, and reduce emissions (through REDD+, agroforestry, sustainable forest management, etc.). Some countries include these items under mitigation, and others under adaptation. The conclusion is that most countries have signaled their intent to include forest emissions and removals in their NDCs. However, whether a country specifically cites REDD+ (and in what context it does so) may depend on whether a country defines REDD+ as a financing or mitigation concept. An issue that requires more discussion is the meaning of conditional contributions. Many developing countries included this concept in their INDCs, but are uncertain of its implementation. Some view a conditional contribution as an additional effort that is (entirely) funded either externally or through results-based payments; others suggest that conditional does not mean entirely funded by the outside. There were also questions around how a country would disaggregate, in the case of large-scale REDD+ programs, results that were ascribed to a conditional versus unconditional portion of an NDC. Further confusion around conditional contributions relates to the use of market-based mechanisms or nonmarket-based payments received for performance and in what instances a country could count such emission reductions toward the achievement of the conditional portion of their NDC. There was an expectation that such issues may be clarified in future COP decisions. A number of countries stated a need to develop guidance on accounting for land use as part of NDCs and that this may have impacts on REDD+. Concerns were expressed about how negotiations on land use, land-use change, and forestry (LULUCF) accounting may affect REDD+ reference levels and measurement, reporting, and verification (MRV), which have been defined as part of the Warsaw Framework. Many wondered if such negotiations may change the rules of the game. There were differing views on whether (and how much) guidance should be provided by the COP on land-sector accounting how to balance a need for a common framework with flexibility to take into account varying capacities of countries. Some expected that previously adopted (Kyoto Protocol) approaches will be recognized and carried over into a new accounting framework, while others prefer rewriting the rules. A few suggested that only Intergovernmental Panel on Climate Change (IPCC) guidelines should be required. Many developed countries would like to see a 9

10 convergence between land-sector accounting and REDD+, while others mentioned that the alignment should not take place at the accounting level, but instead in the development of common modalities and guidelines for reporting. REDD+ experiences can inform ongoing discussions on NDCs, including on accounting and a review process. A number of respondents suggested that decisions and experience with REDD+ reference levels and MRV could inform expected discussions on LULUCF accounting. Some suggested that the REDD+ provisions on reference levels and MRV are both stronger than rules for LULUCF (under the Kyoto Protocol), and likely also more stringent than the future transparency framework. Several suggested the Technical Assessment process of REDD+ forest reference (emission) levels could be a useful model for similar review (and improvements) of NDCs. Concerns were expressed about the level of ownership, transparency, and robustness of future NDCs. Several suggested the INDCs submitted to date are a mixed bag and noted concerns that most are not sufficiently detailed or ready to move into implementation. A need for capacity building in this regard was mentioned, including improving data, identifying synergies among REDD+, broader land use policies and practices, and efforts to reduce emissions in other sectors. One respondent mentioned concerns that baselines applied to NDCs are not as robust as REDD+ reference levels submitted to the UNFCCC. Many countries may need to adjust their NDCs over time, as capacity improves and better data and information is available as one participant at the workshop noted, We are building the plane as we are flying it. There is a lack of clarity on how REDD+ reference levels interact with NDCs, which are often expressed against economy-wide business-as-usual baselines. Many forest country officials said it was still unclear if and how REDD+ reference levels would be incorporated into their NDCs. Some countries suggested it should be a subset or that one should be able to calculate, or trace, what part of the big reference level is captured by a forest reference emission level. Those who believed REDD+ reference levels are unrelated to the NDC either said REDD+ is separate (i.e., only an incentive mechanism) or that links should instead be made at the greenhouse gas (GHG) inventory level. Those who see REDD+ as an opportunity to increase mitigation ambition suggested that NDC baselines require more information, including how existing commitments are factored into them. Takeaways Many countries are only starting to consider how to achieve their NDCs, including the contributions from each sector. There is a risk that REDD+ implementation is slowed by such national processes. At the same time, NDCs offer an opportunity to mainstream REDD+, and climate efforts more broadly, into national planning processes, which is important for their success. There is high ambition reflected in NDCs, but insufficient capacity for implementation. How REDD+ is integrated into NDCs is likely to vary from country to country, but models of integration, including technical issues around accounting (e.g., consistency between NDC baselines and REDD+ reference levels) and policy approaches including institutional structures, will be helpful. Sharing lessons and approaches to achieving NDCs and integrating REDD+ actions and finance into them can be useful in the coming years. Clarifying the meaning of conditional contributions will be helpful to the process of national planning including clarifying what flexibility countries have to achieve this portion of the contribution and, in practice, how it will be accounted. 10

11 The uncertainty about how efforts in the land sector (including forests) will be accounted in NDCs presents challenges for REDD+ countries related to predictability; capacity gaps further compound such challenges. A focus by land use/redd+ negotiators to agree on accounting guidelines for land use will provide more certainty to forest countries. REDD+ experience (with reference levels and MRV) can help inform discussions on LULUCF accounting. 4. Finance and REDD+ How the new Paris Agreement may affect flows of finance is critically important to forest countries seeking to implement REDD+ actions, especially given the fact that such large, landscape-level programs are not short-term propositions, but longer-term investments of resources. Article 9 of the Paris Agreement obligates developed countries, and encourages all other Parties, to provide financial resources to assist developing countries with mitigation and adaptation efforts, and to provide information on such support. The Article also highlights that the institutions serving the Paris Agreement, including the operating entities of the Convention s Financial Mechanism, shall aim to ensure efficient access to financial resources through simplified approval procedures. The COP decision that accompanied the Paris Agreement text also recognizes the importance of adequate and predictable financial resources, including results-based payments, for REDD+. There is still a lack of consensus on whether domestic resources should be considered as REDD+ finance. Some developing countries suggested they have always contributed their own efforts and resources to advance REDD+ implementation, but that these efforts must be accompanied and amplified by international finance in order to produce the transformational changes needed at the pace that climate urgency requires. Those who maintained that domestic finance is not REDD+ finance suggested that REDD+ is only part of the conditional, or REDD+ has always been a common effort from both developing countries and donor countries, and it should remain as a joint effort in the new climate regime. internationally supported, contribution. Most, however, said that they consider a range of types of finance to be REDD+ finance, including public and private sources, domestic and international, donor- and market-based finance and that it is critical to include all sources of finance because no single source of financing will be sufficient for REDD+ implementation. Most developed (donor) country representatives suggested they would continue to finance REDD+, including after the Paris Agreement enters into force. However, they could not specify the scale or channels through which such finance might flow, in part because it is too soon to know how the pieces of the new climate architecture will fall into place. With the exception of Norway, most donors said they cannot make specific financial pledges into the future (e.g., to 2025 or 2030). In the near term, several donors suggested their climate finance would support countries to achieve their NDCs, but that the NDCs themselves needed to be more robust and transparent. A couple suggested that REDD+ would find greater support if forest-related actions were clearly integrated into NDCs. Still others suggested that forest protection and conservation efforts would continue to be supported for multiple reasons (including reasons beyond climate change mitigation). Once the Paris Agreement enters into force, several donors hinted that they expected to see concrete forest country action; in other words, that developing countries do a certain amount of 11

12 work to achieve results, and show they can do more with international support. Many noted that this expectation was for countries with higher capacities and that flexibility would be provided to least developed countries, for example, and that a country s own effort could be nonmonetary or could consist of getting the policies right. One donor said its climate finance would not support NDCs, which should represent countries own effort. Others suggested more flexibility, saying they expect to support both conditional and unconditional pledges and they were looking for transformation and countries that are taking things seriously. Furthermore, one donor country stated that it is willing to keep investing in capacities and phase 1-type activities, but that it will need reassurance that its investments are resulting in real country ownership of REDD+ policies and measures. Very few forest countries have clarity on how they will finance REDD+, particularly once the Paris Agreement enters into force. Most forest countries do not yet have a concrete plan on how REDD+ implementation will be financed, nor whether they might receive results-based payments if they achieve verified emission reductions. Many developing countries mentioned the need to allocate support for all phases of REDD+. Some were unclear on whether accessing results-based finance is in their national interest, given obligations to achieve (unconditional) NDCs. Many recognized that own effort was part of the financing equation, with some suggesting that finance has always been a shared responsibility both before and after the Paris Agreement enters into force. Some were concerned that finance will only flow once a country achieves its unconditional target, while others suggested a need to ensure finance can be accessed for the conditional portion of NDCs, even while a country works to achieve the unconditional target. Finally, some noted concerns about climate finance post-2020, or after the Paris Agreement enters into force, wondering whether only resultsbased finance may be available and emphasized that least developed countries especially need upfront finance for capacity building and implementation. There are some gaps to operationalizing REDD+ results-based payments, but these should be addressed under the Green Climate Fund and not the COP. Many expect the Green Climate Fund (GCF) to play a role, but not the only (or even most important) role, in future finance for REDD+. Some respondents suggested that the role of the GCF was to be transformative (rather than funding small-scale projects) and that this should be a focus of its investments. Most expected multiple channels of finance, including bilateral and multilateral funding, to be available. One respondent said there will not be one superfund in Korea. Another suggested that the GCF is run like a bank and, as such, will present hurdles and will prefer to lend, rather than grant, funds and that bilateral agreements can better advance the REDD+ agenda, both now and after the Paris Agreement enters into force. There were differing views on which phase (or phases) of REDD+ the GCF should fund with some preferring finance for phases 1 and/or 2, and others having a strong preference for results-based finance. Many were frustrated with the pace of discussions and the politicized decisionmaking process under the GCF. Several suggested the GCF needs to develop further guidance on how to access REDD+ funding. However, some were skeptical that the GCF can develop the guidance needed particularly to fund resultsbased payments while others feared an additional layer of guidance beyond the Warsaw Framework would further constrain countries ability to access finance. A number of respondents mentioned the importance of private sector finance. Some suggested that recent commitments by companies seeking to take deforestation out of their supply chains provided reason to be optimistic. Another respondent noted that beyond the adoption of the Agreement, one key outcome of Paris was the successful process of engaging nonstate actors in the climate efforts through the Action Agenda. Several respondents acknowledged the need to engage the private sector in order to scale up finance for REDD+ to the level that will be needed, although 12

13 some clarified that the involvement of the private sector will need to be coordinated with national governments to ensure environmental integrity. Takeaways The Paris Agreement does not solve the ongoing problems related to a lack of predictability of future finance, which presents challenges for forest countries. Furthermore, there remains a near-term finance mismatch in that while finance is available, it does not always target country needs and its allocation is not transparent to recipient countries. Improvements should be made in the use and transparency of existing funds and in the coordination of REDD+ finance, at both the international and national levels. To the extent possible, donor governments (which may also include developing countries that engage in south-south cooperation) should seek alignment with UNFCCC provisions, and provide clarity on the types and scale of finance that will be provided in the future in both the near and longer term as well as any requirements, or expectations of forest country action, to access such finance. The identification of investments and allocation of support must be country-driven and based on building and strengthening local capacities. For finance to be effective, cross-sectoral coordination is needed at the country level, as well as more coherence in the investments from donors. While challenged by a highly politicized atmosphere, the Green Climate Fund Board should nevertheless work to provide clarity to forest countries on how to access REDD+ finance and, in particular, how to access results-based finance through the Green Climate Fund. There is no single mix of finance best suited to all countries; for some, results-based finance is desired, for others up front and predictable finance is needed for ambition in the forest sector. 5. Transparency of Action and Support The Paris Agreement establishes a transparency framework (Article 13) that will build on and enhance existing arrangements under the UNFCCC, and whose objective is to build mutual trust and confidence and to promote effective implementation. It will include both a framework for action and for support (i.e., provisions for tracking progress in implementing and achieving NDCs, and for support provided and received). Information submitted would undergo a technical expert review. Article 13 states that, at the first Conference of the Parties serving as the Meeting of the Parties to the Paris Agreement (the CMA) it will adopt modalities, procedures and guidelines for the transparency framework. National Communication reports indicate a wide disparity in Negotiations will be developing countries capacity to perform land sector reporting. focused on transparency This lack of capacity, in many instances, carried over into the INDCs, and accounting; building which are of mixed quality. Several respondents noted a critical confidence is now one of the need to improve the data and information required to estimate GHG main goals of the UNFCCC. forest fluxes for national GHG inventories. This in turn can feed into more robust NDCs that contain forest sector action, as well as more informed policymaking related to how REDD+ can contribute to a country s climate change program. Forest countries would like to see the modalities to access finance be made simpler and more transparent. Many developing country representatives emphasized the need to reduce the 13

14 transaction costs and the time it takes to access different sources of finance. For example, in addition to UNFCCC rules and procedures, donor governments often have differing rules and regulations on the use of official development assistance (ODA), and multilateral organizations have further requirements. A few respondents declared that the current multilateral mechanisms (which they suggest make access to finance complex) should end to allow support to better align with UNFCCC rules and procedures, flow through leaner bilateral deals and, to some extent, through the GCF. There is a hope that negotiation periods can become shorter and disbursements can be faster. Forest countries representatives also communicated a feeling of uncertainty regarding how REDD+ finance will be allocated by donor countries moving forward (noting in particular the growing emphasis in results-based payments). REDD+ experiences with reporting on finance: The Voluntary REDD+ Database REDD+ has more experience than other sectors in developing a reporting system for financial support. In 2010, the REDD+ Partnership agreed to develop a publicly accessible online database of REDD+ finance. It was based on voluntary submissions by governments, multilateral institutions, and other organizations providing funding to developing countries pursuing REDD+ programs. The Voluntary REDD+ Database (VRD) was designed as a tool to improve transparency and coordination around REDD+; support efforts to identify and analyze gaps and overlaps in REDD+ financing; and help share experiences and ideas on among REDD+ Partners and with other stakeholders. In the REDD+ Partnership Assessment conducted at the end of the Partnership, an evaluation suggested that the VRD successfully increased transparency of support and provided the global community with useful information on REDD+ financing. It provided underlying data that supported analysis on gaps and overlaps in REDD+ support. However, the experience of the VRD also identified challenges with reporting on finance including data collection (quality, completeness and consistency) as well as data presentation, including technical and usability issues. Countries interviewed stated that collecting and submitting data was a resource-intensive effort. Finally, both forest countries and donors suggested that identifying exactly what is REDD+ finance could be one of the most difficult challenges and differing definitions likely led to a lack of comparability on what was reported to the VRD. Previous experiences and lessons from REDD+ could inform how to best develop modalities, procedures, and guidance for the transparency of support, and how donor governments may best communicate biennially indicative, quantitative, and qualitative information on support to the Convention. Takeaways Nationally determined contributions (NDCs) present new challenges for developing countries that require more robust capacities to measure and monitor emissions and removals, particularly from land use and forests. Building national capacities to better monitor and improve data on forests for national GHG inventories should be a priority for both forest and donor governments. An equally important issue is how support is reported in a way that promotes effective implementation, and addresses forest country challenges around finance. Drawing on 10 years of experience (including the Voluntary REDD+ Database), a discussion between REDD+ recipient and donor governments on the most effective methods to report on support could be useful to discussions under the Ad Hoc Working Group on the Paris Agreement on developing modalities, procedures and guidelines for the framework for transparency of support. 14

15 6. Market mechanisms and REDD+ Article 6 of the Paris Agreement was often mentioned by respondents as having potential implications for REDD+, in particular in relation to the newly created internationally transferred mitigation outcomes (ITMOs) and to the future mechanism for sustainable development that may include forest-related emissions trading. However, many were unsure of the ultimate impacts of these provisions, and suggested much still needed to be negotiated to understand if and how this Article would affect REDD+. The impact of markets on REDD+ is unknown until the rules are negotiated. Our interviews suggested that most stakeholders are taking a wait-and-see approach to how markets develop under the UNFCCC. Several suggested that developing rules will be one of the most challenging tasks of the negotiations, and may not result in a set of operational rules to establish a market, but rather a set of general principles (that would apply to multiple transfer mechanisms that would be established nationally or bilaterally). A few seemed to take a view that the only allowable emissions trading would be under the newly established sustainable development mechanism, while others assume there will be multiple markets, each with its own set of rules. Most believe some overarching guidelines, common accounting, and rules would be useful to avoid double-counting (particularly in the case of unconditional contributions) and to ensure the respect for safeguards. For many, it remains unclear to many how bilateral approaches (Article 6.2), a market mechanism (Article 6.4) and non-market approaches (Article 6.8) will work together. At this stage, discussion on markets and REDD+ should not be a priority. REDD+ should be a collective effort without focusing on who owns the emission reductions. Absent further agreements on markets under the UNFCCC, there were differing opinions on whether emission reductions trading may occur between countries. Some suggested there is no carbon trading unless a mechanism with regulations is developed under the Paris Agreement. Others suggested markets will be developed by many Parties, including emissions trading outside the UNFCCC, but hoped the COP might provide guidance to avoid divergence in the standards adopted by such markets, particularly for REDD+ credits. A few others mentioned that emission reductions trading should happen only at the national level (within a country) or under very regulated and defined regional markets; given the risks for forests to be used as an excuse for not acting in other sectors, domestically and/ or internationally. Many suggested that REDD+ has unique aspects that require special provisions for markets. Some made explicit reference to the Warsaw decision on MRV, which states results-based actions that may be eligible to appropriate market-based approaches may be subject to any further specific modalities for verification Most supported including REDD+ in future markets, but were cautious about how to ensure social safeguards and environmental integrity (such as permanence, which is unique to land use, and may itself be affected by a changing climate). A few suggested that additional stringency, or restrictions, may be needed beyond the Warsaw Framework for REDD+ to operate in a market. Discussions during the workshop pointed out that if REDD+ were to be part of a market mechanism, it would require capacity building and time; coherence between market and REDD+ policies; and consideration of how markets could complement public finance to fill in gaps. Some, mostly those outside the REDD+ community, said there is still skepticism about whether forest-related emission reductions have the necessary environmental integrity to be part of a market-based mechanism and that, like the Clean Development Mechanism, forests may not be included in the new sustainable development mechanism. A few suggested that only the activities 15

16 included in the plus (conservation and enhancement of carbon stocks, as well as the sustainable management of forests) should be eligible for offsets. There is a lack of clarity on how emission reduction transactions could translate into buyer or seller countries achievement of their NDCs. There are varying views on how emission reductions (ERs) may be used (and under what conditions) by the seller country and the purchasing country to achieve its own NDC. In particular, there was no consensus on whether the seller may count an ER toward achievement of a conditional commitment, if the buyer country is using the same ER to count toward achievement of its NDC. Some suggested there is flexibility depending on how countries suggested they would achieve their national contributions (as stated in their NDCs), while others held stricter views around such transactions for example, that ERs may be counted only as finance provided by purchasing countries, or that selling countries may not use ERs to achieve their NDC. Many suggested the answer would depend on future COP decisions, or on agreements between countries prior to financing emission reductions. One person suggested that such emission reductions should be counted only to raise ambition, (e.g., purchasing countries may use ERs if they raise the ambition beyond what is currently in their NDC, but not as an offset). Most countries have not yet decided how, or whether, they may use market-based mechanisms. This is partly due to the uncertainty around the issues described above, but also because markets have no heart referring to a skepticism of whether markets would pay a fair price, offer equitable distribution of benefits, and safeguard communities. While many countries remained interested in the potential for markets to increase the scale of finance for REDD+ results, some were reconsidering the role of markets to achieve forest-related mitigation given new requirements to reduce emissions with own effort under the Paris Agreement. There was also uncertainty related to the use of market-based mechanisms for transactions involving the private sector and governments and whether and how to regulate transactions among private entities. In particular, many stakeholders mentioned current discussions under the International Civil Aviation Organization (ICAO), related to the inclusion of REDD+ as a potential area for offsetting emissions from the aviation industry. Most of the respondents pointed out that REDD+ has been clearly defined under the UNFCCC, and that any potential market or offset mechanism should observe the agreed provisions. Some went further and explicitly mentioned that the REDD+ framework establishes national-level interventions, or as an interim measure, subnational-level actions, and therefore independent project-level transactions, (i.e., those that occur outside a national [or subnational] system, should not be allowed). It s good that the door is open for REDD+ to be included in future markets but it would need to be carefully designed. Takeaways Uncertainties about whether markets (including the sustainable development mechanism established in Article 6) will be created in the future and, if so, whether and how they might include forests, creates anxiety and a lack of predictability for forest countries. Skepticism still exists outside the REDD+ community about whether forests can maintain environmental integrity as offsets, and there is a risk that old arguments about the robustness of REDD+ emission reductions could be reopened, undermining what the REDD+ community has achieved to date. 16