DEVELOPMENT OF NEW TARGETED PROGRAMS UNDER THE SCF

Transcription

1 SCF/TFC.2/4 January 16, 2009 Meeting of the SCF Trust Fund Committee Washington, D.C. January 27, 2009 DEVELOPMENT OF NEW TARGETED PROGRAMS UNDER THE SCF

2 Introduction 1. Section C of the Governance Framework of the Strategic Climate Fund (SCF) provides: C. SCF Programs 9. Within the framework of the SCF, targeted programs with dedicated funding (SCF Programs) can be established to provide financing to pilot new development approaches or scaled-up activities aimed at a specific climate change challenge or sectoral response. Resources will be mobilized and pledged to specific SCF Programs to be financed within the SCF. Arrangements to guide the SCF Programs, ensure effective partnerships, and provide accountability will be defined for each SCF Program to ensure the effective operations of the programs. 10. The following proposals have been established under the framework of the SCF: (a) A pilot program for climate resilience is proposed to be established to provide incentives for scaled-up action and transformational change in integrating consideration of climate resilience in national development planning consistent with poverty reduction and sustainable development goals. (b) A forest investment program is proposed to be established to mobilize significantly increased funds to reduce deforestations and forest degradation and to promote improved sustainable forest management, leading to emission reductions and the protection of carbon reservoirs. (c) A renewal energy program is proposed to be established to support investments in low income countries for energy efficiency, renewable energy and access to modern sustainable energy. 11. In support of the objectives of the SCF set out in paragraph 7 above, SCF Programs in addition to those listed in paragraph 10 above may be considered in accordance with the following criteria: (a) (b) (c) multiple donor interest in establishing a SCF Program; broad applicability of lessons to be learned; sufficient resources to finance activities at scale;

3 (d) complementary to any other multilateral financial mechanism or initiative; and (e) link between climate change and development. 12. The scope, objectives and eligibility criteria for each of the SCF Programs will be recommended by the Administrative Unit in consultation with the MDBs, the Trustee and other key stakeholders, and approved by the SCF Trust Fund Committee. The SCF Trust Fund Committee will provide guidance in developing such scope, objectives and eligibility criteria for the SCF Program. 2. At its organizational meeting, the SCF Trust Fund Committee (October 16, 2008), in reviewing the work program, underscored its strategic role in keeping under review (a) the strategic directions of the SCF targeted programs, (b) the coherence among the programs of the Climate Investment Programs, and (c) the broader strategic issues related to financing for climate change. The Committee requested that each of its meetings be structured so as to provide an opportunity for strategic discussions. For example, it was proposed that the agenda for the next meeting of the Trust Fund Committee include a discussion of the new targeted programs that are being considered for development under the SCF (the Forest Investment Program and the Scaling-up of Renewable Energy Program). 3. This paper has been prepared in response to that request. It reviews progress that has been achieved in developing the two new targeted programs: the Forest Investment Program (FIP), and the Program for Scaling-Up Renewable Energy in Low Income Countries (SREP). Annexed to this paper are: a) a preliminary design document for the FIP, as prepared by a working group, and b) a concept note for the SREP, based on informal consultations. 4. The SCF Trust Fund Committee is invited to review the annexes, to provide strategic guidance to assist the further development of the programs, and to decide on the next steps to be taken to develop each program. Forest Investment Program 5. During the final design meeting of the Climate Investment Funds (Potsdam, May 2008), it was agreed that a forest investment program should be established by the end of 2008 to mobilize significantly increased funds to reduce deforestation and forest degradation and to promote sustainable forest management, leading to emission reductions and the protection of carbon reservoirs. The FIP should be developed based on a broad and transparent consultative process. That process should take into account country led priority strategies for the containment of deforestation and degradation and build upon complementarities between existing forest initiatives. 6. The first design meeting for the development of the FIP was held in Washington, D.C., on October 16-17, Participants in the meeting included representatives from

4 governments, UN agencies, NGOs, indigenous peoples, private sector, and other civil society groups. 7. In the meeting, it was recognized that a principal objective of the FIP, as a program under the Strategic Climate Fund (SCF), is to pilot and demonstrate new approaches to forest management that lead to major impacts in reducing greenhouse gas emissions from forests. It was agreed that the objective of the FIP should be to pilot and demonstrate what can be achieved through scaling up of resources and activities so as to achieve transformational change at the national the national level. The FIP should leverage other resources, including from the private sector. 8. The meeting agreed that in moving forward on the design of the FIP, it is important to have a fully consultative process. It recommended that the next step should be to establish a working group, comprising invited experts from governments, NGOs, indigenous peoples, private sector and UN agencies, to prepare a preliminary design document for consideration by the second design meeting. 9. The working group met on January 8-9, 2009, in Washington, D.C., and was cochaired by the experts from Ghana and Norway (see Annex 1 for a list of the working group members). 10. The working group prepared a preliminary design proposal for the FIP for submission to the SCF Trust Fund Committee and the next design meeting (see Annex 2). The working group also exchanged views on the FIP design process. 11. With regard to next steps, the working group underscored the need to ensure a broad and transparent consultative process. It agreed to recommend to the SCF Trust Fund Committee two options for a consultative process that would lead to early agreement on the design of the FIP. (a) The first option is to organize two additional FIP design meetings to be held in Washington, D.C. on March 5-6 and May 7-8 with a view to the adoption of the FIP by the SCF Trust Fund Committee at its meeting the week of May 11 The following would be invited to participate in the design meeting: i. Up to 18 representatives from potential contributor countries and up to 18 representatives from potential recipient countries. For the recipient countries, it is recommended that there be equitable regional balance (e.g., 3 countries each from the 6 WB regions). The SCF Trust Fund Committee members should be invited to nominate countries to be invited to the design meeting. ii. NGOs, indigenous peoples and private sector representation should be invited on the basis of a self-selection process. It is recommended that there be: 6 NGO representatives from developing countries (1 from each of the six regions), 6 NGO

5 representatives from developed countries (2 each from Europe, North America, and Oceania); 3 Indigenous Peoples groups (1 each from Africa, Asia and Latin America), and 3 private sector representatives (from developing countries and developed countries). iii. MDB partners should be invited. International organizations should be invited on the basis of their respective mandates in the field of forests and climate change; (b) The second option is to organize one additional FIP design meeting to be held in Washington, D.C. on May 7-8 with a view to the adoption of the FIP by the SCF Trust Fund Committee at its meeting the week of May 11. Prior to the organization of this final design meeting, regional consultations should be organized to ensure broad consultation. Participation in the design meeting should follow the general principles of the first option above. 12. It is anticipated that the time and administrative and transaction costs of the second option could be considerably higher compared to the first option and may not be feasible if the program is to be approved at the SCF Trust Fund Committee meeting in May Scaling Up of Renewable Energy Program 13. Informal consultations on the design of a program to promote renewable energy in low income countries were undertaken: first, to gauge interest in contributing to such a program (held in conjunction with the CIF Pledging Meeting in September 2008), and second, to gather preliminary views on the scope of such a program (held in conjunction with the Partnership Forum in October 2008). 14. On the basis of those consultations and further bilateral discussions, a preliminary concept note has been prepared (see Annex 3). The SCF Trust Fund Committee is invited to review the concept note and to provide strategic guidance to assist the further development of the program. The Trust Fund Committee is also invited to advise whether steps should be taken towards the further elaboration of the concept into a design document. 15. If the Trust Fund Committee agrees that the design of the program should move forward, it is recommended that the following steps be taken, with a view to submitting a program design document to the SCF Trust Fund Committee for approval at its next meeting: (a) (b) Convening of a working group to discuss an issues note so as to clarify key concepts and technical aspects of the proposed program; Preparation of a preliminary design document based on the results of the working group;

6 (c) (d) (e) (f) (g) (h) Circulation of the preliminary design document to SCF Trust Fund Committee Members and working group members with a request for comments; Revision of the design document on the basis of the comments received; Convening of a design meeting; Revision of the design document on the basis of the meeting; Second design meeting (Washington, May 6) to agree on the final design; Submission of the design document to the SCF Trust Fund Committee for approval at its meeting the week of May The Administrative Unit will propose more precise dates and locations for the working group and design meetings when the SCF Trust Fund Committee meets on January For purposes of the working group, it is suggested that the group be comprised of 6 representatives from potential contributor countries, 6 representatives from developing countries, 3 representatives form NGOs and 3 representatives from the private sector. The MDBs and international organizations with experience in the field of renewable energy in low income countries would also be invited to participate in the working group. 18. The SCF Trust Fund Committee is invited to provide guidance on the governments to be invited to nominate experts for the working group. It is recommended that the representatives from developing countries be identified taking into account balance regional representation. 19. The SCF Trust Fund Committee is also invited to provide guidance on those to be invited to the design meeting. Similar to the proposals for the FIP, it is suggested that up to 18 representatives from potential contributor countries and up to 18 representatives from potential recipient countries should be invited. For the recipient countries, it is recommended that there be equitable regional balance (e.g., 3 countries each from the 6 WB regions). The SCF Trust Fund Committee members should be invited to nominate countries to be invited to the design meeting. 20. MDB partners and representatives of international organizations, NGOs and the private sector should also be invited on the basis of their respective mandates in the field of renewable energy in low income countries.

7 Annex 1 Members of the Forest Investment Program Working Group Co-Chairs: Mr. Alhassan Attah Executive Director Ghana Forestry Commission P.O. Box TD 783 Takoradi, GHANA Mr. Per Fredrik Ilsaas Pharo Deputy Director International Climate and Forest Initiative P.O. Box 8013 Dep Oslo, NORWAY Working Group Members: Mr. Sena Alouka Executive Director Jeunes Volontaires pour l Environnement 131 rue Ofe, Tokoin Casablanca Lome 80470, TOGO Ms. Amal-Lee Amin Inter-American Development Bank (IADB) 1300 New York Avenue Washington, DC Ms. Katie Berg Office of International Debt Policy US Department of Treasury 1500 Pennsylvania Avenue NW Washington, DC Ms. Esther Camac-Ramirez Directora Instituto Latinamericana para el Fortalecimiento de Capacidades y Emprendimiento COSTA RICA Mr. Estebancio Castro-Diaz Executive Secretary International Alliance of Indigenous and Tribal Peoples of Tropical Forests 37 Street, Peru Avenue Building Manuel Enrique, Floor 1, Office 119 Panama City, PANAMA

8 Mr. Abdoulaye Dagamaissa Senior Forestry Officer African Development Bank B.P Tunis Belvedere, TUNISIA Mr. Gustavo Fonseca Team Leader Global Environment Facility (GEF) 1818 H Street NW Washington, DC Ms. Zoe Harkin Forest Carbon Specialist Fauna & Flora International 62 Cambridge Street Collingwood, Melbourne VIC AUSTRALIA Mr. Marlon Mohamed Hoesein Deputy Permanent Secretary Ministry of Physical Planning, Land and Forest Management Cornelis Jongbaw Straat Paramaribo, SURINAME Mr. Hector Malarin Inter-American Development Bank (IADB) 1300 New York Avenue Washington, DC Mr. Michael Martin Director, Forest Economics & Policy Division Food & Agriculture Organization (FAO) Viale delle Terme di Caracalla Rome, ITALY Mr. Etienne Massard Directeur General de l Environement Ministere de l'environement Libreville, GABON Ms. Jan McAlpine Director United Nations Forum on Forests Secretariat (UNFF) One UN Plaza, DC New York, NY Mr. Charles Ian McNeill Senior Policy Advisor Environment & Energy

9 United Nations Development Programme 304 East 45 th Street, Room 984 New York, NY Mr. Hadi Pasaribu Director General, Forestry Production Ministry of Forestry Gd. Manggala Blok 1, Lantai V, Jl. Gatot Subroto Jakarta 10270, INDONESIA Mr. Eduardo Paes Saboia Senior Advisor to Executive Director Brazil The World Bank Group 1818 H Street NW Washington, DC Ms. Maria Sanz-Sanchez Programme Officer, Climate Change Secretariat United Nations Framework Convention on Climate Change (UNFCCC) Martin-Luther-King Strasse 8, D53175 Bonn, GERMANY Ms. Amy Sullivan Department for International Development 1 Palace Street SW1E 5HE London UNITED KINGDOM Mr. Tatsuya Watanabe Deputy Director, International Forestry Cooperation Office Forestry Agency Ministry of Agriculture, Forestry and Fisheries Kasumigaseki, Chiyoda Tokyo, JAPAN Resource Persons: Mr. Stewart Maginnis Director, Environment & Development Group International Union for the Conservation of Nature Siege Mondiel de l'iucn, Rue Mauverney Gland, SWITZERLAND Ms. Frances Seymour Director General CIFOR P.O. Box 0113, BOCBD Bogor 16000, INDONESIA

10 Annex 2 Forest Investment Program Proposal presented by Forest Investment Program Working Group

11 I. BACKGROUND 1. There is increasing consensus that addressing climate change is central to the sustainable development, economic growth and poverty reduction agenda. Increasing the resilience to climate change needs to combine both mitigation and adaptation measures. A delay in reducing greenhouse gas (GHG) emissions would significantly constrain opportunities to achieve lower stabilization levels and is likely to increase the risk of more severe climate change impacts. Climate change impacts have the potential to reverse hard-earned development gains and progress towards achieving the Millennium Development Goals. 2. Deforestation and degradation are the second leading cause of global warming. They account for approximately 18% of global greenhouse gas (GHG) emissions and over a third of emissions from developing countries. Although there remain divergent opinions as to how deforestation and forest degradation should be included in any future climate change regime, there is an emerging consensus that this issue must be effectively addressed. Several reports indicate that tackling forest loss is a critical activity in achieving stabilization of greenhouse gas concentrations in the atmosphere at a level that avoids the worst effects of climate change. 3. A recent 2007 UNFCCC study of investment and financial flows for forestry, reported that additional global investment and financial flows are needed to address the mitigation potential of forest-related measures. Additionally, while the direct and indirect drivers of deforestation and degradation are well known, there is limited knowledge regarding the relative effectiveness of alternative approaches to reversing those drivers under different national circumstances. Despite several decades of investment in efforts to reduce deforestation and degradation, there remain few examples of rigorous impact assessment, monitoring, and evaluation that would enable specific outcomes to be associated with specific interventions. There is thus an urgent need for the design of new investments in improved forest management to incorporate an explicit learning agenda to close this knowledge gap. 4. The Bali Action Plan calls for: consideration of policy approaches and positive incentives on issues relating to reducing emissions from deforestation and forest degradation in developing countries; and the role of conservation, sustainable management of forests and enhancement of forest carbon stocks in developing countries. 5. Significant multilateral efforts to prepare developing countries for large scale efforts to reduce emissions from deforestation and forest degradation (REDD 1 ) are underway, first and foremost through the World Bank facilitated Forest Carbon Partnership Facility and the United Nations Collaborative Programme on Reducing Emissions from Deforestation and Forest Degradation in Developing Countries (UN- REDD). These and other efforts, including national and bilateral programs in some 1 For the remainder of this document, REDD should be taken to mean activities consistent with paragraphs 1 (b) (iii) of the Bali Action Plan as quoted in paragraph 4 of this document.

12 developing countries, are expected to identify large scale investment needs that will be prerequisites for the success of REDD activities on a national and global level. 6. A significant number of international and regional agreements, organizations and agencies are at the core of the forest financing architecture, with programs and projects implemented at the sub-national, national, regional and international levels. Many such programs and projects will contribute to the context and foundation for REDD initiatives by facilitating the readiness of countries to participate in REDD. Key organizations include Multilateral Development Banks (MDBs), UN, members of the Collaborative Partnership on Forests (CPF), bilateral aid programs, international NGOs, philanthropic organizations and the private sector. 7. The Strategic Climate Fund (SCF) was established to provide financing to pilot new development approaches or to scale-up activities aimed at a specific climate change challenge or sectoral response through targeted programs. An important objective of the SCF is to maximize co-benefits of sustainable development, particularly in relation to the conservation of biodiversity, natural resources ecosystem services and ecological processes. A Forest Investment Program (FIP) is to be established as a targeted program under the SCF. II. OBJECTIVES AND PURPOSE OF THE FIP 8. The main purpose of the FIP is to support developing countries REDD-efforts, providing up-front bridge financing for readiness reforms and investments identified through national REDD readiness strategy building efforts, while taking into account opportunities to help them adapt to the impacts of climate change on forests and to contribute to multiple benefits such as biodiversity conservation and rural livelihoods enhancements. The FIP will finance efforts to address the underlying causes of deforestation and forest degradation and to overcome barriers that have hindered past efforts to do so. 9. The FIP will be designed to achieve four specific objectives: a) To serve as a vehicle to finance large scale investments necessary for the implementation of policies and measures that emerge from inclusive multistakeholder REDD planning processes at the national level; b) To promote transformational change that is, by combining a high degree of cross-sectoral ownership at the national level with a scale of international funding larger than is typically associated with forest finance, support change of a nature and scope sufficient to catalyze nationally significant shifts from business as usual policies, practices and development paths, or to re-enforce ongoing progress towards conservation and sustainable use of forests, as well as resulting in globally significant reductions in forest-based emissions trajectories;

13 c) To generate understanding and learning of the links between investments and outcomes that is, by committing to apply rigorous a priori and ex post impact assessment, the FIP will ensure that the outcomes and effectiveness of FIPsupported interventions in reducing deforestation and degradation can be measured, and d) To pilot replicable models to leverage additional and sustained financial resources for REDD that is, to demonstrate approaches to implement REDD efforts in partnership with other sources of public and private finance to increase the volume and sustainability of support, and through this to provide valuable experience and feedback in the context of the UNFCCC deliberations on REDD. III. FIP PRINCIPLES 10. The principles set out in the Governance Framework of the Strategic Climate Fund (SCF) apply to the FIP. In addition to the general SCF principles the following principles are important considerations for the FIP: a) Climate change mitigation potential. FIP investments should lead to significant reductions in deforestation and forest degradation and promote policies and measures for improved sustainable forest management that lead to emissions reductions and protection, maintenance and enhancement of carbon reservoirs; b) National ownership and national strategies. FIP pilot programs should be country-led and owned, should build on, enhancing and strengthening existing nationally prioritized REDD efforts, and should respect national sovereignty; c) Inclusive processes and participation of all important stakeholders, including indigenous peoples and local communities. FIP-supported programs should be designed and implemented with the full and effective participation and involvement of and with respect for the rights of indigenous peoples, family forest owners and local communities at the country level, building on existing mechanisms for collaboration and consultation. FIP-financed activities should, moreover, be based upon effective collaboration between local communities, government ministries, private sector companies and financial institutions in planning and implementing programs; d) Coordination with other REDD demonstration efforts. The FIP should complement, be coordinated with and cooperate closely with other REDD demonstrations initiative and ongoing REDD efforts, such as FCPF and UN-REDD, and where applicable build directly on the efforts of the latter two initiatives.

14 e) Measurable outcomes and results based support. The FIP should be results based over time, and promote measurable outcomes with regard to the effectiveness of FIP investments on REDD, livelihoods, climate resilience and other forest benefits. Performance measures, and procedures for performance assessment, should be part of the project design and should serve as a basis for course correction during the implementation; f) Piloting. The FIP should support pilot programs in order to demonstrate how to scale up resources and activities so as to achieve transformational change; g) Forest related governance. The FIP should capitalize on the lessons learned concerning inclusive and effective governance reform and support that the co-dependent relationship between such processes and forest related climate change outcomes is recognized and strengthened; h) Address drivers of deforestation and avoid perverse incentives. FIP pilot programs must assess and address drivers of deforestation and ensure a holistic national approach to REDD. Economic incentives and benefits systems should support sustainable forest practices by local forest dependent communities and where appropriate the private sector, as well as the maintenance of ecosystem services; i) Contribute to sustainable development. The FIP should ensure that its investments make a tangible contribution to the livelihoods of forest dependent communities as well as generate biodiversity benefits and ecosystem services; j) Safeguarding High Conservation Value Forests. The FIP should not support the conversion or unsustainable management of High Conservation Value Forests; k) Investment need and integration. The FIP should focus on meeting the financial gaps not covered by other climate and forest-related funding sources and initiatives, complementing the activities supported by them and leveraging further financial support; l) Partnership with private sector. The FIP should develop models for working with the private sector in effective implementation of REDD investment programmes; m) Cooperation with other actors and processes. The FIP should complement the aims and objectives of other global environmental conventions and processes, such as the Convention on Biological Diversity, the UN Convention to Combat Desertification, the Non-Legally Binding Instrument on all Types of Forests of the UNFF, and the

15 International Tropical Timber Agreement. It should cooperate closely with other international agencies and partnerships, such as the CPF, and with other relevant stakeholders, including IPGs, NGOs, and the private sector; n) Early, integrated and consistent learning efforts. Learning opportunities should be integrated into FIP programming from the start, including, where applicable, identification of pilot program approaches with significant potential for replication, and building in mechanisms for learning lessons from both successes and failures in collaboration with relevant stakeholders. The FIP should proactively communicate these lessons to others engaged in REDD efforts. V. COUNTRY ELIGIBILITY 11. Country eligibility of the FIP will be based on: a) Official Development Assistance (ODA)-eligibility (according to the Organization for Economic Co-operation and Development/Development Assistance Committee (OECD/DAC) guidelines); b) An active MDB country program. For this purpose, an active program means where an MDB has a lending program and/or on-going policy dialogue with the country. VI. CRITERIA FOR SELECTION OF PILOT PROGRAMS 12. Transformational impact through a few programs should be prioritized over limited impact in many programs. The number and extent of pilot programs will be proportional to the resources available, and can thus only be determined once there is a clear idea on the magnitude of contributions. The selection of pilot programs should be based on the following criteria: a) Program potential to contribute to FIP objectives described above under Section II. Objectives and Purpose of FIP, and adherence to the principles described under Section III. FIP Principles ; b) Country preparedness and ability institutional and otherwise to undertake REDD initiatives, taking into account government efforts to date and government willingness to move to a strategic approach to REDD and to integrate the role of forests into development. The selection of pilot programs would also be made on the basis of a REDD investment note, demonstrating that a REDD strategy and investment portfolio is at an advanced stage of development;

16 c) Country distribution across regions and biomes, ensuring that pilot programs generate lessons on how to go to scale with respect to immediate action to curb high rates of deforestation, maintenance of existing carbon stocks within pristine forests, enhancement of carbon stocks on degraded forest lands and building effective capacities for sustainable forest management. VII. FIP SUB-COMMITTEE 13. Consistent with the SCF Governance Framework, the SCF Trust Fund Committee will establish a Sub-Committee for the FIP to oversee the operations and activities of the Pilot Program. 14. It is proposed that the FIP-SC consist of: a) up to six representatives from contributor countries to the FIP, identified through a consultation among such contributors, and at least one of which should be a member of the SCF Trust Fund Committee; b) a matching number of representatives from eligible recipient countries to the FIP, selected on a regional basis and identified through consultations among such countries, at least one of which should be a Member of the SCF Trust Fund Committee. For this purpose, an eligible recipient country means any country, which is eligible under paragraph 15 above; provided, however, to the extent that any country is selected as pilot country for the FIP at the time of the selection of the representatives, any such country on the list of pilot countries shall be given priority to represent eligible recipient countries under this paragraph; c) [Two representatives each from indigenous peoples, NGOs, and the private sector, identified through an open and inclusive self-selection process.] 15. All pilot countries under the program, members of the MDB Committee and the Trustee may attend the FIP-SC as observers. 16. To ensure good linkages and effective cooperation with key partners so as to promote the efficient use of resources and complementarity with other sources of financing, the FIP-SC should seek advice from, and invite as observers, representatives of other organizations with a mandate to promote forest and climate change investments, including the FAO, FCPF secretariat, the Global Environment Facility, ITTO, UNDP, UNEP, UNFCCC, UNFF, and UN-REDD technical secretariat. 17. Civil society should also be invited to identify observers, including representatives from the North and from the South through an open and inclusive selfselection process.

17 Functions of the FIP-SC 18. The FIP-SC will be responsible for: a) appointing the expert group and approving criteria and guidance to be followed by the group based on objectives and purpose of FIP (section II), principles of FIP (section III), country eligibility criteria (section V), criteria for selection of pilot programs (section VI), and programming processes (section IX). b) selecting pilot programs based on specified country eligibility criteria and program selection criteria, and recommendations of the expert group; c) approving programming priorities, operational criteria and financing terms and modalities for the FIP, including modalities for private sector activities; d) approving FIP financing for programs and projects; e) ensuring complementarity between activities foreseen for the FIP and activities of developing countries, other development partners active in the field of climate change and forests, including the FCPF and other MDB efforts, UN-REDD and other UN efforts, and GEF; f) ensuring that FIP program design builds in provisions for evaluating the performance and effectiveness of FIP investments; g) ensuring that lessons learned are transmitted through the SCF Trust Fund Committee to the UNFCCC and to other stakeholders; and h) exercising such other functions as they may deem appropriate to fulfill the purposes of the FIP.. VIII. EXPERT GROUP 19. An Expert Group should be established and provided with appropriate criteria and guidance by the FIP-SC to make recommendations on selection of pilot programs for the FIP. 20. The Expert Group should include up to eight individuals, acting in their personal capacities, chosen on the basis of their expertise, strategic and operational experience and diversity of perspectives, including knowledge of scientific, economic, environmental and social aspects of conservation and sustainable use of forest ecosystems and climate change, governance and institutional and development planning. The Expert Group members should be selected in accordance with criteria to be approved by the FIP-SC, taking into account professional qualifications of the experts. The group should include

18 experts from both developed and developing countries, and should receive support required to fulfill their functions properly. IX. FIP PROGRAMMING PROCESSES FIP programming will be initiated by a FIP-SC tender for proposals for REDD investment strategy proposals, see paragraph 12(b). Governments should develop the investment strategy proposals building and expanding on earlier multi-stakeholder priority setting processes and existing planning frameworks. Those processes should be inclusive, transparent and participatory, involving sectoral ministries, development partners working in the country, including MDBs, bilateral development agencies, NGOs, indigenous peoples, forest dwellers, the private sector and other stakeholders. 22. In preparing investment strategy proposals, governments should specify whether individual projects are to be executed by national, regional, or local governments, IPGs, community based organizations, NGOs, private enterprise and other members of civil society. 23. A group of countries may propose to the FIP-SC a regional or sub-regional investment strategy proposal that brings together a number of country activities. A regional or sub-regional program will be considered one pilot in the program. 24. The investment strategy proposals will be evaluated by the expert group in the process of preparing recommendations on the selection of pilot programs. The FIP-SC will decide on the final selection of pilot programs. 25. For each selected pilot program, and in response to a country request, the MDBs concerned will organize a joint mission to discuss with the government, other development partners, including UN agencies, private industry, NGOs, indigenous peoples and other forest dependent communities, as well as other stakeholders how the FIP may help refine and finance the proposed program activities. The FIP-SC and observers invited to the SC will be informed in advance of the joint mission. The outcome of the collaborative exercise will be a detailed investment plan, developed under the leadership of, and owned by, the recipient country, for the use of FIP resources through a joint MDB program. Investment plans will be submitted to the FIP-SC for endorsement. 26. The further processing of a program or project will follow the MDB s policies and procedures for appraisal, MDB approval and supervision. 27. The very wide spectrum of potential areas for FIP investment (see Attachment 1) highlights the importance of encouraging governments to prioritize requests for FIP 2 This section will be supplemented by an Annex diagramming the process steps to be prepared before the next design meeting.

19 support. This process should have been previously embarked upon through national REDD readiness efforts, and could be further refined as part of preparation for FIP applications. Special emphasis should be given to a programmatic approach to addressing the underlying causes of deforestation and degradation in as short as possible a time frame at reasonable cost and in ways that will optimize the multiple benefits of forests. X. INDIGENOUS PEOPLES AND LOCAL COMMUNITIES DEDICATED INITIATIVE 28. The effective and continuous participation of indigenous peoples (IPs) and local communities in FIP pilot programs is crucial to the success of those programs, and will be highly dependent on increasing the capacity of these groups to become informed and active players in national REDD processes in general and FIP processes in particular. This need should be addressed by directly making indigenous peoples and local communities able to access specific grants for that purpose. 29. The operation, funding modalities and governance of such a mechanism will be developed through a process involving appropriate stakeholders. A more detailed proposal will be presented to the final design meeting. XI. MONITORING AND EVALUATION 30. Based on the monitoring results of the MDBs, the FIP-SC will report regularly to the SCF Trust Fund Committee, and an independent joint evaluation of the operations of the FIP and its activities will be carried out after three years of operations by the independent evaluation departments of the MDBs. Results achieved through the FIP should be published and made publicly available. Full reporting criteria, including results measurement at the programmatic, country and institutional levels, will be proposed by the FIP-SC and approved by the Trust Fund Committee of the SCF. The key performance criteria should pertain to emissions reductions achieved or emissions avoided.

20 Attachment 1 [The secretariat will revise this attachment based on the Working Group s discussions and submit it to participants well in advance of to the next design meeting]. EXAMPLES OF POTENTIAL TYPES OF INVESTMENTS OF THE FIP 1. The FIP is to support actions that pilot and demonstrate new approaches to forest management that are transformative and set the stage for major impacts in reducing greenhouse gases from forests. 2. The following types of investments illustrate the activities that may be financed by the FIP. a) Investments in institutional capacity, forest governance and information The ongoing dialogue on REDD and SFM often points to the reality that such transformation in the forest sector requires reduction or elimination of the direct and underlying causes of deforestation. Such investments require enabling legal, regulatory and institutional frameworks and a conducive investment climate. In this context demand-side market transformation is another key catalyst. Often, the greatest barrier is the governance framework needed to sustain government or community initiatives (whether forest protection, management, forest community development, etc) and leverage follow-up actions by the private sector, forest communities and smallholders. Examples of the types of programs which could be supported are: i. Investments in improving forest governance and forest sector transparency and control (e.g. adjustment of legal framework, forest inventory, information and monitoring systems, log tracking systems, certification, supervision and control). ii. Investments in land use zoning, cadastre and planning in forest areas and respective assessment and monitoring systems. iii. Investments in building institutional, legal and technical capacities of governments and private and communal forest stakeholders to effectively protect and manage forests as well as to undertake strategic and management planning and control of their forest resources. iv. Investments in analysis and processes to clarify and where desirable change negative impacts of taxing patterns and government subsidies on REDD+. v. Where not (fully) completed through previous readiness work: Assessment of drivers of deforestation and forest degradation (like large scale agriculture, infrastructure, logging and extraction of other

21 natural resources as well as the impact of commodity prices, government subsidies, currency manipulations, and ownership and tenure arrangements on deforestation and forest degradation), and development and implementation of plans to tackle such drivers. b) Increasing forest benefit yields by forest resource investments Conservation (of high conservation value or pristine forests) i. Investments in protection of forests against fires, pests and diseases, invasive alien species and other external threats. Improved forest management (in production forests), including restoration of degraded forests ii. Investments in SFM-based production of timber and non-timber forest products in secondary forests that will create sustainable livelihood opportunities for forest-adjacent, low-income rural families that currently depend on subsistence agriculture and income from illegal logging. iii. Investments in measures to protect intact forest landscapes, based on support to the livelihoods of forest-dependent communities and protection of biodiversity, while avoiding large scale extractive economic activity. iv. Investments in restructuring and improvement of forest-based industries for efficient production and procurement of sustainably produced raw materials, engagement of farm forest owners and other smallholders through company/community/smallholder partnerships, and transfer of technology. v. Investments in improved forest management practices, including support for certification of forests and chain of custody. vi. Investments in restoration of degraded forest ecosystems, including watershed rehabilitation, enrichment planting for carbon sequestration, wood production and conservation, including by engaging local communities and smallholders. vii. Investments in payments for ecological services-schemes, to contribute to alternative development models, in particular in intact forest areas. Afforestation and reforestation viii. Investments in plantations and creation of woodlots on non-forested and previously forested land for carbon sequestration and wood production and conservation, including by engaging local communities and smallholders. Plantations should be based on a diverse use of native species. Safeguards must be included to insure against clearing of (degraded) primary forests for plantation purposes. c) Investments outside the forests sector

22 The following types of investments outside the forests sector could when clear causal chains to effects on the forest sector can be established be engaged in: ix. Investments to support a shift by agribusiness companies and landowners away from clearing of rain forests towards planting on non-forest lands including improvement of agricultural productivity and fertility of soils (e.g. BioChar investments). x. Investments in rural development, social services, as well as administration and management skills of forest communities xi. Complementary investments in non-forest sector programs (agriculture, infrastructure, mining, energy, etc.) to ensure inclusion of specific provisions for forest protection.

23 Annex 3 Concept Note for New Targeted Program Scaling-up Renewable Energy Program for Low Income Countries (SREP) Objectives 1. A Scaling-up Renewable Energy Program (SREP) for low income countries is proposed to be established in 2009 within the Strategic Climate Fund. Its principal objective would be to help low income countries make a transformational change to low carbon energy pathways by optimally exploiting their renewable energy potential to offset fossil-based energy supply. It should greatly increase renewable energy use to meet the energy needed for economic development, expand access, and promote energy security. SREP will help capture other co-benefits such as reduced local air pollution, improve climate resilience and the diffusion of low carbon technologies and industries, while reducing greenhouse gas emissions. 2. SREP resources would be leveraged significantly to achieve transformational change change that creates greater public and private confidence in renewable energy, and improves market and financial conditions and lead to large scale replication. Transformational change occurs when renewable energy is adopted as mainstream options in increasing energy supply rather than undertaking pilot-scale or single projects. SREP would aim to achieve this through programmatic, country-led interventions that build on national policies and complement other energy initiatives, to achieve lasting and financially sustainable outcomes. 3. The SREP would co-finance multilateral development bank (MDB) investments, with the aim of shifting generation of energy to renewables in place of conventional fuels such as oil and coal. Rationale for SREP 4. Low income countries 3 face a dual challenge of increasing the availability of electricity and other commercial fuels needed for economic development while increasing access to the millions who have no access to electricity and are dependent almost wholly on traditional biomass fuels. While these countries are low emitters of CO 2, the IEA World Energy Outlook (2008) estimates that by 2030, one third of the incremental greenhouse gases will emanate from these countries under a business-asusual scenario. 5. SREP would support low income countries to maximize the opportunities, while minimizing the risks, of a transition to a low carbon economy. This means helping low income countries to leapfrog to the production of clean energy to help support economic growth and reduce poverty. 3 Majority of the low income countries and populations are in Sub-Saharan Africa and Asia. Their energy use is a mere 7 percent of that in the USA on a per capita basis. Electricity access is about 25 percent in Africa and 52 percent in Asia.

24 SREP would be a catalytic instrument to leverage other resources to help countries exploit their renewable resources to support their economic development. SREP would help overcome constraints to the development of renewables, such as higher capital costs compared to fossil-based options; knowledge and capacity constraints; the nascent stage of market development; underdeveloped planning and regulatory frameworks; a lack of long term financing; and the perceived risks of new technologies. 6. The Bali Action Plan adopted by the UNFCCC recognizes the types of activities that SREP would support. It calls for transfer of technology to developing country Parties in order to promote access to affordable environmentally sound technologies and ways to accelerate deployment, diffusion and transfer of affordable environmentally sound technologies. Building on experience 7. The experience in supporting renewable energy programs, particularly in low income countries, suggests the following needs should be addressed in designing the SREP: a) Overcome reluctance of financiers to lend for renewable energy. There is a funding gap for renewable energy as commercial lenders are often unwilling to finance such investments. The capital intensity of renewable energy investments further exacerbates the problem. b) Increasing affordability. Affordability is low as many potential customers have limited resources and little or no recourse to financing. c) Incentivizing entrepreneurship for renewable energy services delivery. The private sector and civil society can be effective in scaling up renewable energy investments if an enabling environment exists. This does not discount the important role of the public sector, especially in setting the policy and regulatory framework for private sector and civil society interventions and in the early stages of a transformative program. d) Establishing the enabling environment. Creating an enabling environment is essential to reduce risks and transactions costs, and thereby encourage renewable energy investment. Few low income countries have these conditions in place. Complementarity with other clean energy funding facilities 8. SREP could play an important complementary role to existing funding sources for promoting clean energy. The Global Environment Facility has piloted renewable energy applications that the SREP can scale up in a transformative and programmatic way. Several trust funds at MDBs support upstream project development and capacity building that could lay the ground work for follow-on SREP support.

25 SREP priorities and design principles 9. The SREP would pilot programmatic interventions in selected low income countries that greatly increase the use of renewable energy to support economic development and improve access to modern, clean energy. Building on this aim and the insights above, several key SREP priorities and design principles could be proposed for further consideration: a) Be country-led, with delivery targeted through a designated national authority. This would enable the full integration of SREP to the national energy plan, and allow it to build on, and draw benefit from, national policies. b) Take a programmatic and outcome-focused approach for investing in renewable energy as an alternative to conventional energy sources such as coal or oil. An SREP program in a pilot country would be comprised of renewable energy investments and technical assistance, together with support for policy changes to greatly increase the use of renewable energy. c) Commit sufficiently high levels of SREP funding and leverage significant additional financing from MDBs and the private sector to achieve large scale renewable energy impacts. d) Work in a smaller number of low income countries, selected using robust, objective criteria to maximize the impact and the demonstrative effect of SREP. e) Utilize the transformational potential of the private sector and civil society groups to achieve economic development and support long-term social and environmental sustainability. f) Give priority to renewable energy investments that create value added in local economies, by targeting renewable energy technologies that allow for the generation and productive use of energy. g) Seek wider co-benefits, such as improved climate resilience, reduced local pollution and increase energy security. Scale of the SREP Facility 10. A target funding level of $250 million and more would be sought. There would not be a sufficient critical mass necessary to justify the setting up of a new program without this overall level of SREP funding commitment. Furthermore, without a critical scale of programmatic investments in a country or sector, conditions needed for transformational change would not take place. Priority Countries 11. Low income countries that are eligible for MDB concessional financing (i.e., IDA or its regional development bank s equivalent) would receive priority in selecting pilot countries (or regions) to access SREP resources. Objective criteria to guide the selection