the nested approach to REDD+

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1 the nested approach to REDD+ What is the Nested Approach? The Nested Approach (NA) is a proposed framework for structuring effective incentive mechanisms for reducing greenhouse gas (GHG) emissions from deforestation and forest degradation (REDD+¹) at multiple scales. In many developing countries early REDD+ actions are being developed by communities, civil society and governments at the local or subnational level. Nesting allows incentivizing such early actions and to insert them into broader subnational and later national REDD+ schemes once these are fully developed. The NA is designed to encourage immediate emission reductions in developing countries at a scale compatible with their capacities and levels of governance. It offers the opportunity of fast learning by implementing concrete actions on the ground, thus allowing developing countries to scale-up successful models to the national level, set national standards and registries, design national programs, and inform policy decisions. In the last few years, different schemes of international REDD+ incentives have emerged, each with different and still evolving sets of rules. At the same time, different kinds of REDD+ initiatives have been launched in developing countries (Figure 1). These initiatives are not only at different stages of development, but are also being developed using different standards and approaches to set reference emission levels (RELs), design monitoring systems, and report emission reductions. Hence, reconciliation of these schemes is a necessary step that can be already identified in order to achieve the principles of environmental integrity. The NA is the only framework that could accommodate different incentive schemes and levels of REDD+ implementation and reconcile initiatives that have used different standards under an environmentally robust framework at the national level.

2 Who is proposing the Nested Approach to REDD+? The concept of nesting local REDD+ activities in broader subnational and later national REDD+ schemes was introduced in the UNFCCC negotiations by a group of observers ² and Latin American countries³ as an alternative to other schemes proposed for incentivizing only national-level emission reductions. Today, the concept of nesting subnational REDD+ activities in broader national frameworks is frequently mentioned in the discussions on REDD+⁴. Many stakeholders in the political process realize that developingcountry governments are faced with REDD+ related demands and initiatives from subnational governments, indigenous groups, civil society and the private sector; that national capacities and governance may take some time to be developed and strengthened; and that public funding for REDD+ alone may not be sufficient to induce mitigation activities at the scale required to keep the global average temperature increase below 2 ºC in this century. Are there examples of nested REDD+ implementation? Many REDD+ countries are seeking ways to link early subnational actions to their upcoming national REDD+ schemes. Countries like Peru and Guatemala have already designed a nesting framework and have started with implementation. There is, however, a need for standardizing nested approaches to REDD+ to ensure that such schemes will develop according to the principles of environmental integrity. To this end, the Verified Carbon Standard (VCS) has launched the Jurisdictional and Nested REDD Initiative that is expected to propose a first set of rules and regulations on nesting approaches early next year. Other international standards (e.g. California Climate Action Registry, American Carbon Registry) are also considering developing nesting rules. These standards, along with the REDD+ Social and Environmental Standard (REDD+ SES), could inform policy decisions under the United Nations Framework Convention on Climate Change (UNFCCC). What are the issues with nesting? Levels of nesting Subnational activities could encompass areas as large as entire biomes (such as the Legal Amazon in Brazil), individual states or provinces (such as San Martin in Peru) or subnational regions that do not match political boundaries (such as the Northern Lowlands of Guatemala), and smaller units of lands under specific projects, such as indigenous territories, protected areas, forest concessions, and private lands. REDD+ actions could therefore be implemented at three or more levels, each of which needs to be nested in the higher level. This requires adequate rules for setting reference emission levels (RELs) and for measuring, reporting and verifying the results of the different REDD+ actions. As smaller subnational actions develop faster than broader government programs, there will be a need to grandfather smaller REDD+ initiatives into the broader programs once these are fully developed. Reference levels (RELs) Nesting requires subnational and national REDD+ activities to be implemented under consistent and credible frameworks for reference emission levels (RELs). To this end, a country needs to decide how it wants to subdivide its territory for the purpose of establishing subnational RELs.

3 The divisions could either follow political or administrative boundaries, in which case the governments of sub-national jurisdictions would each have their own REL, or be based on biophysical, economic and other criteria (Figure 2.a). For each subnational region a REL would then be developed. Some regions will be able to complete their REL sooner than others (Figure 2.b), depending on institutional capacities, data availability and levels of support from local, national and international REDD+ stakeholders. In this way, the national REL would be developed following a bottom-up approach, once all subnational regions have their REL. If standardized approaches are used to develop subnational RELs, the country will generate a consistent and credible framework of RELs across all scales. Peru and Guatemala are examples of countries that are implementing this approach. Monitoring, measuring, reporting and verifications (MMRV) Under a nested scheme, a national MMRV system does not need to be implemented wall-to-wall from day one. The results of early subnational REDD+ actions, however, should be measured over an area that is large enough to capture and account for any activity displacement leakages that may occur. MMRV systems should therefore reach the national scale as soon as possible. In addition, standardized MMRV protocols should be developed and applied to ensure consistency across space and time. Double counting of emission reductions Promoters of REDD+ actions at different levels (e.g. local, regional and national) may all want to claim incentives for emission reductions measured, reported and verified within their territories. Without transparent bookkeeping, the same emission reduction could be claimed several times, potentially creating the problem of double or multiple counting of emission reductions.

4 Underperformance and permanence To address this issue, a country may decide to allow subnational REDD+ actions to be credited directly (as shown in Figure 3.a) or to capture all international incentives at the level of the national government (Figure 3.b). Under both scenarios, the national government may develop benefit distribution schemes to incentivize REDD+ actions at subnational levels. Under a nested approach to REDD+, a jurisdiction may report less emission reductions than the sum of its registered sub-jurisdictional REDD+ actions. If this occurs, the jurisdiction is underperforming. Under-performance may occur for several reasons, such as ineffective jurisdictional REDD+ policies and programs, leakages from sub-jurisdictional activities, leakages from other jurisdictions, or a combination of all these factors. If subnational actions are credited directly, emission reductions must be attributed to each REDD+ initiative in a way that no multiple counting of emission reductions can occur. This implies that credits issued for sub-jurisdictional activities must be subtracted from jurisdiction-wide emission reductions to calculate the number of credits to be issued to the jurisdiction. To allow this type of accounting, a national registry system for REDD+ actions is required and should be in place in the early stages of the process. The registry would link RELs, MMRV and a subnational REDD+ initiatives in an integrated database, thus allowing transparent tracking of emission reductions (or increases) at the level of each initiative. Leakage The Verified Carbon Standard (VCS), as well as other international standards, have already developed guidelines and approved methodologies that could help understand how leakages from subnational REDD+ actions could be addressed. Methods to address within-country leakages would only be necessary during the interim phase in which countries are still developing their national RELs and M/MRV systems. Once a national REL and MMRV system is functioning, withincountry leakages will be captured and duly accounted at the national level. At this stage, national governments (or governments of subnational jurisdictions) may want to establish their own policies to address leakages from subnational activities (e.g. a leakage tax or rules for monitoring, reporting and accounting).

5 Permanence is the issue of ensuring that verified emission reduction used to offset emissions under a capand-trade scheme will actually be permanent. There is always a risk that a forest protected today will be deforested tomorrow. Both issues, underperformance and permanence, require appropriate insurance mechanisms, such as the creation of a reserve of verified emission reductions that would be cancelled in case of underperformance or nonpermanence, and other insurance mechanisms. Conclusions Although many technical issues remain to be discussed, reality shows that a nested approach to REDD+ seems unavoidable under the current status of REDD+ implementation in developing countries and the existence of international incentives for subnational REDD+ activities. While national governments have focused on readiness preparation and strategy planning, on the ground implementation has been led by communities, civil society and subnational governments. Multiple-level implementation of REDD+ is already a fact that needs to be addressed as there is a potential of inconsistencies that could undermine the credibility of REDD+ schemes currently being developed. A functional REDD+ mechanism under the UNFCCC is perhaps many years ahead. Developing countries are therefore facing the challenge of planning national REDD+ programs and strategies without knowing the set of international rules that will apply to RELs, MMRV and other critical issues. As REDD+ implementation is going forward at multiple levels, crucial decisions on nesting rules cannot be postponed for much longer. Developing countries governments cannot afford to wait until all rules and regulations are set under the UNFCCC. They must find a way to accommodate the different demands of their own communities, civil society and subnational governments to start implementing effective measures to halt deforestation.

6 Our Vision We imagine a healthy, prosperous world in which societies are forever committed to caring for and valuing nature, our global biodiversity, for the long-term benefit of people and all life on Earth. Our Mission Building upon a strong foundation of science, partnership and field demonstration, CI empowers societies to responsibly and sustainably care for nature, our global biodiversity, for the well-being of humanity. References cited Angelsen, A., C. Streck, L. Peskett, J. Brown, and C. Luttrell, What is the right scale for REDD? The implications of national, subnational and nested approaches. Brief info No. 15. CIFOR, Bogor, Indonesia, 6 p. Cortez, R., R. Saines, B. Griscom, M. Martin, D. De Deo, G. Fishbein, J. Kerkering, and D. Marsh, A Nested Approach to REDD+: Structuring effective and transparent incentive mechanisms for REDD+ implementation at multiple scales. The Nature Conservancy and Baker and McKenzie, 46 pp. Estrada, M., Looks at the status of talks to establish an international regime to reduce greenhouse gas emissions from deforestation and degradation. In: Trading Carbon, supplement on the Bonn climate talks (June 2010), P Parker, C., A. Mitchell, M. Trivedi, N. Mardas, and K. Sosis, The Little REDD+ Book., Global Canpy Programme, 71 p. Pedroni, L., M. Dutschke, C. Streck and M. Estrada, Creating incentives for avoiding further deforestation: the nested approach. Climate Policy, 9: The + (of REDD+) refers to concepts such as sustainable management of forests, conservation and carbon stock enhancement. 2 FCCC/SBSTA/2006/L.25: Submission to the UNFCCC by the Tropical Agricultural Research and Higher Education Center (CATIE) and the German Emissions Trading Association (BVEK) regarding Reducing Emissions from Deforestation in Developing Countries. 3 FCCC/SBSTA/2007/MISC.14: Submission of Paraguay on behalf of Honduras, Mexico, Panamá, Paraguay and Peru and the submission of Chile. 4 See Angelsen et al., 2008; Pedroni et al., 2009; Parker et al., 2009; Cortez et al., 2010; Estrada, 2010; Pedroni et al conservation.org/peru Av. Dos de Mayo 741 Miraflores, Lima 18 Lima - Peru Contact: Claudio Schneider Technical Manager c.schneider@conservation.org Photo Credits, Front to Back: CI/ Photo by carmen noriega GRAPHICS By carbon decisions international and conservation international