Writing the Rules for a New REDD Paradigm: Norway and Guyana

Chris Santiago

In the global fight against deforestation, incentives for Reducing Emissions from Deforestation and forest Degradation (REDD) typically mean countries should improve from their historical rate of forest loss. But with vast and relatively undisturbed forests, Guyana is pushing for a bold new model for REDD payments, with Norway’s backing, and not everyone is happy about it.

20 May 2011 | Guyanese Finance Minister Ashni Singh was ebullient when he and his Norwegian counterpart, Erik Solheim, officially launched the Guyana REDD+ Investment Fund (GRIF) last October.

“Today represents a big step forward in our joint efforts to show that we can create a low deforestation, low carbon, climate resilient economy in Guyana,” he said. “Our two countries are forging new ground in trying to work out how REDD+ can help to reconcile the world’s need for urgent action to avert climate catastrophe with Guyana’s sustainable development.”

The partnership, which provides a financial mechanism through which Norway will support Guyana’s Low Carbon Development Strategy if Guyana meets certain governance criteria, was broadly hailed as potentially groundbreaking. If it succeeded, it could serve as a blueprint for other nations seeking to combat forest loss through payments for Reducing Emissions from Deforestation and forest Degradation (REDD). With the collapse of climate legislation in Washington, the uncertain future of the Kyoto Protocol, and a general lack of international leadership, GRIF emerged as a model partnership between a high forest cover developing nation (Guyana), and a responsible donor nation (Norway).

But over the last few months, the partnership has come under increasing fire, with watchdog groups contending that the agreement is not only deeply flawed, but lacking in effective oversight. Its harshest critics have even raised the twin specters of bureaucratic mismanagement and corruption.

The furor seemed to peak after the recent publication of a report by Pí¶yry, a New Zealand-based consultancy and one of several third parties contracted by Guyana and Norway to perform due diligence.

According to the Pí¶yry report, deforestation actually increased during the first year of the deal (2009-2010)—by a whopping 200%—but Norway is still set to pay further millions of dollars to Guyana.

Deforestation: Escalating, Not Abating?

Environmental groups were understandably outraged. How could Guyana receive millions of dollars in funding to promote sustainability when its tropical rainforests were destroyed not only in greater quantities than in the previous year, but at triple the historical rates?

Greenpeace and other environmental watchdog groups blamed this on a flaw in the original document, which, assigned Guyana a maximum deforestation “reference level” of 0.45% forest loss per year. This level would serve as a performance benchmark for receiving payments, and was based on the then-most current studies from Guyana and estimates of average deforestation rates in other countries. So when Pí¶yry came in and delivered the first focused and rigorous assessment of satellite and other data to provide a refined deforestation estimate, the revelation of an actual historical rate of deforestation (from 1990-2009 of only 0.02% had a dramatic effect. With the way the agreement was then structured, deforestation in Guyana could “increase by 20-fold and still remain within the agreed limits,” according to the nonprofit watchdog group Global Witness.

Building Capacity: The Big Picture

“We do not believe the model is flawless,” Andreas Tveteraas, senior adviser to the government of Norway’s International Climate and Forest Initiative, told Environmental Finance, acknowledging the difficulties faced by the two countries in estimating projected deforestation rates.

Furthermore, in recently published documents, Norway and Guyana have responded to the furor.

The fundamental argument relates to the agreement’s actual aims. Despite its high forest cover, Guyana has historically low levels of deforestation (thus, it is at times referred to as High Forest Cover, Low Deforestation or HFLD). Norway and Guyana formed the GRIF partnership in order to head off the very real possibility of a catastrophic increase in the deforestation rate in the future.

In other words, the goal of REDD in Guyana is not so much to slow the current or historically observed level of deforestation, but to build the country’s capacity to resist drivers and deforestation pressures anticipated in the future. For Guyana and other HFLD countries, in order for REDD to offer any incentive or financing of capacity-building for forest conservation, it should be immediately apparent that using historical deforestation rates as performance benchmarks would offer no meaningful incentives for improvement compared to other countries like Brazil and Indonesia that have a long track record of rapid deforestation to improve.

In short, Norway and Guyana do not dispute Pí¶yry’s 2009-2010 figures; in a sense, however, they would argue the figures are being fundamentally misused.

Revising the Payment Structure

But isn’t it possible for Guyana to experience drastically increased rates of deforestation and still receive incentive payments?

Not exactly.

According to Tveteraas, clauses were built into the original language to allow the partners “to revise the agreement in light of new knowledge.”

“We believe we can only succeed if we learn from mistakes,” Tveteraas told Environmental Finance, “and have included provisions for gradual improvements.”

Accordingly, the GRIF partners have now revised the original agreement’s payment structure so that progressive discounting will be applied to all payments if deforestation exceeds the current annual rate (of 0.06%). (Details can be found in the partners’ recently published Revised Joint Concept Note.),

Furthermore, if rates increase to 0.1%—a figure which is still well below the reference level—Guyana will not receive any money at all.

Guyana is technically being credited based on performance against a combination of its own average of historical deforestation and a rate based on all other rainforest countries. This combined average is what serves as Guyana’s benchmark. Granted, this “middle” is still quite high compared to Guyana’s historical deforestation rate, but according to the progressive payment structure, payments will now be increasingly removed as the cut-off level is approached.

The old agreement, Greenpeace contended in Bad Influence: How McKinsey-inspired plans lead to rainforest destruction, included “almost no measures to address the existing divers of deforestation in Guyana. In fact, logging would be allowed to increase by 20 times its current rate.”

According to the Revised Joint Concept Note, however, Guyana could conceivably still receive payments if the rate of deforestation doubled. But funding would be cut long before deforestation ever approached the apocalyptic rates Greenpeace suggests.

Critics still maintain that emissions-based metrics are not realistic; some have even suggested that third parties who are already in place to verify that capacity building is being done could also be used to calculate payments.

So why did Norway and Guyana choose to use emission reductions as a metric for the deal? Couldn’t they just as easily have used indicators of forest sector governance and capacity-building instead of a contrived emissions benchmark?

Norway sees its work with Guyana forging a new paradigm for REDD incentives.

“An emissions-based approach was chosen because our key objective is to contribute to reduced emissions from deforestation and forest degradation,” said Elisabeth Brinch Sand, press officer for The Government of Norway’s International Climate and Forest Initiative (NICFI). “As an HFLD country, Guyana provides an opportunity to demonstrate how an emissions-based approach can be designed to generate incentives to further reduce or maintain very low deforestation rates.”

Third Parties Under Fire

Guyana and Norway, according to both their original and updated policy notes, are fully aware that GRIF breaks new ground. The Summary of the Updated Joint Concept Note indicates that both governments “strongly endorse the establishment of…an incentive structure under the United Nations Framework Convention on Climate Change (UNFCCC).” But in the absence of consensus and the slow pace of international climate talks, Norway and Guyana embarked on their own REDD partnership to “pilot an incentive structure.”

Plenty of doubt and skepticism was surely in order, so Guyana and Norway agreed early on to employ several third-party auditors to build confidence in the results. For example, the third-party verifier Det Norsk Veritas was brought in to independently review the earlier report produced by Pí¶yry, and the certification group Rainforest Alliance was contracted to assess Guyana’s performance against a set of indicators intended to show the government’s burgeoning capacity for forest governance, monitoring and conservation. But shortly after its release, Rainforest Alliance’s independent verification has come under direct fire.

In a letter to the NICFI, a coalition of watchdog groups led by Global Witness expressed concern that the verification made pivotal conclusions “while simultaneously acknowledging a lack of information on which to base an assessment.”

Additionally, the coalition argued that the assessment of issues relating to indigenous peoples’ rights and tenure was “superficial,” and that the report papers over “problems regarding public availability of information.” Finally, the critics call into question the reports very independence, saying Rainforest Alliance “[declined] to either review important independent literature, or raise concerns regarding self-censorship and anonymity of persons interviewed.”

The Global Witness letter, in short, faults the Rainforest Alliance’s verification more for the manner in which it was carried out than for its conclusions. It’s hard to imagine a more direct assault on a certifier’s credibility than by calling into question the organization’s very ability to follow the rubric they were given.

“Our overriding concern,” the letter states, “is that the Rainforest Alliance report does not provide an accurate picture of progress on the ground. It relies heavily on statements made by government officials and on government documents, rather than on independent verifications of those statements, or on the progress of the enabling activities.”

Improvements to Verification

The Rainforest Alliance’s Richard Donovan, the verification report’s lead author, acknowledges Global Witness’s criticism of the verification team’s time in the field and time spent in Guyana’s interior.

“There were delays in contracting and limits on how much could be spent on what during the actual verification exercise,” Donovan told Ecosystem Marketplace. Officials in Norway, Donovan said, recognize the extent to which funding constraints limited the team’s ability, and have suggested in private discussions that greater allocation of resources would be welcomed for any future verifications.

“No one has ever done this before,” Donovan notes. “This is the first verification we have done for the government of Norway, as well as the first REDD verification we have done. In fact, it is the first of this kind of [national] REDD verification that has ever been done.”

When asked about the tough talk that had been leveled at Rainforest Alliance’s report, Donovan responded, “They seemed to want us to be more definitive in our report, to basically say yes or no, the progress is being met; basically, they wanted us to say no.”

In particular, Donovan takes issue with allegations that RA’s assessment short-changed the concerns of Guyana’s many indigenous groups, and even allowed the government to skew the team’s perspective.

“Guyana put zero restrictions on who we could talk with,” Donovan stated. “The Rainforest Alliance has worked with free prior and informed consent for over 20 years; it’s part of our core values.”

“And it’s important to keep in mind that there are a series of Amerindian groups who are actively engaged with the government of Guyana. They don’t love everything about it, but they are working closely with the government.”

Amaila Falls: An Exception to the Rule?

“Some of the amendments to the agreement are positive,” Laura Furones of Global Witness said in response to the recent changes to GRIF policy. In particular, Furones cited the more “stringent system” for payment, although she also suggested that the adjusted rate is still “way above the historical level of 0.02, even last year’s rate of 0.06.”

“Other things remain fairly worrying though,” Furones added, such as “the not-at-all insignificant ‘exception’ being made for the Amaila Falls hydropower project. What is the point of setting a maximum rate if not everyone needs to play by the rules?”

Furones is referring to the centerpiece of Guyana’s Low Carbon Development Strategy, a planned hydropower plant which Guyana estimates will eliminate “more than 92% of its energy related emissions, after emissions related to its construction are accounted for.”

In response to concerns about REDD funding being used to essentially clear 4,500 hectares of forest to make way for the plant, Norway and Guyana said that “funding for the project from GRIF will only go ahead upon the Inter-American Development Bank guaranteeing that the necessary Environmental, Social, and Financial safeguards have been met.” This includes an assessment that the project itself produces a net reduction in greenhouse gas emissions.

Norway and Guyana contend that the forest loss resulting from the construction of the plant would yield “around 0.025% deforestation, given Guyana’s current forest cover. In other words, the project in itself would cause deforestation above the agreed ceiling on deforestation.” Therefore, to avoid a situation in which REDD payments would cease to flow as a result of the development of a plant with net carbon reduction benefits, the partners have agreed “not to apply the 0.1% ceiling on deforestation directly related to the eventual construction of the Amaila Falls hydropower plant.”

The Days Ahead: Seeing REDD

In the struggle to develop a multilateral REDD mechanism, Guyana is not the most obvious target: most would agree that this designation would fall to Indonesia which last year earned the ignominious ranking of third-highest global carbon emitter due primarily to deforestation. Guyana, however, is a key piece of the REDD puzzle, particularly for other countries like it that have massive forest resources that have been comparatively safe from the ravaging drivers of deforestation wreaking havoc for decades in other forest countries. If an international REDD mechanism such as that envisioned in negotiations at the United Nations is to succeed, it will rely heavily on the experiences of countries like Guyana.

While observers are right to decry the apparent shortcomings, challenges, and areas for improvement, it would seem crucial to likewise acknowledge the unprecedented effort Norway and Guyana have undertaken to incentivize forest conservation.

And although the viability of this new model for REDD remains to be tested, Guyana and Norway aren’t looking back. Nor are the third parties and watchdog groups, as all those involved see the influence wielded by this pilot test. But as the saying goes, “you can always recognize pioneers: they’re the ones face down in the mud with arrows in their backs.”