REDD+ Finance: Lessons From The US

Every government agency, it seems, has a different way of accounting for REDD+ financing. That’s true for countries, and it’s even true for agencies within the same country. Here a quick look at how the United States does it, with a glance at Norway and the UK.

8 August 2013 | The Tropical Forest Group has been tracking the REDD+ finance flowing from the U.S. in its U.S. REDD+ Finance Database (USRFD). This contains more than 800 data points for REDD or sustainable forestry reported by United States agencies with data transcribed from public documents. Although it is not linked to the US government, the USRFD is the only centralized way to assess US REDD+ finance from USAID, the Treasury Department and the US State Department.

Different US agencies have different reporting styles and different ways for classifying expenditures, which presents a challenge when synthesizing and analyzing reports in the data base. For a variety of reasons, theTreasury and State Departments are required to provide detailed reports and a list of expenditures by country, while USAID provides more general overviews even though it often dispenses more money. Further, since finance flows from multiple agencies, redundancies are common and estimates can be revised after they have been posted. Rarely is there a comparable picture of what is being spent.

Still, we can draw general conclusions. Data from 2008 to 2011 shows US REDD+ finance focused on forest nations with large forests and relatively high GDP and the smallest overall capacity gaps for executing national forest monitoring systems that can link with an international REDD+ framework.
Several factors are likely to influence spending, but the trends may be because the US has focused its support on countries that can implement projects and there can be more certainty on the return.

While big picture trends emerge from spending, it is very difficult to link finance to impact. Tracking REDD+ finance would be much more effective if donor nations would strive to:

• Report in specific line items with explicitly stated goals
• Provide summary information and links to reports that show where and how the climate funds were or are being used;
• Work with recipient countries in reporting

The Global Challenge

The US situation is hardly unique, and pinning down what REDD+ finance is can be tough given its variety of forms no matter which donor country you are examining. REDD+ finance might be channeled toward strengthening partnerships between local people and forest governments in one instance, and developing methods and technologies for forest carbon inventory and mapping in another.

This creates difficulties as many readiness activities are not fundamentally different from activities funded historically in forest conservation. Actors therefore count different things as REDD+ finance. Pulling apart what is REDD+ finance or how much finance can be attributed to any one activity is complex as much funding arrives with multiple objectives, or as part of national country programs.

Multiple Channels

Finance for REDD+ is also delivered in many different ways. Some countries, such as Norway, have a number of high value bilateral agreements and also tend to focus on emission-reductions as an outcome, such as for the Amazon Fund. The UK, in contrast, funds REDD+ mostly through multilateral REDD+ funds such as the Forest Carbon Partnership Facility or Forest Investment Program. The instruments through which finance is delivered can also differ, including: grants, loans, equity, loan forgiveness, insurance, and private investments, which affects the way finance is accounted for (is a grant the same value as a loan?).

These channels don’t all converge to a central point in country either. Forest, environment, or agriculture ministries, international or local NGOs, and other various intermediaries can be engaged as intermediaries and in implementing REDD+ projects. Where centralized reporting does not exist or function effectively, it is hard to establish the total amounts of REDD+ finance arrive in recipient countries as no one is counting everything.

Why it Doesn’t Always Add up

Aside from making aggregate figures on REDD+ finance elusive, variety in activities, channels and reporting of REDD+ finance, leads to discrepancies between contributor and recipient countries. The Voluntary REDD+ Database of the REDD+ Partnership, for example, reports US$3.35 billion from contributor countries through bilateral flows, while recipients report only US$1.44 billion. This occurs because the Voluntary REDD+ Database receives information from both bottom-up and top-down, whereas, most other initiatives seek just one data source.

While there may be political motivations for contributors to report significant amounts of spending, the differences are also likely to be a function of large bureaucracies not speaking the same language or following the same reporting process. There is also, often, a significant time-lag that exists between when a contributor country declares money spent (typically when it is allocated) and when a recipient nation recognizes it’s delivery (typically when it lands in a bank account). The regularity with which it is reported in a REDD+ finance database also comes into play. This makes it difficult to square reports across nations at any given time. Countries’ different fiscal years compound the problem.

Despite formidable challenges, the ability to more accurately track climate finance is critical to moving REDD+ forward. Being able to accurately track REDD+ finance also enables us to link expenditures to actual impacts so we can assess the effectiveness of a particular strategy, something critical to evolving REDD+ at this relatively early stage in the game. Ultimately, REDD+ finance, as well as climate finance more generally, will depend on trust and accountability. Without a way to accurately measure progress against commitments, neither is on solid footing.

This series of blogs on REDD+ finance intends to create a forum for debate and exchange of ideas, this blog reflects the opinions of Jeff Metcalfe of the Tropical Forest Group, and should not be understood to reflect the views of ODI, Forest Trends, REDDX or Climate Funds Update.