What Does Copenhagen Mean for the Private Sector in REDD-plus?

31 December 2009 | The Copenhagen Accord has drawn fire because it’s not a legally-binding climate agreement on targets and funding mechanisms, but progress has been made on many sticky issues beyond the accord.   To begin with, the main negotiating body charged with drafting a text for dealing with mechanisms for reducing greenhouse gas emissions from deforestation and forest degradation (REDD) as well as for promoting forest conservation, enhancement of forest carbon stocks, and sustainable forest management (REDD-plus) released a four-page draft that reveals widespread agreement on many once-contentious issues. Moreover, Norway, Japan, the United States, Britain, France, and Australia together pledged $3.5 billion in short-term financing for getting REDD-plus off the ground.

The draft was handed over on Thursday of week two of the Conference of Parties to high level ministers to ultimately decide on. The proverbial REDD+ sausage that came out of the Copenhagen Polsevogn was not entirely complete. While there is no REDD+ mechanism set in place, enough was agreed on to continue to tend the garden of forest carbon offsets. Nonetheless, even without a legally binding REDD+ mechanism, the private sector has a crucial yet experimental role to play in implementing sub national demonstration activities and bridging them to the national level.

For a roundup of a year of negotiations leading to Copenhagen and starting in Poznan to provide some context, the Global Canopy Programme’s (GCP) blog provides an historical overview of the negotiations as well as an overall analysis of the COP 15 REDD+ negotiations.

Consensus: Sub national Approaches Survive REDD+ Text

The draft conclusions from the Advanced Working Group on Long-Term Cooperative Action (AWG-LCA) REDD-plus negotiating text are similar to the previous version from the last round of talks in Barcelona, the so-called “non-paper 39”, but negotiators this time around have removed brackets (in UN speak this means consensus has been reached) from the principles (paragraph 1), scope (paragraph 3), sub-national approaches (paragraph 7 and 13) and social and environmental safeguards (paragraph 2).

Other goodies include the mention of the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP), addressing land tenure and gender considerations, reference to biological diversity and ecosystem services and precluding the conversion of natural forests.

The safeguards are now part of the operational text, not the preamble—previously it was thought that moving the safeguards to the preamble weakened them. However, the lack of definition for one of the eligible activities, ‘sustainable management of forests’, under scope is cause for concern among some environmentalists. A consortium of organizations developed the following briefing defining what sustainable management of forests would entail.

A Nested Approach: Sub-National Systems as Part of National Systems

Another area of agreement was the draft decision on methodological guidance for REDD+ reached by the Subsidiary Body for Scientific and Technological Advice (SBSTA). Some of the highlights include SBSTA echoing the AWG-LCA in recognizing the need to engage indigenous peoples and local communities and develop guidance for their involvement in monitoring and reporting. It established the Intergovernmental Panel on Climate Change guidelines as the basis for estimating emissions from land use activities, removals by sinks, forest carbon stocks and forest area changes. The draft decision also approved sub national forest monitoring systems as long as they were part of a national system (paragraph 1.d) and promotes historically adjusted forest reference emissions levels and/or forest reference levels (proxies in the interim).

Going forward, SBSTA will play an increasingly significant role in continuing the work of establishing a REDD+ mechanism. The AWG-LCA has requested SBSTA to establish:

1. Land use planning in developing countries
2. An inventory of emissions from land use, land use change and forestry (LULUCF) activities
3. Emission and removal estimations from LULUCF
4. Develop modalities for measuring, reporting and verifying emissions by sources, removals by sinks, forest carbon stocks, and forest area changes
5. Develop modalities for measuring, reporting and verifying the support provided by developed country parties to enable the implementation of safeguards mentioned
6. The promotion and implementation of national strategies or action plans, policies and measures and capacity building, followed by the implementation of national policies and measures, and national strategies or actions plans and, as appropriate, sub national strategies, that could involve further capacity building, technology transfer and results based demonstration activities, and evolving into results based actions.

Discord and/or Missing Core Components

Nonetheless, the ministers left many issues unresolved to be concluded by the next COP in Mexico City, such as the global targets and timeframe for halting deforestation and for finance (which in previous versions were suggested to be 50% by 2020 and to halt gross deforestation by 2030 and targets to provide finance amounting to €15-25 billion by 2020), the institutional arrangements (such as market versus public finance mechanisms, a forest emissions inventory, reference levels and a national or international registry), sub national reference levels for initial phases, the measuring, monitoring and verifying (MRV) systems and benefit distribution mechanisms.

Private Sector= Demonstration Activities

The text decides (without brackets) in paragraph 7 that REDD-plus will occur in three phases and acknowledges sub-national strategies and results based demonstration activities as part of those strategies “beginning with the development of national strategies or action plans, policies and measures and capacity building, followed by the implementation of national policies and measures, and national strategies or actions plans and, as appropriate, sub national strategies, that could involve further capacity building, technology transfer and results based demonstration activities, and evolving into results-based actions.”

The text goes further on to explain that, depending on national circumstances and capacities and level of support received, developing country parties have the autonomy to decide how these activities will be implemented (such as whether sub national activities will receive tradable credits). This is consistent with the principles outlined in the first paragraph, which state that the implementation of activities should be country driven and respect national sovereignty. In other words, countries control the process and ultimately have the authority to allow an interim sub national approach if they so wish—perhaps utilizing a conservative and historically adjusted sub national reference level proxy until a robust national system is in place.

The private sector can play the role of providing investment, developing REDD+ projects and programs, providing services and acquiring REDD+ credits via transactions. More than likely, the Designated National Authorities (DNA)s will act as an intermediary through which the private sector will have to seek approval to develop and sell its credits. Access to and rules of the market are key for enabling the private sector to participate fully.

Following the aforementioned phase structure the following are some of the institutions and schemes that can finance each of the stages including private sector demonstration activities:

• Phase One and Two: Public Finance and Voluntary Carbon Markets; Multilaterals: the UN REDD Programme, the Forest Carbon Partnership Facility, the BioCarbon Fund, Congo Basin Forest Partnership, Congo Basin Forest Fund, the Amazon Fund, the Forest Investment Program (5-7 countries selected soon to get significant funding), a recent Asian Development Bank Climate Change Fund (which would fill upfront investment gap in market infrastructure for REDD+); Bilaterals: Norway’s Climate and Forest Initiative, Australia’s International Forest Carbon Initiative, Germany’s International Climate Initiative, Japan’s Cool Earth Partnership
• Phase Three: Markets (potential regional and federal US cap and trade schemes: the House climate bill passed, now the Senate Kerry-Graham bipartisan climate bill will reach the floor in spring 2010); according to the Global Canopy Programme’s the Little Climate Finance book, the European Union excluded forestry in last year’s directive but it has a provision for allowance revenue going to avoided deforestation activities if an international agreement reached; states and private entities under a signed new Climate protocol will have to meet targets and countries will presumably have their own cap and trade schemes with their own rules which would accept Kyoto credits (which might include REDD-plus offsets) which both governments and private entities could purchase.

Maria Bendana manages the Forest Carbon Portal, a project of Ecosystem Marketplace. She can be reached at [email protected].

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