Can Katoomba 18 HelpThe Miyun Reservoir?

More than 200 delegates to Katoomba 18 from as far away as Peru, Switzerland, and Ghana will be spending the next three days in China’s troubled Miyun Reservoir. Their aim: to trade experiences, share lessons learned, and make recommendations to project developers at Miyun on designing and implementing effective watershed investments.

17 May 2013 | BEIJING | People’s Republic of China | On the hour-and-a-half drive to the Miyun reservoir from Beijing, you can’t miss all the trees. Recently-planted seedlings – mostly deciduous, with neatly painted white trunks – grow in orderly rows, stretching for miles, filling every spare patch of ground in the countryside. Trees have been planted in old agricultural fields, along the banks of rivers, and even in dried-up riverbeds.

In the age of climate finance, REDD, and forest carbon, it’s a little-known fact that the biggest afforestation program in the world is in China, and is actually driven by water, not carbon. The Sloping Lands Conversion Program, which has delivered billions of dollars to forests, is just the biggest of dozens of similar efforts that incentivize projects in China.

We’ll be spending the next three days by the Miyun reservoir, talking to experts from all over the world about how to build a better forest compensation model. The occasion is the 18th Katoomba meeting. Hosts Forest Trends and the Beijing Forestry Society have brought together more than 200 people in China – from countries from Peru to Switzerland to Ghana – to trade experiences, share lessons learned, and – this brings us to the reservoir – make recommendations to project developers at Miyun on designing and implementing effective watershed investments.

Understanding the Miyun

As much as 70 percent of Beijing’s surface water supply comes from the Miyun reservoir, but the water is disappearing. Surface flows have fallen by two-thirds over the last decade. Pollution is a growing problem and a bit of a moving target. There have been extensive efforts to implement soil and water conservation structures around the reservoir, but in the meantime other problems have appeared.

“Ten years ago I would have said erosion is the biggest problem in the Miyun reservoir,” Madame Duan Shuhuai, Professorate Senior Engineer at the Beijing Water Authority, told the Katoomba audience. “But now we are most worried about household garbage, wastes from animals and fertilizer.”

The communities surrounding the reservoir are much poorer than the nearby capital. Annual income levels in the area are estimated in official statistical yearbooks at $623/year, compared to the national average of $964. A recent rapid assessment in the field by Forest Trends partners put the actual number even lower – in the range of $228-407/year.

A History of Investments

Beijing municipality has aggressively backed a range of efforts to restore and create forests in the watershed, including “eco-compensation” programs that pay communities to plant trees. More than 18,000 hectares have been planted around the reservoir. Today, there is more than 70% forest cover in the area.

A GEF-funded project implemented by the Beijing Forestry Society and UNDP from 2007-2011 also worked to develop capacity in upstream communities for forest management, as a way to get more trees in the ground, provide alternative livelihoods (and thus in theory limit pollution) and build climate resilience.

Those efforts, said Sun Mingchen, Director General of the Fengning County Forestry Bureau in a Friday morning panel, were successful in many ways: they resulted in tenure being granted to private landholders and stressed participatory planning approaches.

But trees are slow to mature, Sun pointed out. In the meantime, landholders who have switched livelihoods from farms to forests find themselves with a production timeline that doesn’t match up with their income needs. “The delayed benefits from trees mean farmers need compensation in the period before trees mature,” said Sun.  

Designing a Smarter Project

Meanwhile, water risk continues to hover in Beijing. Pollution downstream reaches a grade 4 out of 5 (1 being cleanest), and yet information about the precise nature of pollutants or their sources is scarce: there is no systematic monitoring of hydrological indicators like flow rates or nutrient pollution levels.

Similarly, despite Beijing’s heroic investments, little is known about their socio-economic impacts. Are payment levels high enough to attract sufficient participation? Are the trees increasing flows into the reservoir, as expected, or actually contributing to the falling water levels?

The new proposed pilot in the Miyun reservoir aims to try to answer some of these questions. Project developers believe that a more rigorous understanding of hydrological and social impacts will improve design and ongoing management. And success in Miyun will help demonstrate that natural infrastructure will have an important role to play in safeguarding water security – and far less expensively than projects like the South-North Water Transfer Project, a massive infrastructure initiative to bring water to cities like Beijing the dry North from the Yangtze River more than 1,000 kilometers away to the south.

The pilot has the benefit of not starting from scratch: it already has a natural buyer (Beijing) and sellers (poor upstream communities) and builds on years of previous efforts to safeguard the Miyun reservoir.

Katoomba: The Secret Ingredient?

Now, project developers hope to also build on years of expertise developing watershed investment projects around the world – which is where Katoomba conference-goers come in. They represent leading projects around the globe, as well as some of the most cutting-edge ecosystem services policy and project design experience out there. Over the next three days, they’ll be intensively briefed on the watershed and relevant subjects.

A major goal of the conference is to tap the collective wisdom of practitioners, policy-makers, and other actors, and develop a concrete set of recommendations for advancing the Miyun project. We can’t wait to see what they come up with.

 

 

 

 

 

China:The Unappreciated Eco-Entrepreneur

We’ve all heard how China’s voracious economic growth is destroying its air, water, and forests – but few know of the country’s burgeoning market-based response, which aims to halt environmental degradation by incorporating the value of nature’s services into the production process.   EM parent Forest Trends has published an exhaustive inventory of these efforts.

7 May 2013| China, today the world’s second-largest economy, has quietly seized a leadership role in the evolving field of environmental markets. Its global financial force drives some of the largest public payments and markets for ecosystem services (PES/MES) programs in the world, particularly with carbon and water markets, yet China’s market-based initiatives remain relatively unknown. This is surprising, given the country’s increasing importance in the world economic order and critical role for future international climate negotiations.

A study of China’s developing ecosystem services reveals the amazing breadth and scale of what is currently happening on the ground. The environment is an important area for engagement with China; the central government says it is eager to learn from outside experience and collaborate with international organizations to develop capacity, broaden and refine its policy toolkit, and better evaluate and improve its current programs.

The world, as well, has much to learn from China; the sheer scale of the country’s ongoing ecological payment programs and policy innovations suggests a hidden wealth of untapped experience exists that could provide valuable lessons and insights to both domestic and international policymakers and practitioners of PES and MES schemes.

Ecosystem Markets Serve Economic Growth

Policymakers in China have become increasingly interested in developing new approaches for environmental policy to address the country’s multiplying conservation challenges and resource constraints in the face of break-neck economic growth. This led China’s central and local governments to rapidly expand its range of policy and program innovations, many under the broad heading of “eco-compensation,” which lay the groundwork for the development of ecosystem services markets.

As a result, the country’s public sector drives some of the largest public payment schemes for ecosystem services in the world – and this includes local governments, which are rapidly adapting centrally-designed eco-compensation programs to their own needs.   They are also creating hybrid programs that weave together and draw upon multiple central and provincial policies and funding sources.   They create their own distinct initiatives that often feed back into central government policy development.

The result has been a highly diverse mosaic of initiatives and public programs.   They incorporate payments or market-based concepts into national, provincial and municipal levels. And they are almost all primarily developed and funded domestically, with relatively little involvement of international expertise or funding.  

Range of Programs

China’s broad range of ecosystem programs includes watershed, carbon, timber, landscape amenities, biodiversity conservation and anti-desertification services. An increasing number of initiatives aim to protect watershed services and resolve conflicts over the rights and access to water resources. China has also actively embraced the Clean Development Mechanism (CDM) of the Kyoto Protocol as well as voluntary carbon markets as means to finance a transition to renewable, cleaner and more efficient energy systems.  

Other programs include China’s green and organic food certification system, the central government’s green procurement program and green product label certification system, promotion of energy efficiency, central and local government subsidies and fees regarding the impacts of development and infrastructural projects on soil erosion and watersheds, as well as continuing experimentation with air and water pollution emissions trading.

Policy circles have been abuzz with debate on how to improve these programs as well as how to explore and develop other market-based tools and regulatory innovations to better address China’s environmental and development challenges.

Inside China’s Markets

To understand these market’s potential, it is important to first understand how they operate today.

Most of China’s https://ecosystemmarketplace.com/pages/dynamic/article.page.php?page_id=9700§ion=news_articles&eod=1“>eco-compensation policies and market-based environmental initiatives are domestically driven and funded, and are geographically concentrated in China’s richer, coastal regions.

Watershed ecosystem services are by far the biggest driver of eco-compensation policy in China, and where most local innovation is occurring.   Even forest-related programs have been initiated due to water-related problems.   For example, large-scale flooding in Southwest and Northeast China in 1998 spurred China to launch its Conversion of Cropland to Forests and Grassland (CCFG) program, which we examined in detail in https://ecosystemmarketplace.com/pages/dynamic/article.page.php?page_id=9700§ion=news_articles&eod=1“>the first installment of this series.

Private-sector involvement has been small, but opportunities for growth exist. The majority of existing market-based initiatives in China are government-mediated, publicly-administered programs that use public funds to pay land users for the stewardship of ecosystem services on their land. Although the public sector is clearly the dominant player in these ecosystem service provision programs, government ministries and provincial governments often emphasize in their policy documents the development of multi-jurisdictional and multi-sectoral policy frameworks that diversify funding sources.

Local Innovations

Meanwhile, the wide variety of ecosystem markets developing locally throughout China reveals a significant degree of local innovation. This innovation is spurred by resource constraints and the need to find innovative ways to improve resource management and resolve regional administrative and property rights issues that span geographic boundaries.  

Local variations in eco-compensation policies in China take three main forms.   They include central government policies, local innovations independent of central policies and hybrid developments.  

In the majority of cases, central-government policies provide frameworks for local innovation by stipulating for local matching funds or administrative support, or delegating management authority and the development of standards and fee structures to provincial or local governments. In addition to the CCFG, other examples include China’s water and soil conservation law, and policies governing the implementation and support of local eco-agricultural programs.

Significant local-level innovation also occurs in the creation of eco-compensation schemes and market-based instruments for environmental policy. The vast majority of these innovations resolve issues surrounding water resources, their effective sustainable protection and equitable and efficient distribution. Examples include arrangements between Beijing and Hebei regarding the upper watershed of the Miyun reservoir; water rights trading and water-based eco-compensation policies between various municipalities and irrigation districts and cost-sharing and integrated watershed management between various city governments.

Perhaps the most interesting and clearly the most innovative policies involve hybrid policies where local governments draw upon and weave together multiple central and provincial policies and funding sources to address local environmental concerns. The Jinhua River Watershed provides a good example of this type of hybrid innovation.   Here, in addition to local water rights trading and downstream development zone policies, governments also draw upon funding from State Forestry Administration policies.  

The Property Rights Issue

Significantly, the Chinese term shengtai buchang jizhi, meaning “eco-compensation mechanisms”, encompasses PES schemes as well as policies that foster cooperation between various levels of government to finance and share environmental protection and restoration costs. The term’s growing use and importance within China’s developing environmental policy framework indicates the greater emphasis on not only developing innovative market-based instruments for environmental policy, but also on resolving property rights and equity issues surrounding the use and protection of natural resources.

Getting the Word Out

Developments on the ground in China have been rapid, and policymakers still face numerous challenges in creating effective and financially sustainable policies. Part of this is because many of China’s policymakers are still new to PES and market-based instruments in general. This, combined with a dearth of platforms for dialogue and information-sharing in China between government ministries, academic institutions and the private sector results in having a significant share of PES and MES-like programs, activities and initiatives unrecognized, undocumented and “off the radar.” Existing information sources are generally sector-specific, with minimal cross-sectoral information, comparison and analysis.

Moving Forward

As a result, policymakers and practitioners in China and internationally have not been able to fully benefit from China’s own growing wealth of experience gained in just under 10 years developing innovative market-based policies for conservation. China’s experiences provide insight into the implementation and outcomes for evolving ecosystem markets worldwide.   They can illustrate relationships between local institutions, social capital, property rights, local environmental conditions, equity and poverty, and how these interact with different program designs influence program efficiency and outcomes.

A clearer and more comprehensive picture of the status of markets for ecosystem/environmental services in China, the key actors, and the distribution of these activities and programs across ecosystem services and regions could provide valuable insights for policymakers.   Cross-learning and collaboration across government ministries would benefit, illustrating where further research should be targeted, and where the private sector could most easily and effectively be brought in as a key partner and stakeholder in environmental programs.

To move forward, there is a need for greater documentation and analysis of existing programs and developing cross-sectoral platforms for dialogue, information-sharing and cross-learning between policymakers, practitioners, stakeholders and experts and linking to global innovations.

China Today; the World Tomorrow

China’s extensive innovations in ecosystem markets offer tremendous opportunities for knowledge and growth in these evolving markets.   China’s ongoing, large-scale experiments in PES and other environmental policy innovations should be comprehensively studied to learn where further research should best be targeted and where the private sector could most easily and effectively be brought in as a key partner and stakeholder in environmental programs.

As nations face ongoing challenges to fund conservation, China’s initiatives can provide guidance and insights that offer untapped lessons on policy experiments of potentially great importance for policymakers worldwide.  

Michael Bennett is  leading   Forest Trends’ efforts to  assess and track the  current status and   development of PES in China, and to lay the groundwork for a China Katoomba   Group. Prior to working with Forest Trends, he was  a  post-doctoral  researcher  at the  Center for   Chinese  Agricultural Policy, Chinese Academy of Sciences. He is also  currently a research fellow at the Environmental Economics Program in China,  College of Environmental Sciences and Engineering, Peking University.   He can be reached at mbennett (at) forest-trends.org.

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NOTE:   This article has been adapted from Markets for Ecosystem Services in China: an Exploration of China’s “Eco-Compensation” and Other Market-Based Environmental Policies, a comprehensive inventory of Payments for Ecosystem Services (PES) in China published by Ecosystem Marketplace parent Forest Trends, together with the Peking University College of Environmental Sciences and Engineering, the Policy Research Center for Environment and Economy, Ministry of Environmental Protection, China, and the Natural Capital Project.   You can download the full report to the right.

 

 
Additional resources

China Uses Market-Like Mechanisms To Promote Reforestation Of Sloping Lands

Rapid expansion of agriculture has led to the destruction of forested hills critical for regulating water flows. China’s expansion has been bigger and faster than most, and so are its problems. But the notoriously top-down government has responded with a centrally funded yet incredibly decentralized, flexible, and locally-administered solution.

30 April 2013 | Until the middle of the last century, Fuzhou, China enjoyed regular flows of clean water from the Min River. But that began to change with the advent of urbanization in upstream cities like Sanming and Nanping, and with deforestation in hills surrounding those cities. This brought irregular flows of dirty, unsanitary water to Fuzhou. Now the city is paying roughly $800 million annually to each of those cities. The money is used to administer regional water management programs that encourage farmers to reforest the denuded hills and implement sustainable land-use practices.

It’s all part of the Min River Watershed Water Resource Protection Eco-Compensation Program – one of several uniquely Chinese efforts to promote healthy watershed stewardship on a grand scale. Like dozens of Payments for watershed services (PWS)-also known as investments in watershed services (IWS)-programs underway across the world, China’s eco-compensation programs aim to tap the flexibility of markets to promote responsible and cost-effective watershed stewardship. Unlike those other efforts, however, this one has the heft of China’s powerful central government behind it. That’s made it possible for them to achieve unrivaled scale – to the point that China accounted for 91% of watershed investments in 2011, according to Ecosystem Marketplace’s State of Watershed Payments 2012 report. This one country almost singlehandedly generated all of the $ 7.46 billion in watershed transactions that came out of Asia that year.

The term “eco-compensation” is an all encompassing term that covers government initiatives to improve environmental management with a focus on water resources and watershed management. While eco-compensation is a uniquely Chinese concept, it shares DNA with PWS, because it offers market-based – or at least market-like – solutions to environmental challenges. Eco-compensation is almost entirely driven by the government – primarily the national government, although local implementation varies place to place. Sometimes, compliance is mandatory. It has strong elements of wealth transfer from urban to rural and from richer to poorer members of society, and that means to those most environmentally impacted. It’s also happening at an unprecedented scale. Much of China’s involvement and innovation in this sector is due to the nation’s growing environmental problems. The rapid economic growth in China has put increased pressure on the nation’s water supply and other resources.

China’s biggest and most successful eco-compensation program so far has been the Conversion of Croplands to Forests and Grasslands, (CCFG) otherwise known as the Sloping Lands Conversion Program. The CCFG initially aimed to convert 14.67 million hectares of cropland to forests and afforest about the same amount of land that is currently wasteland, according to a study on the program called China’s Sloping Land Conversion Program: Institutional Innovation or Business as Usual? The program has since been frozen at 9.2 million hectares.

The Genesis

The CCFG program was implemented after flooding across China in the 1990s displaced millions of people and killed thousands. According to the same study on CCFG, sloping cropland contributes 65% of the 2-4 billion tons of silt that is dumped into the Yangtze and Yellow-China’s longest and most productive rivers- every year, and that’s the focus of this program.

In order for this program to work, farmers don’t necessarily have to stop farming but they do have to alter their land-use practices. While many farmers find other sources of employment, the program uses several creative approaches like agroforestry that allows farmers to continue working on the land. As part of the program, the government provides compensation to farmers. At one time, farmers could be paid with grain or cash but now all payments are in cash.

By 2003, the program was being implemented in more than 2000 counties in 25 provinces. As of 2007, the program had retired and afforested over 9 million hectares of land-an area slightly smaller than the state of Maine-according to a report on CCFG.

In 2011, the CCFG program was the largest land reforestation program in the world and was responsible for 47% of China’s Investments in Watershed Services, according to State of Watershed Payments 2012.

Eco-Compensation vs PES

The innovative approaches CCFG used – like contract rural landowners as direct stewards of ecological services- helped generate widespread momentum for eco-compensation in China.

Eco-compensation envelopes a variety of frameworks. This includes direct payments from government to individuals or community suppliers of watershed ecosystem services. It covers compensation to households or regional governments for taking regulatory action towards conservation or protecting a fragile ecosystem among other deeds. Eco-compensation can also include some sort of fee or tax to increase funding or incentives on restoration and environmental management.

Although the central government is driving the policy and footing much of the bill, the program enjoys flexibility in how the policy directive can be implemented locally. This has positives and negatives. On the plus side, it has fostered variety and experimentation on the ground, which in theory promotes models that work. But because of the low information sharing between government ministries, academic institutions and the private sector, several eco-compensation programs are undocumented. It’s created a system that’s difficult to evaluate and tough to track. Also, China as a whole is new to market-based instruments causing some market-like activities to remain under the radar.

Moving Forward

With solid financial backing from the Chinese government to implement these market based instruments that are improving efficiency, eco-compensation has the potential to bring real and much-needed reform to China’s water resource management and also help China develop an economic model that is sustainable. In 2009, China’s National Development and Reform Commission (NDRC) and other government agencies hosted the “International Conference on Payments for Ecological Services” in an attempt to share experiences and provide opportunities to invest and operationalize eco-compensation programs. The NDRC is also developing a national Eco-compensation Ordinance, and the national government has stressed promotion and improvement of eco-compensation as a key component of the environmental targets of its 12th Five-Year Plan. Chin’s Five-Year Plans are a series of social and economic incentives laid out by the Chinese government. The current guideline, the 11th Five-Year Plan (2011-2015) focuses on tackling environmental challenges like carbon emissions and water pollution.

Eco-compensation will likely be integrated into China’s zoning laws in the future as well. In a new zoning system, development rights and restrictions are distributed based on the ecological services of the land.

Much more work needs to be done, however, and it remains to be seen if the eco-compensation trend will truly solve China’s water problems.

Forest Trends’ Katoomba Group will be discussing this issue further as it unfolds at their next meeting-Katoomba XVIII: Forests, Water and People, to take place next month in China. The meeting will draw on talks with leading experts, practitioners, policymakers and investors from China and abroad to try and solve the water crisis using nature-based solutions.

 

 

The Business Of Climate-
Adaptation: Keeping It Fair

Climate change will disrupt the global economy in ways none of us really know, and companies that properly adapt to it will survive and perhaps even thrive. But the tools for profiting currently lie in the countries that created the mess – not those that will suffer. Here’s how the Higher Ground Foundation and others hope to level the playing field.

27 February 2013 | Farmers in the semi-arid area of India are struggling to survive as rains fail and soil erodes at an estimated 16.3 tons per hectare per year, according to Totally Pradeep, the Institutional Advisor at Samuha, an Indian non-governmental organization (NGO) focusing on health and environmental issues.

“It’s a game of dice,” he said during the webinar “Climate Adaptation: Urgencies and Opportunities for Business,” with the Higher Ground Foundation in October. “They go through each month without any idea of what it might bring.”

View the Webinar Here

Challenges and Opportunities

Realizing these communities’ vulnerabilities to climate, Pradeep saw an opportunity in working with Higher Ground, a nonprofit focused on financing climate adaptation projects in developing countries with funds from wealthy governments and businesses.

“The private sector is the biggest driver of growth in developing countries,” says Su-Lin Garbett-Shiels, Climate and Environment Advisor for the UK’s Department for International Development (DFID).

Higher Ground has developed a metric called the Vulnerability Reduction Credit (VRC) , which Pradeep and Sumaha hope to utilize. VRCs quantify climate-change induced vulnerabilities and facilitate climate adaptation. The tool factors in income and wealth of a subject community to determine the human vulnerability to climate impacts. Higher Ground plans for the credit to be available on a voluntary market where companies looking to fight climate change in the hardest hit areas will participate.

“The VRC is a tool that can prioritize and facilitate adaptation investments,” says Higher Ground Executive Chairman and co-founder Karl Schultz.

And such investments will become more and more critical as climate-change takes hold across the globe – with impacts that won’t be limited to one region or one sector. Last year’s flooding in Thailand, for example, threatened the world’s supply of hard disks and altered the entire electronic industry.

But Schultz says there are opportunities for the private sector when it comes to adapting to climate change.

“Higher Ground looks at the ways, whys and hows of climate adaptation finance and how they can support greater business action,” he says.

The Ways, Whys and Hows

Schultz says that spending on adaptation costs roughly $150 billion a year, and that figure is only expected to rise. In a poll given by Higher Ground on reasons why companies in developed countries would pay for climate adaptation in the developing world, 33% said supply chain risk reduction and 14% said for first mover advantage in adaptation.

In order for companies to stay competitive in the global market and meet the investment needs for adaptation, the Higher Ground Foundation suggests three broad types of tools that will be necessary-funding mechanisms, governance and capacity, and a metric that can compare across several sectors.

As of right now, the metrics have been at a national level and focus on input, like finance for training, rather than output and they come from public investment and overseas development assistance, Schultz says. These have been driven by public sector and large foundations with little involvement from the private sector.

And leveraging private finance is a fundamental part of funding mitigation and adaptation activities, which, Schultz, says, can come from the sale of VRCs. This will create a new revenue stream from the private sector.

In terms of governance and capacity, it’s a sign of progress that multi-lateral development banks are increasing their involvement with adaptation initiatives and the UNFCCC has developed the Adaptation Fund and the Green Climate Fund. Unfortunately many of the nations hit hardest by climate lack the capacity for adaptation. This is another problem Higher Ground hopes to fix with the market for VRCs, Schultz says, which will expand under a robust new framework for projects with many new players and hopefully lead to more investments and solutions for this issue.

Leveraging the Private Sector

A recurring question in the climate realm is that the impact of climate change is a societal risk rather than a threat to an individual and should be handled as so.

“But government doesn’t have a bottomless pocket,” says Jeremy Richardson, head of climate change and sustainability services at URS, an engineering firm. “So the next question is how to bring in the private sector.”

One of the imperatives for business is to protect their operations from climate impacts. But consequences of climate change to areas vital to business, such as water supplies, health and agriculture are likely to be severe, says Garbett-Shiels of DFID. The World Economic Forum’s (WEF) Global Risk 2013 report found water supply and food shortage crisis as well as rising greenhouse gas emissions were among the top five risks in the likelihood and impact section.

This gives the private sector another imperative to act-providing goods and services that will help communities adapt to climate impacts.

For example, Sunlabob, a Lao private commercial company, provides renewable energy to areas not yet on the public electricity grid. Sunlabob is a full service, profitable company and the energy it provides will create more climate resilient communities in the rural regions it services.

While cases like this reveal signs of progress, the private sector still faces many obstacles to adapting to climate change in the form of lacking capacity, awareness and policy.

“I think one of the things that make businesses nervous about climate change is the uncertainness,” says Richardson.

Although a company may understand the threat climate change poses, it might not know the extent of this threat and choosing what source of information to trust can be difficult. And businesses often lack the wherewithal to take a proactive stance in adapting to climate change while fiscal incentives aren’t available and government policies aren’t supportive.

“There’s obviously a line between what is the role of the private sector and what the public sector can do to incentivize more action,” says Garbett-Shiels.

She says both sectors have a role to play in financing climate adaptation. The private sector can’t be expected to finance adaptation alone, Garbett-Shiels says, but they are expected to cover the costs of climate impacts on private businesses. The public sector, however, should create policies that incentivize adaptation-friendly technology as well as a market for adaptation goods and services.

“The public sector should send the right signals to the private sector that adaptation is important,” says Garbett-Shiels.

The Pilot Program for Climate Resilience, (PPCR) which supports broad-based strategies to integrate climate risk into development planning, is one example of gathering all the necessary stakeholders together and encouraging private sector engagement.

Richardson notes the partner initiatives between the public and private sector offer opportunities for both sides in financing climate adaptation, where the risks are shared and a deep understanding of which sector should take on what risk is required.

“They are gathering a good body of evidence of how to set up these public private partnerships where risk is shared in a sensible way,” Richardson says.

The Case In India

For the risky situation in India’s semi-arid region, Samuha’s approach is centered on creating carbon neutral villages that combine climate mitigation and adaptation activities with heavy involvement from the local people.

“In the present-enviro-political scenario, our communities have the opportunity of continuing as the victims, dependent on government and civil society for their future, or become part of the solution,” Pradeep says.

Pradeep is seeking to use sustainable practices for farming reducing the climate impact on the land and people living there. For instance, biomass generation and rainwater harvesting could reduce the impact of farming on the land and lead to better crop yields.

Cookstove projects create the core of Samuha’s mitigation strategy. From there, Samuha can bring in other technologies like solar water heaters and LED lights. Samuha’s adaptation strategy is based on climate change interventions that the organization has had experience with like social welfare programs and sustainable agriculture practices.

By creating enterprises that focus on farm-gate procurement credits-or purchases at the net value of an agricultural product-and retail, along with the help of climate resources like VERs (Verified Emissions Reductions) and Higher Ground’s VRCs, Samuha plans to spur economic development. Capacity building and pilot projects will be done with grants adding to the region’s development.

There is an urgency to act, says Pradeep on climate, and there are opportunities that climate adaptation brings.

Carbon Finance Unit Of The World
Bank Sees Initiatives Move Forward

The World Bank received good news recently with several of its climate initiatives moving into new phases starting with the first PoA in China to issue CERs along with 3,000 hectares of a valuable watershed reforested. Meanwhile, Costa Rica becomes the first country to access performance based payments through the Carbon Fund and developed nations funnel more funds toward the FCPF.

24 January 2013 | As China’s economy evolved and it experienced a period of rapid industrialization, the nation’s environmental problems grew right along with it. Water scarcity and strangling pollution constantly plague the world’s most populous country. But in recent years China is engaging in climate mitigation and adaptation programs to address these problems and the progress they have made is starting to show.

This year, China was able to announce their China Power Sector Transformer Efficiency Program, a PoA (Programme of Activity) under the Clean Development Mechanism (CDM), has issued CERs (Certified Emission Reductions). The program has led to the retirement of 37,000 inefficient power distribution transformers mitigating emissions from the power industry. And with more companies adopting energy efficient transformers, emissions will continue to shrink.

Late last year, China’s Facilitating Reforestation for Guangxi Watershed Management in Pearl River Basin Project issued carbon credits under the CDM. This was the first reforestation project in the world to be registered under the UNFCCC (United Nations Framework Convention on Climate Change).

The Guangxi watershed is one of the most diverse regions for flora in China, but since the 1950s the watershed has struggled with deforestation from fires, grazing and fuel-wood among other reasons. The Guzngxi project has reforested 3,000 hectares with farms in the region practicing conservation. The farms increase biodiversity by improving the habitats and control water erosion along the Pearl River.

The local communities also benefit from the sale of carbon sequestered in the trees. The carbon credits are sold to the World Bank’s BioCarbon Fund as well as products like resin.

The BioCarbon Fund, along with the Forest Carbon Partnership Facility (FCPF) is administered by the World Bank enabling the financial institution to fund projects worldwide that reduce carbon emissions, conserve biodiversity and alleviate poverty.

Outside of China, Costa Rica is also helping move the World Bank into a new phase of carbon finance. The nation is set to become the first country to access performance-based payments through the FCPF’s Carbon Fund. This is the first national program supported by the Carbon Fund-a part of FCPF that supplies countries with payments based on verification of emission reductions from large-scale projects. Costa Rica seeks to be the world’s first ‘carbon neutral’ country and using Payments for Ecosystem Services (PES) to keep carbon locked in trees by keeping forests standing is one part of achieving this goal.

Costa Rica’s proposal would reduce carbon emissions by 29.5 million tons by reforesting and conserving 341,000 hectares of mostly privately owned land. The nation has a history of a PES program that is supported by a 3.5% tax on gasoline and distributes roughly $25 million to 8,000 property owners. The extra finance brought in by the Carbon Fund will allow the program to expand.

Costa Rica and other countries with activities funded by the FCPF were guaranteed continued support this month when Norway, Germany and Finland announced new financial contributions amounting to about US $180 million. That brings the FCPF’s capitalization to US $650 million.

Majority of these new funds will be used for the FCPF’s Carbon Fund.

Additional resources

The Business Of Climate- Adaptation: Keeping It Fair

Climate change will disrupt the global economy in ways none of us really know, and companies that properly adapt to it will survive and perhaps even thrive. But the tools for profiting currently lie in the countries that created the mess – not those that will suffer. Here’s how the Higher Ground Foundation and others hope to level the playing field.

27 February 2013 | Farmers in the semi-arid area of India are struggling to survive as rains fail and soil erodes at an estimated 16.3 tons per hectare per year, according to Totally Pradeep, the Institutional Advisor at Samuha, an Indian non-governmental organization (NGO) focusing on health and environmental issues.

“It’s a game of dice,” he said during the webinar “Climate Adaptation: Urgencies and Opportunities for Business,” with the Higher Ground Foundation in October. “They go through each month without any idea of what it might bring.”

View the Webinar Here

Challenges and Opportunities

Realizing these communities’ vulnerabilities to climate, Pradeep saw an opportunity in working with Higher Ground, a nonprofit focused on financing climate adaptation projects in developing countries with funds from wealthy governments and businesses.

“The private sector is the biggest driver of growth in developing countries,” says Su-Lin Garbett-Shiels, Climate and Environment Advisor for the UK’s Department for International Development (DFID).

Higher Ground has developed a metric called the Vulnerability Reduction Credit (VRC) , which Pradeep and Sumaha hope to utilize. VRCs quantify climate-change induced vulnerabilities and facilitate climate adaptation. The tool factors in income and wealth of a subject community to determine the human vulnerability to climate impacts. Higher Ground plans for the credit to be available on a voluntary market where companies looking to fight climate change in the hardest hit areas will participate.

“The VRC is a tool that can prioritize and facilitate adaptation investments,” says Higher Ground Executive Chairman and co-founder Karl Schultz.

And such investments will become more and more critical as climate-change takes hold across the globe – with impacts that won’t be limited to one region or one sector. Last year’s flooding in Thailand, for example, threatened the world’s supply of hard disks and altered the entire electronic industry.

But Schultz says there are opportunities for the private sector when it comes to adapting to climate change.

“Higher Ground looks at the ways, whys and hows of climate adaptation finance and how they can support greater business action,” he says.

The Ways, Whys and Hows

Schultz says that spending on adaptation costs roughly $150 billion a year, and that figure is only expected to rise. In a poll given by Higher Ground on reasons why companies in developed countries would pay for climate adaptation in the developing world, 33% said supply chain risk reduction and 14% said for first mover advantage in adaptation.

In order for companies to stay competitive in the global market and meet the investment needs for adaptation, the Higher Ground Foundation suggests three broad types of tools that will be necessary-funding mechanisms, governance and capacity, and a metric that can compare across several sectors.

As of right now, the metrics have been at a national level and focus on input, like finance for training, rather than output and they come from public investment and overseas development assistance, Schultz says. These have been driven by public sector and large foundations with little involvement from the private sector.

And leveraging private finance is a fundamental part of funding mitigation and adaptation activities, which, Schultz, says, can come from the sale of VRCs. This will create a new revenue stream from the private sector.

In terms of governance and capacity, it’s a sign of progress that multi-lateral development banks are increasing their involvement with adaptation initiatives and the UNFCCC has developed the Adaptation Fund and the Green Climate Fund. Unfortunately many of the nations hit hardest by climate lack the capacity for adaptation. This is another problem Higher Ground hopes to fix with the market for VRCs, Schultz says, which will expand under a robust new framework for projects with many new players and hopefully lead to more investments and solutions for this issue.

Leveraging the Private Sector

A recurring question in the climate realm is that the impact of climate change is a societal risk rather than a threat to an individual and should be handled as so.

“But government doesn’t have a bottomless pocket,” says Jeremy Richardson, head of climate change and sustainability services at URS, an engineering firm. “So the next question is how to bring in the private sector.”

One of the imperatives for business is to protect their operations from climate impacts. But consequences of climate change to areas vital to business, such as water supplies, health and agriculture are likely to be severe, says Garbett-Shiels of DFID. The World Economic Forum’s (WEF) Global Risk 2013 report found water supply and food shortage crisis as well as rising greenhouse gas emissions were among the top five risks in the likelihood and impact section.

This gives the private sector another imperative to act-providing goods and services that will help communities adapt to climate impacts.

For example, Sunlabob, a Lao private commercial company, provides renewable energy to areas not yet on the public electricity grid. Sunlabob is a full service, profitable company and the energy it provides will create more climate resilient communities in the rural regions it services.

While cases like this reveal signs of progress, the private sector still faces many obstacles to adapting to climate change in the form of lacking capacity, awareness and policy.

“I think one of the things that make businesses nervous about climate change is the uncertainness,” says Richardson.

Although a company may understand the threat climate change poses, it might not know the extent of this threat and choosing what source of information to trust can be difficult. And businesses often lack the wherewithal to take a proactive stance in adapting to climate change while fiscal incentives aren’t available and government policies aren’t supportive.

“There’s obviously a line between what is the role of the private sector and what the public sector can do to incentivize more action,” says Garbett-Shiels.

She says both sectors have a role to play in financing climate adaptation. The private sector can’t be expected to finance adaptation alone, Garbett-Shiels says, but they are expected to cover the costs of climate impacts on private businesses. The public sector, however, should create policies that incentivize adaptation-friendly technology as well as a market for adaptation goods and services.

“The public sector should send the right signals to the private sector that adaptation is important,” says Garbett-Shiels.

The Pilot Program for Climate Resilience, (PPCR) which supports broad-based strategies to integrate climate risk into development planning, is one example of gathering all the necessary stakeholders together and encouraging private sector engagement.

Richardson notes the partner initiatives between the public and private sector offer opportunities for both sides in financing climate adaptation, where the risks are shared and a deep understanding of which sector should take on what risk is required.

“They are gathering a good body of evidence of how to set up these public private partnerships where risk is shared in a sensible way,” Richardson says.

The Case In India

For the risky situation in India’s semi-arid region, Samuha’s approach is centered on creating carbon neutral villages that combine climate mitigation and adaptation activities with heavy involvement from the local people.

“In the present-enviro-political scenario, our communities have the opportunity of continuing as the victims, dependent on government and civil society for their future, or become part of the solution,” Pradeep says.

Pradeep is seeking to use sustainable practices for farming reducing the climate impact on the land and people living there. For instance, biomass generation and rainwater harvesting could reduce the impact of farming on the land and lead to better crop yields.

Cookstove projects create the core of Samuha’s mitigation strategy. From there, Samuha can bring in other technologies like solar water heaters and LED lights. Samuha’s adaptation strategy is based on climate change interventions that the organization has had experience with like social welfare programs and sustainable agriculture practices.

By creating enterprises that focus on farm-gate procurement credits-or purchases at the net value of an agricultural product-and retail, along with the help of climate resources like VERs (Verified Emissions Reductions) and Higher Ground’s VRCs, Samuha plans to spur economic development. Capacity building and pilot projects will be done with grants adding to the region’s development.

There is an urgency to act, says Pradeep on climate, and there are opportunities that climate adaptation brings.

Community Carbon Pools Help
Vietnamese Villagers Get Ready For REDD+

Forest communities stand to benefit tremendously from REDD+, but only if tenure rights are incorporated into the decision-making process and benefits are shared across the community. That’s why Fauna & Flora International is piloting Community Carbon Pools across Asia. Here’s a look at how the program works in Vietnam.

This article was adapted from REDD+ In Vietnam: Integrating National and Subnational Approaches, which was published by Forest Trends and Climate Focus with support from several other organizations.

9 January 2013 | Despite having been identified as a Key Biodiversity Area (KBA) by the Vietnamese government, the Kon Plong district of Vietnam’s Kon Tum province continues to be categorized as a production forest, with unsustainable/illegal logging and conversion to other purposes. The district already contains several large dams and a large area of degraded forest has been lost to reservoir inundation.

It appears that without improved environmental governance in the area, this forest (and the link between existing protected areas and KBAs) will be further degraded and eventually lost.

For this reason, Fauna & Flora International (FFI) chose Kon Plong as the spot to pilot the Vietnam Component of our Developing Community Carbon Pools for REDD+ project. Other programs are being tested in the Philippines, Cambodia, and Indonesia as well.

The Region

Kon Tum Province in the Central Highlands region has 420,000 hectares of lowland and mountainous tropical forest, is rich in biodiversity and endemism, and has a mosaic of urban and peri‐urban settlements. The province has the highest percentage of ethnic minorities of any in the country and among the highest poverty rates.

The Kon Plong district is made up of 99% ethnic minorities, largely forest‐dependent peoples. Community forestry and REDD+ project activities target forest communities and the households with forestland the government allocated to them for a 50 year period as recipients. REDD+ carbon pools will be developed based on allocated forestland areas.

FFI aims to protect the High Conservation Value Forest (HCVF) found there while developing Community Forest Management (CFM).

The Project

Overall, the project has been designed to contribute to reducing deforestation and forest degradation through improved forest governance and the development of finance and incentive mechanisms that provide benefits to forest‐dependent local and indigenous people.

Specifically, the project is designed to connect with emerging national mechanisms around benefit sharing and MRV, as are being developed in Vietnam under UN‐REDD guidance. The project has been designed to build the capacity of local communities and governments to actively participate in REDD+ pilot projects and provide feedback on lessons learned for policy dialogues at sub‐national, national and regional levels.

The project will draw from practical local level experience and seek to influence national and regional policy responses to deforestation and forest degradation.

Integration Into A National System

In terms of policy, FFI and its partner, the Non Timber Forest Products ‐ Exchange Programme for South and Southeast Asia (NTFP‐EP) has conducted analytical studies on laws and policies related to community forestry and REDD+ in collaboration with environmental lawyers to provide on‐going legal advice on community carbon rights, permitting and licensing systems, and benefit/finance distribution mechanisms in Vietnam.

Supported by national lawyers, FFI will provide legal advice for the development of community forestry REDD+ policies and for the incorporation of social and environmental safeguards into the national and sub‐national REDD+ policy framework.

FFI will undertake socio‐economic studies to define opportunity costs and forest protection costs of local communities, and establish a socio‐economic baseline for the REDD+ pilot project at sub‐national level. Accordingly, an equitable benefit sharing distribution will be developed that will need to integrate into a national system. Mutual learning and sharing are expected to occur, as well as technical support among subnational and national projects through methodologies, training and short term consultancies.

As planned, national REDD+ Working Group and thematic REDD+ workshops are regarded as a platform for sharing important policy issues related to local stakeholder participation. At least two national policy workshops will be convened to introduce proposed REDD+ governance, benefit sharing, community rights and safeguard mechanisms. At a local level, several field visits to pilot projects will be held for national/subnational policy makers to engage local community groups.

Funding Sources

Based on VCS (Verified Carbon Standard) and CCB (Climate, Community and Biodiversity) market approach, FFI will facilitate REDD+ Payments for Ecosystem Services mechanisms for community forestry pilots through voluntary markets or fund‐based mechanisms to ensure the flow of financial resources to provide local benefits and sustainability. Based on existing relationships with potential high volume buyers and investors, FFI’s Environmental Markets team will provide site‐specific advice to facilitate engagement of appropriate third‐party carbon investors, brokers or buyers in the projects after the end of the EU‐funded action. This will facilitate community carbon pools’ access to markets or funds.

Approaches

R(E)L and project scenario models will be built from a range of data, including historical deforestation trends determined through a time‐series analysis using existing satellite imagery and predictive modeling of threats of human population expansion and present management zone designations. The analysis will generate statistically robust ‘avoided deforestation scenario forecasts’, based upon relevant social, environmental and economic data and trends, combined with carbon stock data from the forest.

FFI‐owned Standard Operational Procedure (SOP) for carbon accounting, already successfully tested in Indonesia and the Philippines, will be adapted consistently with emerging national guidelines. Local stakeholders will be provided with trainings and tools for developing participatory forest carbon inventory and monitoring techniques to qualify and quantify rates of deforestation and degradation.

A plan for ongoing monitoring of forest carbon stocks and land use change indicators will be developed, to demonstrate that the project is meeting deforestation reduction targets. Monitoring will include remote sensing and field sampling to measure forest recovery and the effectiveness of forest protection measures. Third party verification of MRV outputs will be undertaken of the monitored results.

Additional resources

Vietnam Goes For Flexibility In
Nested Approach To REDD+

Vietnam’sREDD+ National Action Plan gives it plenty of flexibility in designing a nested approach to REDD+, and a recent report looks at three pilot projects in Dien Bien Province, Kon Tum Province and Lam Dong Province. All demonstrate both the opportunities and complexities of REDD+.

This article was adapted from the report, REDD+ In Vietnam: Integrating National and Subnational Aproaches that was published by Forest Trends and Climate Focus with support from several other organizations.

7 January 2013 | The global community has landed on REDD as possibly one of the best strategies in halting deforestation and thus slowing global warming. But implementing this mechanism in individual countries has resulted in varying styles and approaches.

For instance, the small Southeast Asian nation of Vietnam is taking an aggressive stance in addressing climate change mitigation and adaptation, and has developed a REDD+ National Action Plan that set out key legal and institutional roles and priority actions.

Vietnam’s government supports a national framework for its ultimate domestic REDD+ approach, and is exploring the possibility of nested REDD+ approaches for establishing voluntary carbon markets, regulating REDD+ project‐based investments and maintaining environmental integrity.

A recently published paper from Forest Trends, Climate Focus, the Vietnam Administration of Forestry and Japan International Cooperation Agency, titled, “REDD+ in Vietnam: Integrating National and Subnational Approaches” provides background and preliminary information on applying a nested REDD+ approach in Vietnam. The report is based on the current understanding of how to integrate national and subnational approaches to REDD+.

The Nested Approach

Despite the significant progress made to date on reducing emissions from deforestation and degradation (REDD+) it is still unclear how a future REDD+ mechanism may be implemented in practice, and in particular how to design REDD+ to deliver ecosystem conservation and restoration in an economically efficient and socially sustainable way.

“Nested” approaches to REDD+ offer countries an opportunity to account for overall emission reductions and removals (ERRs) from REDD+ activities at the national level as well as at the level of nested subnational programs and/or projects within the national system. Nested approaches to REDD+ require consideration of approval, registration and review, substantive policy issues and carbon rights and crediting.

Although nesting can add considerable complexity in carbon accounting, risk‐sharing, and institutional arrangements, the advantages to nested approaches seem to outweigh this increased complexity. This is true especially as the UNFCCC discussions focus increasingly on accounting and performance at national levels and away from project‐level activities that have dominated voluntary carbon markets to date. Yet countries will benefit greatly by building on their project‐level capacity.

Issues and options like accounting, regulatory framework and incentives require special consideration in regard to nesting. In establishing incentives, governments will first need to figure out their options in terms of programs and project funding and what private and public sector finance sources are available. They will then have to decipher the best pathways for distributing this finance to appropriate recipients.

Accounting issues relevant to nested REDD+ can draw on the work of the Verified Carbon Standard (VCS) and its Jurisdictional and Nested REDD+ Initiative, which has provided guidance on establishing jurisdictional and nested reference emissions levels (RELs); monitoring, reporting, and verification (MRV); leakage; issuing credits and avoiding double counting; and accounting for reversals and forest loss.

Arguably the most complex of these issues is creating a jurisdiction‐wide R(E)L to incorporate smaller R(E)Ls such as those at project‐level, given the numerous factors that must be considered such as determining the boundary, scope and calculation of the R(E)L, creating rules on how to nest different scales and ensuring additionality.

While the UNFCCC has not established methodologies for setting R(E)Ls, Vietnam is working to adopt interim performance indicators in pilot provinces for each type of REDD+ activity to be implemented, which will be monitored and assessed at the provincial level. This includes calculation of “top‐down” jurisdiction‐wide R(E)Ls and smaller scale R(E)Ls- from a project or series of projects- or how it relates to projects developed after the jurisdiction‐wide R(E)L is set.

The Case in Vietnam

According to the report, the pilot subnational activities studied in Dien Bien Province, Kon Tum Province and Lam Dong Province demonstrate both the opportunities and complexities of REDD+. The study reads that Vietnam has considerable flexibility in designing a nested approach to REDD+ that can ensure integrity in environmental accounting and maximize financial flows for REDD+ activities and local stakeholder benefits.

Essential areas of work include the following:

  • • Clarifying the legal and regulatory framework regarding carbon rights and pilot project activities;
  • • Elaborating synergies between project and provincial‐level REDD+ activities;
  • • Elaborating the National REDD+ Action Plan; • Creating guidelines on safeguards and benefit‐sharing for pilot projects;
  • • Establishing principles for allocating ERRs; and
  • • Integrating currently available bi‐ and multi‐lateral funding schemes.

Vietnam is also working to establish a REDD+ National Forest Monitoring System (NFMS), to provide MRV for both REDD+ activity outcomes and mitigation performance, with the aim to reach an accuracy assessment that will bring Vietnam to report at the higher Tier 3 level, which will reduce uncertainty but increase the complexity and resources needed. Policy and regulatory considerations for nested REDD+ will depend on how nesting is designed and developed within Vietnam. If a national scheme is chosen, provinces could fall under the authority of the national system, or the national government could create institutions or systems tailored to that province.

Fortunately for Vietnam, the National REDD+ Action Plan supports the formation of carbon credit markets and encourages private sector participation in REDD+. The Constitution and laws in force in Vietnam appear to support legal land users owning carbon rights.

As Vietnam moves into Phase II, they will build provincial MRV capacities, implementation strategies and benefit distribution systems. Further Phase II work is focused on creating conditions for results‐based finance to flow into such provinces “nested” within the national framework.

More work, however, is needed on how accounting for results at different scales will be carried out and any different approaches or inconsistent findings reconciled.

Forests or Agriculture: Not Necessarily
An All Or Nothing Trade-Off

In order to measure the impact and success of climate change mitigation actions in terms of forestry and agriculture, researchers at CIFOR first weigh three options- the potential of emissions reductions, economic risks and implementation expenses. They find the best mitigation action is an integrated approach between land-use, land-use change and forestry.

This article was originally published on the CIFOR (Center for International Forestry Research) website. Click here to read the original.

31 December 2012 BOGOR Indonesia | Making informed decisions on how to reduce carbon emissions from forestry and agriculture requires some solid knowledge about potential tradeoffs between development and conservation objectives: what you manage to win through avoided deforestation or reduced cropping emissions has to be weighed against possible farm income losses when first-best farming strategies have to be sacrificed.

Forest conservation climate mitigation strategies typically involve creating areas where trees are protected. Activities in these areas, such as crop expansion or logging, are restricted or prohibited, so trees are left standing.

Making sure there are trees in the landscape is a definite game changer when it comes to assessing the costs and benefits of different types of land-use strategies for reducing emissions and mitigating climate change. On a per-hectare basis, preserving threatened Amazonian forests provides an exceptionally high mitigation benefit according to a recent CIFOR study.

However, this does not mean that agriculture has no mitigation potential.

Low-cost technological alternatives to conventional agriculture and extensive cattle ranching do exist in the Amazon. For instance, no-till farming, a way of growing crops without mechanically overturning the soil is a now widespread alternative to conventional farming. No-till farming can help maintaining soil fertility and reduce greenhouse gas emissions from biological processes in agricultural soils.

However, while avoiding deforestation and conserving forests can result in substantial emissions reduction, such benefits must be weighed against the possible economic losses of sacrificing income from agriculture. Finding the optimal tradeoff of conserving forests versus developing land for agriculture will therefore be instrumental in ensuring the best use of scarce resources.

Yet, adopting new technologies often requires new skill sets, and improved access to credit or markets, and may expose farmers to risks. That is unattractive for many Amazon smallholders, and explains why they are often hesitant to adopt these techniques, even if research suggests that the profits, on average, are increasing.

Ideal Features of Climate Change Mitigation Options

There are several criteria we considered when looking to invest in different climate mitigation options.

First, the potential for emissions reduction should be high. Second, the risks of economic failure to the land user should preferably be low. Third, implementing the option should be cheap. And finally, any negative knock-on effects have to be contained.

In practice, none of the available options for mitigating climate change scores highly on all four features. A compromise has to be struck that takes into account the pros and cons of both forestry and agriculture to achieve an integrated reduction in emissions from land use, land-use change and forestry (LULUCF).

This can only be achieved if land-use mitigation strategies take into account the different local environmental, social and political contexts. The aforementioned study has shown how different factors can hamper forest conservation and agriculture mitigation efforts, respectively, reducing the kind of benefits that can be achieved.

For instance, while forest-based mitigation strategies can be implemented more easily than getting farmers to adopt new farming practices, in some contexts poor governance and conflicting claims over land as a result of unclear tenure can reduce the effectiveness of forest conservation in lowering carbon emissions. Here, agricultural reforms could eventually be more interesting.

When choosing between forest conservation and agriculture, the hidden costs associated with forest conservation must be weighed against the potentially high operational and transaction costs of promoting agricultural change through extension programs and infrastructure investments, at often relatively low mitigation benefits per unit of land.

Moreover, promoting agricultural change bears the risk of undesired “spillover effects” such as crop or pasture expansion into forest areas, thus neutralizing the potential mitigation benefits from adopting such technologies.

CIFOR’s and others’ research on deforestation, REDD, and agricultural technologies has shown that these side effects are not only possible, but probable – and thus, at the very least, need to be accounted for. Our scoping attempt reconfirms the prime mitigation potential of trees and forests, but also recommends a fine-tuning of parallel strategies for Amazon frontier forests and established agricultural regions.

This new publication is part of the CGIAR research program on Forests, Trees and Agroforestry.

Additional resources

Carbon Finance Unit Of The World Bank Sees Initiatives Move Forward

The World Bank received good news recently with several of its climate initiatives moving into new phases starting with the first PoA in China to issue CERs along with 3,000 hectares of a valuable watershed reforested. Meanwhile, Costa Rica becomes the first country to access performance based payments through the Carbon Fund and developed nations funnel more funds toward the FCPF.

24 January 2013 | As China’s economy evolved and it experienced a period of rapid industrialization, the nation’s environmental problems grew right along with it. Water scarcity and strangling pollution constantly plague the world’s most populous country. But in recent years China is engaging in climate mitigation and adaptation programs to address these problems and the progress they have made is starting to show.

This year, China was able to announce their China Power Sector Transformer Efficiency Program, a PoA (Programme of Activity) under the Clean Development Mechanism (CDM), has issued CERs (Certified Emission Reductions). The program has led to the retirement of 37,000 inefficient power distribution transformers mitigating emissions from the power industry. And with more companies adopting energy efficient transformers, emissions will continue to shrink.

Late last year, China’s Facilitating Reforestation for Guangxi Watershed Management in Pearl River Basin Project issued carbon credits under the CDM. This was the first reforestation project in the world to be registered under the UNFCCC (United Nations Framework Convention on Climate Change).

The Guangxi watershed is one of the most diverse regions for flora in China, but since the 1950s the watershed has struggled with deforestation from fires, grazing and fuel-wood among other reasons. The Guzngxi project has reforested 3,000 hectares with farms in the region practicing conservation. The farms increase biodiversity by improving the habitats and control water erosion along the Pearl River.

The local communities also benefit from the sale of carbon sequestered in the trees. The carbon credits are sold to the World Bank’s BioCarbon Fund as well as products like resin.

The BioCarbon Fund, along with the Forest Carbon Partnership Facility (FCPF) is administered by the World Bank enabling the financial institution to fund projects worldwide that reduce carbon emissions, conserve biodiversity and alleviate poverty.

Outside of China, Costa Rica is also helping move the World Bank into a new phase of carbon finance. The nation is set to become the first country to access performance-based payments through the FCPF’s Carbon Fund. This is the first national program supported by the Carbon Fund-a part of FCPF that supplies countries with payments based on verification of emission reductions from large-scale projects. Costa Rica seeks to be the world’s first ‘carbon neutral’ country and using Payments for Ecosystem Services (PES) to keep carbon locked in trees by keeping forests standing is one part of achieving this goal.

Costa Rica’s proposal would reduce carbon emissions by 29.5 million tons by reforesting and conserving 341,000 hectares of mostly privately owned land. The nation has a history of a PES program that is supported by a 3.5% tax on gasoline and distributes roughly $25 million to 8,000 property owners. The extra finance brought in by the Carbon Fund will allow the program to expand.

Costa Rica and other countries with activities funded by the FCPF were guaranteed continued support this month when Norway, Germany and Finland announced new financial contributions amounting to about US $180 million. That brings the FCPF’s capitalization to US $650 million.

Majority of these new funds will be used for the FCPF’s Carbon Fund.

Additional resources

Powerful Forest Friends Deliver Indonesian Approval of Landmark REDD Project

The Rimba Raya REDD Project is on again – one year after being put on ice when Indonesia’s Ministry of Forestry promised half the project’s territory to a palm oil company. That decision has now been reversed, and the project is set to preserve an orangutan habitat the size of Singapore, generating millions of dollars in carbon income for local communities along the way.

6 December 2012 | Doha | Qatar | It was a fitting end to a topsy-turvy year for Todd Lemons and Jim Procanik.   As co-directors of carbon project developer InfiniteEARTH, they spearheaded the Rimba Raya Biodiversity Reserve REDD Project, a ground-breaking endeavor that will conserve 80,000 hectares of rainforest and generate 104 million credits over 30 years and was finally green-lighted last week. The announcement became official at climate talks here, a little more than a year after the Ministry of Forestry said it was giving half the project’s territory to a palm oil company.

Reuters credits the Ministry of Forestry’s reversal to intervention by Singapore-based businessman Rusmin Widjaja, Central Kalimantan governor A. Teras Narang, and Triwatty Marciano, whose husband, Marciano Norma, heads Indonesia’s State Intelligence Agency.

Whatever its cause, the decision could keep tons of carbon locked in peat swamps while habitat for one of the world’s last wild orangutan populations will remain undisturbed.

The Project

Rimba Raya is the world’s first REDD project on deep peat and Indonesia’s first REDD project and could funnel billions of dollars into community development projects that provide access to clean water, childhood development, health services, reforestation and eco-tourism.    

It’s located in the tropical peat swamp forest on the island of Borneo in Central Kalimantan province in Indonesia – a country with the highest rate of deforestation in the world, according to the 2008 and 2009 Guinness Book of World Records, although Yuyu Rahayu, the Ministry of Forestry’s Director of Forest Resources Inventory and Monitoring, speaking at a side event here last night, said that deforestation has plunged dramatically in the last three years, and that the country was on track to reduce its deforestation rate by 26%. Central Kalimantan has the world’s fastest rate of forest conversion to palm oil plantations, says Indonesia Forest Watch.

The Biodiversity Reserve also houses six species of endangered mammals-one of those being the orangutan.

Saving Indonesia’s forests are crucial to fighting climate change. Its forests and peat swamps release huge amounts of carbon when they are cleared and drained.            

“I am happy with the work progress in Jakarta and soon enough we can focus on the important work of community development and orangutan habitat conservation in the Rimba Raya project area,” says Procanik.

“Rimba Raya represents the hope and future of an entire species,” says Dr. Biruté Mary Galdikas, the ounder of the Orangutan Foundation International. “Once the Minister signs the decree, Rimba Raya will be one of the most important orangutan conservation projects in the world.”

The area is also home to hundreds of threatened and endangered species of flora and fauna.

Long Road to Success

In 2010, Rimba Raya had hit several milestones. It was verified and validated under the VCS (Verified Carbon Standard) and the CCBA (Climate Community and Biodiversity Alliance), was the first project to develop a REDD methodology and was on track to become the first REDD project to issue credits. The energy giant, Gazprom, invested in the Rimba Raya project saying they had buyers lined up while both Indonesia’s president and the governor of Central Kalimantan endorsed it.

But the Ministry of Forestry unexpectedly said it was giving almost half of the project’s territory to PT Best Group for palm oil development in 2011. Shortly afterwards, Indonesia’s Corruption Eradication Commission was sent to investigate the concession process.

The Ministry said it was skeptical of InfiniteEARTH’s economic development projections, and it argued that the financial benefits of converting forests into palm oil plantations and other development projects outweighed payments for ecosystem services, like water filtration and carbon storage, they would receive if the forests were left intact.

“Mutual friends, that both parties trust, have facilitated a dialog between our two companies and we now understand that Rimba Raya and its developers, InfiniteEARTH,represent a new breed of conservationists that recognize Indonesia’s right to develop its natural resources,” says Winarto Tjajadi, who runs PT Best along with his brother.

InfiniteEARTH said in a statement the Rimba Raya Biodiversity Reserve is a benchmark for everything REDD can accomplish and Indonesia has now cleared the way for that to happen.

“Every day we borrow from our children’s future by consuming more than we replenish and by not paying for valuable ecosystem services,” says Todd Lemons. “Four years ago, I promised my children more than just a ‘carbon neutral’ and ‘sustainable’ future. I intend to deliver on that promise and I intend to repay that debt.”

Additional resources

Can Micronesia Save Its
Reefs By Fixing Its Ridges?

Micronesia’s 2,100 islands and atolls are mere specs on the ocean upon which they depend, but activities on land are destroying the marine habitat that supports them. That’s prompted several environmental organizations to ask whether payments for ecosystem services can promote harmony among competing interests on land, sea, and stream.

29 November 2012 | People across the western Pacific archipelagos of Polynesia, Micronesia, and Melanesia have long enjoyed the sedating effects of a leafy plant called sakau. Beverages made from the root are said to keep people mellow without putting them to sleep, but the plant’s cultivation has taken a toll on the land.

“It’s not super-intensive farming, but sakau doesn’t hold the soil to the same degree as the undergrowth it replaces,” says Steven Victor, a region-wide planner for The Nature Conservancy (TNC). “From the air it looks like old growth forest, but it’s gone underneath.”

And where it’s gone is into streams and tributaries, in the form of sediment and excess fertilizer. From there, it seeped into mangrove forests and sea-grass beds before leeching out into the ocean and suffocating coral reefs.

Sick reefs mean fewer fish than just a few years ago, and that means smaller catches for local fishermen, who move further out to sea in search of prey. As fishing nets go empty, the islands have turned to tourism – which brings new roads and glittering new seaside hotels that add human waste to the mix and threaten to accelerate the degradation of the sea.

But the tourist trade also brings deep pockets that may contain the seeds of a solution.

The Micronesia Challenge

In 2006, the Micronesia Conservation Trust (MCT) lauched its “Micronesia Challenge” – a call on governments, agencies, and NGOs across the region to protect at least 30% of Micronesia’s coastal areas and 20% of its forest by 2020.

In an effort to achieve that goal, organizers asked TNC to provide both project and financing expertise and enlisted the Conservation Strategy Fund (CSF) to provide training for local authorities in setting economic parameters for conservation and measuring their results. Also on board is Rare Conservation, which creates the grassroots campaigns that are being deployed by local authorities to raise awareness and change behaviors.

The consortium has been examining the interacting economies and ecosystems of these islands to see if payments for watershed services (PES) could be used to build support for watershed and marine protection.

Such programs generally funnel money from users and polluters to conservation efforts, but this one has a serious flaw: namely, the farmers who are causing much of the damage are also the fishermen who suffer the most from it.

Who Will Pay – and Why?

Umiich Sengebau says the solution to Micronesia’s problem lies in education, which he hopes the tourism sector will find it worth investing in. After all, tourists are also looking for pristine waters and lovely coral reefs.

“There’s a need to raise awareness that what happens on a property can increase soil erosion,” says Sengebau, who is TNC’s deputy director for conservation and is based in Palau. “It’s about teaching techniques they can use in conjunction with the sorts of farming they are doing that can limit soil erosion.”

One group that might be willing to pay is Exhibit and Travel Group (ETG), a private entity headquartered in Chengdu, China. The company wants to build up to 10 hotels with a combined 4,000 guest rooms and 10,000 jobs on the island of Yap by the year 2015.

But the development might also contribute to sedimentation, and the government of Yap has yet to sign off. MCT and its partners are toying with the idea of proposing surcharges on utility bills and annual fees for sediment mitigation.

MCT and its partners have also looked outward, to commercial fishing fleets, and are investigating the possibility of placing surcharges on the fishing rights that governments and protectorates sell to commercial fleets.

None of the ideas have moved beyond the drawing board.

“Adding a few cents to the water bill doesn’t produce a good chunk of money,” says MCT director William Kostka. “And introducing the size of fees that would [produce a sizeable pool] might create a situation where people are over-taxed.”

As a result, MCT and the local partners it supports are drawing on expertise from a coterie of agencies active in the region. Their work is occurring in realms as diverse as funding-source sustainability, land-use planning in areas not embraced by the Micronesia Challenge conservation drive, delineation of ownership rights, and setting data parameters for measurement of the effects both of sedimentation from upland runoff and of efforts to mitigate it.

“We certainly don’t want to give up the idea [of PES],” says Kostka. “But we have to be careful not to push forward with something that does more harm than good.”

Building a Program

“Our goal is to identify what it takes to create programs that can be sustainably financed and then to get funding for those initiatives, including sedimentation prevention,” says Trina Leberer, TNC’s Guam-based Micronesia program director. “Monitoring is a big role, in terms of providing tools and expertise in measuring the overarching trends in general and effectiveness of management in particular.”

Given the multifaceted nature of both the agencies and the region’s logistics and cultural demands, work to devise solutions to reef sedimentation is progressing on several fronts. They include creating an endowment to supplement funds devoted annually to conservation by national governments and from the US, via it protectorates: Guam and the Northern Mariana Islands. Government sources and private donors continue to seed various endowment sub-accounts, which stand at around $10.5 million.

However, Leberer estimates that an endowment of around six times that size is necessary to generate the interest income to fully support local projects. And adds that $20 million is required annually if authorities across the five jurisdictions that comprise the region are to meet their conservation targets.

Hence, the near-term goal is to develop and implement models and programs that enfranchise locals in planning and decision-making when it comes to watershed management. By doing so, participants say, they will effect the sorts of behavior changes that are critical to long-term success.

At project level, TNC is working to create watershed alliances that shift responsibility for management from national boards and bodies to local residents. The group has helped to underwrite an information exchange that is aimed at implementing models used elsewhere in the Pacific and in Latin America.

Representatives from the California-based CSF, which in March conducted two weeks of course work aimed at providing the sort of referential framework in terms of definitions and base concepts that is necessary to collectivizing the efforts of a broad range of stakeholders. They see linking payments to future developments as one means of making conservation programs sustainable.

Education Works

Through the training program, CSF hopes to use its record of success to push for PES.

“The commitment and awareness of the importance of these activities to their communities is evident,” Kim Bonine, CSF’s training director, says of those she taught during the classes in March. “They may have had little previous exposure to economics, but this provides an opportunity for them to use these new skills and approaches to have a big impact in support of conservation, particularly in this region, where there are fewer actors involved.”

And US-based Rare Conservation is working within the framework of the Micronesia Challenge to support efforts by local groups to forge solutions that are best suited to the constraints of small populations and shallow pools of funds for conservation. At present, Rare is working at 11 sites, four of them land-focused, to promote the awareness of just how in activity in the watershed affects marine protected areas.

“The goal is to give the alliances tangible activity that they can get behind,” says Matt Lutkenhouse, a regional director at Rare Conservation in Arlington. “Sedimentation also is a problem with the marine protected areas that have been created in places like the Philippines. So, development of a PES-type solution is something that could be applied there, as well.”

The results from feasibility studies at several sites are expected at the turn of the year, as is a master plan from ETG that government officials in Yap have requested prior to voting on the hotel project’s approval. In addition to the empanelling of watershed alliances and Rare Conservation’s campaigns within the Micronesia Challenge , they will provide what the MCT hopes is a framework for establishing the PES-type compensation arrangements that make planned conservation sustainable.

Different Islands, Different Drivers

The challenge is daunting, in part because every island is different. In Palau, for example, a US-sponsored road built to ring Babeldaob significantly degraded marine habitats. And the effect of opening new areas of the island to development since the 50-mile circuit was completed in 2006 means the run-off from construction and agriculture poses a continued threat.

Meanwhile, Pohnpei has lost70% loss of its native forests over the last three decades thanks to growth in both population and in the popularity of sakau. Along with sedimentary run-off, the area’s coastal waters have declined in quality thanks to organic and untreated human and animal waste.

“There’s a lot of groundwork that needs to be done,” says TNC’s Victor. “Here in Palau, there’s a hydro-electric utility. And there’s a feasibility study underway looking at whether there’s a fee tolerance for upland protection among the locals. But that’s a first step in seeing whether conventional PES systems might work in the region.”

Tapping Existing Funds

Funding for the activities to-date have come from a variety of sources, including national government contributions to endowments for the Micronesia Challenge, matching funds from NGOs like TNC, donations from foundations like the Global Environment Facility, and from businesses and private citizens.

TNC’s Leberer says as much as $58m is necessary to produce the kind of returns from interest and investment that would supplement other recurrent sources and make funding sustainable for marine and upland protection and management. That’s where PES comes in.

“We need to be creative in helping our local partners find additional sources of funding to fully capitalize the endowment,” she says, noting avenues such as applying a tourist tax in places like Guam, which draws 1.3 million visitors a year, also are being explored. “There are not big pots of money here, so we need to cobble together grants and donations in addition to what the governments provide on an annual basis and make it work that way.”

Community Carbon Pools Help Vietnamese Villagers Get Ready For REDD+

Forest communities stand to benefit tremendously from REDD+, but only if tenure rights are incorporated into the decision-making process and benefits are shared across the community. That’s why Fauna & Flora International is piloting Community Carbon Pools across Asia. Here’s a look at how the program works in Vietnam.

This article was adapted from REDD+ In Vietnam: Integrating National and Subnational Approaches, which was published by Forest Trends and Climate Focus with support from several other organizations.

9 January 2013 | Despite having been identified as a Key Biodiversity Area (KBA) by the Vietnamese government, the Kon Plong district of Vietnam’s Kon Tum province continues to be categorized as a production forest, with unsustainable/illegal logging and conversion to other purposes. The district already contains several large dams and a large area of degraded forest has been lost to reservoir inundation.

It appears that without improved environmental governance in the area, this forest (and the link between existing protected areas and KBAs) will be further degraded and eventually lost.

For this reason, Fauna & Flora International (FFI) chose Kon Plong as the spot to pilot the Vietnam Component of our Developing Community Carbon Pools for REDD+ project. Other programs are being tested in the Philippines, Cambodia, and Indonesia as well.

The Region

Kon Tum Province in the Central Highlands region has 420,000 hectares of lowland and mountainous tropical forest, is rich in biodiversity and endemism, and has a mosaic of urban and peri‐urban settlements. The province has the highest percentage of ethnic minorities of any in the country and among the highest poverty rates.

The Kon Plong district is made up of 99% ethnic minorities, largely forest‐dependent peoples. Community forestry and REDD+ project activities target forest communities and the households with forestland the government allocated to them for a 50 year period as recipients. REDD+ carbon pools will be developed based on allocated forestland areas.

FFI aims to protect the High Conservation Value Forest (HCVF) found there while developing Community Forest Management (CFM).

The Project

Overall, the project has been designed to contribute to reducing deforestation and forest degradation through improved forest governance and the development of finance and incentive mechanisms that provide benefits to forest‐dependent local and indigenous people.

Specifically, the project is designed to connect with emerging national mechanisms around benefit sharing and MRV, as are being developed in Vietnam under UN‐REDD guidance. The project has been designed to build the capacity of local communities and governments to actively participate in REDD+ pilot projects and provide feedback on lessons learned for policy dialogues at sub‐national, national and regional levels.

The project will draw from practical local level experience and seek to influence national and regional policy responses to deforestation and forest degradation.

Integration Into A National System

In terms of policy, FFI and its partner, the Non Timber Forest Products ‐ Exchange Programme for South and Southeast Asia (NTFP‐EP) has conducted analytical studies on laws and policies related to community forestry and REDD+ in collaboration with environmental lawyers to provide on‐going legal advice on community carbon rights, permitting and licensing systems, and benefit/finance distribution mechanisms in Vietnam.

Supported by national lawyers, FFI will provide legal advice for the development of community forestry REDD+ policies and for the incorporation of social and environmental safeguards into the national and sub‐national REDD+ policy framework.

FFI will undertake socio‐economic studies to define opportunity costs and forest protection costs of local communities, and establish a socio‐economic baseline for the REDD+ pilot project at sub‐national level. Accordingly, an equitable benefit sharing distribution will be developed that will need to integrate into a national system. Mutual learning and sharing are expected to occur, as well as technical support among subnational and national projects through methodologies, training and short term consultancies.

As planned, national REDD+ Working Group and thematic REDD+ workshops are regarded as a platform for sharing important policy issues related to local stakeholder participation. At least two national policy workshops will be convened to introduce proposed REDD+ governance, benefit sharing, community rights and safeguard mechanisms. At a local level, several field visits to pilot projects will be held for national/subnational policy makers to engage local community groups.

Funding Sources

Based on VCS (Verified Carbon Standard) and CCB (Climate, Community and Biodiversity) market approach, FFI will facilitate REDD+ Payments for Ecosystem Services mechanisms for community forestry pilots through voluntary markets or fund‐based mechanisms to ensure the flow of financial resources to provide local benefits and sustainability. Based on existing relationships with potential high volume buyers and investors, FFI’s Environmental Markets team will provide site‐specific advice to facilitate engagement of appropriate third‐party carbon investors, brokers or buyers in the projects after the end of the EU‐funded action. This will facilitate community carbon pools’ access to markets or funds.

Approaches

R(E)L and project scenario models will be built from a range of data, including historical deforestation trends determined through a time‐series analysis using existing satellite imagery and predictive modeling of threats of human population expansion and present management zone designations. The analysis will generate statistically robust ‘avoided deforestation scenario forecasts’, based upon relevant social, environmental and economic data and trends, combined with carbon stock data from the forest.

FFI‐owned Standard Operational Procedure (SOP) for carbon accounting, already successfully tested in Indonesia and the Philippines, will be adapted consistently with emerging national guidelines. Local stakeholders will be provided with trainings and tools for developing participatory forest carbon inventory and monitoring techniques to qualify and quantify rates of deforestation and degradation.

A plan for ongoing monitoring of forest carbon stocks and land use change indicators will be developed, to demonstrate that the project is meeting deforestation reduction targets. Monitoring will include remote sensing and field sampling to measure forest recovery and the effectiveness of forest protection measures. Third party verification of MRV outputs will be undertaken of the monitored results.

Additional resources

Ecosystem Marketplace Guide To Doha Side Events

As our Ecosystem Marketplace team prepares to join the (albeit downsized) mass of avid climate talk followers to Doha, we set out to find the “must attend” events – and bring them to you. Take a look below for our hand-picked list of promising events during COP 18, including where and when you can find the Forest Trends team in action!

26 November 2012 | Doha | Qatar | The 18th Conference of the Parties (COP 18) to the United Nations Framework Convention on Climate Change (UNFCCC) begins Monday in Doha, Qatar. Here is a look at some of the side events we will be participating in and covering.

FIRST UP: ECOSYSTEM MARKETPLACE EVENTS
IETA side events at COP 18, Nov. 29th:  
Ecosystem Marketplace will participate in the panel  Climate Leadership and Future Trends for Voluntary Carbon Markets, where Carbon Programs manager Molly Peters-Stanley will moderate the session, joined by panelists from the Gold Standard, American Carbon Registry, The CarbonNeutral Company and ClimateCare. The event is one of many taking place during the International Emissions Trading Association’s side event program. It will take place at Doha’s Diplomatic Club from 10:45am-12pm, when panelists will evaluate the progress voluntary markets have undergone in the last twelve months and discuss future global trends for voluntary offsetting demand.  
   
Forest Day 6, Sunday, Dec. 2nd:  
Ecosystem Marketplace and parent organization Forest Trends will table at Forest Day where the team will be on hand to discuss our new REDD+ Finance Tracking Initiative, the latest State of the Forest Carbon Markets report and other Forest Trends initiatives. Stop by, say “hi” and give us your feedback on our soon-to-launch REDD+ finance portal!
 
IETA side events at COP 18, Dec. 4th:  
Ecosystem Marketplace along with co-organizers the International Emissions Trading Association (IETA) and Climate Markets and Investors Association (CMIA) will host the 3rd International Voluntary and Compliance Carbon Markets Assembly at 9:00-10:30AM at Doha’s Diplomatic Club. We will present preliminary findings from our 2nd survey of emerging domestic carbon programs, and hear reactions from country representatives from Thailand, Japan, Peru, Australia and others. Read more here and RSVP here.  
 
Following this event, Ecosystem Marketplace’s Molly Peters-Stanley will also moderate a session, How to stimulate and scale up private sector demand for forest carbon credits in an increasing carbon market patchwork?, hosted by the Forest Carbon Group from 1:30-2:45PM.

AND ON TO OTHER EVENTS:

What does Doha and the Durban Platform need to do about REDD & LULUCF
November 27/ 3:00-4:30PM/  Qatar National Convention Centre  Side Events Room 6
Global Witness Limited, Environmental Investigation Agency (EIA), Rainforest Foundation Norway (RFN) and Rainforest Foundation UK (RFUK)
To start off, we’ll begin at an official UNFCCC side event. This quality group of organizations will bring together experts to discuss how forest protection can move forward under a new climate agreement, including what’s still left do to for REDD.  
Mobilizing Private-Sector Finance for REDD+: Innovative Partnerships for Scaling up Investment
November 29/ 3:00-4:30PM/  Qatar National Convention Centre  Side Events Room 6
Conservation International (CI), Verified Carbon Standard Association (VCSA)
This event will present examples of how the private sector is working with governments and civil society, using best-practices, including jurisdictional VCS, to invest in and scale up REDD+ for regional, national and global impact.  
 
What does it take to achieve pro-poor REDD+?
November 29/ 4:00-5:30PM/ Gokulam Park Hotel, Al Aaliya St
International Institute for Environment and Development (IIED)
In this session, IIED will focus on the challenges surrounding the equitable distribution of costs and benefits and how REDD+ governance will improve the livelihoods of forest-dependent communities. If you’re a national-level REDD+ negotiator or NGO representative with a pilot REDD+ project, this one might be of particular interest to you!
 
The Private Sector and How it Interacts in REDD+
November 29/ 9:00-10:15AM/ Diplomatic Club, Roshana Hall 2
International Emissions Trading Association (IETA), International Institute for Sustainable Development (IISD), ASB Partnership for the Tropical Forest Margins
This even will present the findings of IISD and ASB’s 3-year REDD+ capacity-building initiative using the REDD+ supply chain as an analytical framework. It will draw together government and private sector stakeholders to provide commentary on what is needed to further scale-up private sector investment in REDD+.
 
The Business Partnership for Market Readiness (B-PMR): An Open Q&A between IETA and the World Bank PMR Secretariat  
November 29/ 10:45-12:00PM/ Diplomatic Club, Roshana Hall 1
International Emissions Trading Association (IETA)
This open discussion with IETA’s President and CEO Dirk Forrister and officials from the World Bank will discuss the B-PMR and how IETA members can engage. It will also be an opportunity to learn more about activities in the 16 PMR implementing countries from the World Bank’s PMR Secretariat.  
 
IETA Side Events at COP18  
November 29 & December 4/ 9:00AM-6:00PM/ Diplomatic Club
International Emissions Trading Association (IETA)
COICA Side Events at COP 18
November 29-December 7/ Times vary/ Qatar National Convention Centre
Coorinator of Indigenous Organizations of the Amazon River Basin
An Amazonian delegation from the 9 countries in the basin will participate in COP 18 to present their proposal for Amazonian Indigenous REDD+ through several discussions spread through both weeks of COP 18.
 
IETA and World Business Council for Sustainable Development (WBCSD) Evening Reception: Taking Stock on New Market Mechanisms  
November 29/ 6:30-8:30PM/ Science and Technology Park
International Emissions Trading Association (IETA)
Mobilizing LULUCF in the Post-Kyoto Framework
November 30/ 8:15-9:45PM/ Qatar National Convention Centre Side Event Room 8
Swedish University of Agricultural Sciences (SLU)
The discussion in this event will mainly focus on whether the Durban agreement can adequately mobilize LULUCF in a post-Kyoto framework, partly through the efficient  and balanced use of forest-based resources.
 
World Climate Summit 2012
December 2/ 8:00AM-7:00PM/ Ritz-Carlton Doha
World Climate Limited
The WCS promises to be one of the most prominent annual events, bringing in leaders from government, finance and business to speed up solutions to climate change.  
 
Forest Day 6
December 2/ 8:00AM-9:00PM/ Renaissance Doha City Center Hotel
CIFOR
This event has been a favorite among forest carbon followers each year! This year’s theme “Living Landscapes” aims at recognizing the links between forestry and agriculture. The event will inform participants on possible steps forward on REDD+, social and environmental benefits, long-term financing and many other topics of interest.  
 
Agriculture, Landscapes and Livelihoods Day 5
December 3/ 8:00AM-5:30PM/ Renaissance Doha City Center Hotel
CGIAR, CTA, Food, Agriculture and Natural Resources Policy Analysis Network (FANPRAN), World Bank
Part two of the “Living Landscapes” banner hopes to provide an opportunity for the natural resource and ag community to exchange solutions for climate change adaptation and mitigation.  
 
Land-use Drivers Presentation at UCS Workshop: Achieving development and addressing the drivers of land use change
December 3/ 8:15PM-9:45PM/ Side Event Room 4, Qatar National Convention Centre
Union of Concerned Scientist
Rainforest Alliance will contribute their experiences with the forest certification process and thoughts on connections with REDD+ as the workshop explores land-use change drivers.
 
How to stimulate and scale-up private sector demand for forest carbon credits in an increasing carbon market patchwork?
December 4/ 1:30-2:45PM/ Diplomatic Club, Roshana Hall 2
IETA, Ecosystem Restoration Associates (ERA), Forest Carbon Group (FCG)
This session will outline the landscape of forest based projects and how it is expected to grow in the future. Discussions will focus on what the current situation suggests for the future of REDD+, the potential impact of private sector initiatives, and the role public institutions can play in raising private sector interest.  

Climate Finance Readiness & Effectiveness: Voices and Experiences from Latin America
December 4/ 5:00-7:00PM/ School of Foreign Services, Georgetown University
Swiss Agency for Development & Cooperation, UNDP, The Nature Conservancy
This side event is a testament to the ongoing collaboration among this Region’s countries, represented in this case by the Governments of Colombia, El Salvador and Peru, which have come together to share and exchange practice-proven solutions with the international community on their in-country developments on institutional arrangements and financial instruments for climate finance readiness and effectiveness.

 
 
We hope you will find our selected events will be to your liking! The Ecosystem Marketplace team wishes all those Doha-bound the best of luck navigating those panels, workshops, negations, etc. We’ll see you there!

 

 

Vietnam Goes For Flexibility In Nested Approach To REDD+

Vietnam’sREDD+ National Action Plan gives it plenty of flexibility in designing a nested approach to REDD+, and a recent report looks at three pilot projects in Dien Bien Province, Kon Tum Province and Lam Dong Province. All demonstrate both the opportunities and complexities of REDD+.

This article was adapted from the report, REDD+ In Vietnam: Integrating National and Subnational Aproaches that was published by Forest Trends and Climate Focus with support from several other organizations.

7 January 2013 | The global community has landed on REDD as possibly one of the best strategies in halting deforestation and thus slowing global warming. But implementing this mechanism in individual countries has resulted in varying styles and approaches.

For instance, the small Southeast Asian nation of Vietnam is taking an aggressive stance in addressing climate change mitigation and adaptation, and has developed a REDD+ National Action Plan that set out key legal and institutional roles and priority actions.

Vietnam’s government supports a national framework for its ultimate domestic REDD+ approach, and is exploring the possibility of nested REDD+ approaches for establishing voluntary carbon markets, regulating REDD+ project‐based investments and maintaining environmental integrity.

A recently published paper from Forest Trends, Climate Focus, the Vietnam Administration of Forestry and Japan International Cooperation Agency, titled, “REDD+ in Vietnam: Integrating National and Subnational Approaches” provides background and preliminary information on applying a nested REDD+ approach in Vietnam. The report is based on the current understanding of how to integrate national and subnational approaches to REDD+.

The Nested Approach

Despite the significant progress made to date on reducing emissions from deforestation and degradation (REDD+) it is still unclear how a future REDD+ mechanism may be implemented in practice, and in particular how to design REDD+ to deliver ecosystem conservation and restoration in an economically efficient and socially sustainable way.

“Nested” approaches to REDD+ offer countries an opportunity to account for overall emission reductions and removals (ERRs) from REDD+ activities at the national level as well as at the level of nested subnational programs and/or projects within the national system. Nested approaches to REDD+ require consideration of approval, registration and review, substantive policy issues and carbon rights and crediting.

Although nesting can add considerable complexity in carbon accounting, risk‐sharing, and institutional arrangements, the advantages to nested approaches seem to outweigh this increased complexity. This is true especially as the UNFCCC discussions focus increasingly on accounting and performance at national levels and away from project‐level activities that have dominated voluntary carbon markets to date. Yet countries will benefit greatly by building on their project‐level capacity.

Issues and options like accounting, regulatory framework and incentives require special consideration in regard to nesting. In establishing incentives, governments will first need to figure out their options in terms of programs and project funding and what private and public sector finance sources are available. They will then have to decipher the best pathways for distributing this finance to appropriate recipients.

Accounting issues relevant to nested REDD+ can draw on the work of the Verified Carbon Standard (VCS) and its Jurisdictional and Nested REDD+ Initiative, which has provided guidance on establishing jurisdictional and nested reference emissions levels (RELs); monitoring, reporting, and verification (MRV); leakage; issuing credits and avoiding double counting; and accounting for reversals and forest loss.

Arguably the most complex of these issues is creating a jurisdiction‐wide R(E)L to incorporate smaller R(E)Ls such as those at project‐level, given the numerous factors that must be considered such as determining the boundary, scope and calculation of the R(E)L, creating rules on how to nest different scales and ensuring additionality.

While the UNFCCC has not established methodologies for setting R(E)Ls, Vietnam is working to adopt interim performance indicators in pilot provinces for each type of REDD+ activity to be implemented, which will be monitored and assessed at the provincial level. This includes calculation of “top‐down” jurisdiction‐wide R(E)Ls and smaller scale R(E)Ls- from a project or series of projects- or how it relates to projects developed after the jurisdiction‐wide R(E)L is set.

The Case in Vietnam

According to the report, the pilot subnational activities studied in Dien Bien Province, Kon Tum Province and Lam Dong Province demonstrate both the opportunities and complexities of REDD+. The study reads that Vietnam has considerable flexibility in designing a nested approach to REDD+ that can ensure integrity in environmental accounting and maximize financial flows for REDD+ activities and local stakeholder benefits.

Essential areas of work include the following:

  • • Clarifying the legal and regulatory framework regarding carbon rights and pilot project activities;
  • • Elaborating synergies between project and provincial‐level REDD+ activities;
  • • Elaborating the National REDD+ Action Plan; • Creating guidelines on safeguards and benefit‐sharing for pilot projects;
  • • Establishing principles for allocating ERRs; and
  • • Integrating currently available bi‐ and multi‐lateral funding schemes.

Vietnam is also working to establish a REDD+ National Forest Monitoring System (NFMS), to provide MRV for both REDD+ activity outcomes and mitigation performance, with the aim to reach an accuracy assessment that will bring Vietnam to report at the higher Tier 3 level, which will reduce uncertainty but increase the complexity and resources needed. Policy and regulatory considerations for nested REDD+ will depend on how nesting is designed and developed within Vietnam. If a national scheme is chosen, provinces could fall under the authority of the national system, or the national government could create institutions or systems tailored to that province.

Fortunately for Vietnam, the National REDD+ Action Plan supports the formation of carbon credit markets and encourages private sector participation in REDD+. The Constitution and laws in force in Vietnam appear to support legal land users owning carbon rights.

As Vietnam moves into Phase II, they will build provincial MRV capacities, implementation strategies and benefit distribution systems. Further Phase II work is focused on creating conditions for results‐based finance to flow into such provinces “nested” within the national framework.

More work, however, is needed on how accounting for results at different scales will be carried out and any different approaches or inconsistent findings reconciled.

Forests or Agriculture: Not Necessarily An All Or Nothing Trade-Off

In order to measure the impact and success of climate change mitigation actions in terms of forestry and agriculture, researchers at CIFOR first weigh three options- the potential of emissions reductions, economic risks and implementation expenses. They find the best mitigation action is an integrated approach between land-use, land-use change and forestry.

This article was originally published on the CIFOR (Center for International Forestry Research) website. Click here to read the original.

31 December 2012 BOGOR Indonesia | Making informed decisions on how to reduce carbon emissions from forestry and agriculture requires some solid knowledge about potential tradeoffs between development and conservation objectives: what you manage to win through avoided deforestation or reduced cropping emissions has to be weighed against possible farm income losses when first-best farming strategies have to be sacrificed.

Forest conservation climate mitigation strategies typically involve creating areas where trees are protected. Activities in these areas, such as crop expansion or logging, are restricted or prohibited, so trees are left standing.

Making sure there are trees in the landscape is a definite game changer when it comes to assessing the costs and benefits of different types of land-use strategies for reducing emissions and mitigating climate change. On a per-hectare basis, preserving threatened Amazonian forests provides an exceptionally high mitigation benefit according to a recent CIFOR study.

However, this does not mean that agriculture has no mitigation potential.

Low-cost technological alternatives to conventional agriculture and extensive cattle ranching do exist in the Amazon. For instance, no-till farming, a way of growing crops without mechanically overturning the soil is a now widespread alternative to conventional farming. No-till farming can help maintaining soil fertility and reduce greenhouse gas emissions from biological processes in agricultural soils.

However, while avoiding deforestation and conserving forests can result in substantial emissions reduction, such benefits must be weighed against the possible economic losses of sacrificing income from agriculture. Finding the optimal tradeoff of conserving forests versus developing land for agriculture will therefore be instrumental in ensuring the best use of scarce resources.

Yet, adopting new technologies often requires new skill sets, and improved access to credit or markets, and may expose farmers to risks. That is unattractive for many Amazon smallholders, and explains why they are often hesitant to adopt these techniques, even if research suggests that the profits, on average, are increasing.

Ideal Features of Climate Change Mitigation Options

There are several criteria we considered when looking to invest in different climate mitigation options.

First, the potential for emissions reduction should be high. Second, the risks of economic failure to the land user should preferably be low. Third, implementing the option should be cheap. And finally, any negative knock-on effects have to be contained.

In practice, none of the available options for mitigating climate change scores highly on all four features. A compromise has to be struck that takes into account the pros and cons of both forestry and agriculture to achieve an integrated reduction in emissions from land use, land-use change and forestry (LULUCF).

This can only be achieved if land-use mitigation strategies take into account the different local environmental, social and political contexts. The aforementioned study has shown how different factors can hamper forest conservation and agriculture mitigation efforts, respectively, reducing the kind of benefits that can be achieved.

For instance, while forest-based mitigation strategies can be implemented more easily than getting farmers to adopt new farming practices, in some contexts poor governance and conflicting claims over land as a result of unclear tenure can reduce the effectiveness of forest conservation in lowering carbon emissions. Here, agricultural reforms could eventually be more interesting.

When choosing between forest conservation and agriculture, the hidden costs associated with forest conservation must be weighed against the potentially high operational and transaction costs of promoting agricultural change through extension programs and infrastructure investments, at often relatively low mitigation benefits per unit of land.

Moreover, promoting agricultural change bears the risk of undesired “spillover effects” such as crop or pasture expansion into forest areas, thus neutralizing the potential mitigation benefits from adopting such technologies.

CIFOR’s and others’ research on deforestation, REDD, and agricultural technologies has shown that these side effects are not only possible, but probable – and thus, at the very least, need to be accounted for. Our scoping attempt reconfirms the prime mitigation potential of trees and forests, but also recommends a fine-tuning of parallel strategies for Amazon frontier forests and established agricultural regions.

This new publication is part of the CGIAR research program on Forests, Trees and Agroforestry.

Additional resources

Can Micronesia Save ItsReefs By Fixing Its Ridges?

Micronesia’s 2,100 islands and atolls are mere specs on the ocean upon which they depend, but activities on land are destroying the marine habitat that supports them. That’s prompted several environmental organizations to ask whether payments for ecosystem services can promote harmony among competing interests on land, sea, and stream.

29 November 2012 | People across the western Pacific archipelagos of Polynesia, Micronesia, and Melanesia have long enjoyed the sedating effects of a leafy plant called sakau. Beverages made from the root are said to keep people mellow without putting them to sleep, but the plant’s cultivation has taken a toll on the land.

“It’s not super-intensive farming, but sakau doesn’t hold the soil to the same degree as the undergrowth it replaces,” says Steven Victor, a region-wide planner for The Nature Conservancy (TNC). “From the air it looks like old growth forest, but it’s gone underneath.”

And where it’s gone is into streams and tributaries, in the form of sediment and excess fertilizer. From there, it seeped into mangrove forests and sea-grass beds before leeching out into the ocean and suffocating coral reefs.

Sick reefs mean fewer fish than just a few years ago, and that means smaller catches for local fishermen, who move further out to sea in search of prey. As fishing nets go empty, the islands have turned to tourism – which brings new roads and glittering new seaside hotels that add human waste to the mix and threaten to accelerate the degradation of the sea.

But the tourist trade also brings deep pockets that may contain the seeds of a solution.

The Micronesia Challenge

In 2006, the Micronesia Conservation Trust (MCT) lauched its “Micronesia Challenge” – a call on governments, agencies, and NGOs across the region to protect at least 30% of Micronesia’s coastal areas and 20% of its forest by 2020.

In an effort to achieve that goal, organizers asked TNC to provide both project and financing expertise and enlisted the Conservation Strategy Fund (CSF) to provide training for local authorities in setting economic parameters for conservation and measuring their results. Also on board is Rare Conservation, which creates the grassroots campaigns that are being deployed by local authorities to raise awareness and change behaviors.

The consortium has been examining the interacting economies and ecosystems of these islands to see if payments for watershed services (PES) could be used to build support for watershed and marine protection.

Such programs generally funnel money from users and polluters to conservation efforts, but this one has a serious flaw: namely, the farmers who are causing much of the damage are also the fishermen who suffer the most from it.

Who Will Pay – and Why?

Umiich Sengebau says the solution to Micronesia’s problem lies in education, which he hopes the tourism sector will find it worth investing in. After all, tourists are also looking for pristine waters and lovely coral reefs.

“There’s a need to raise awareness that what happens on a property can increase soil erosion,” says Sengebau, who is TNC’s deputy director for conservation and is based in Palau. “It’s about teaching techniques they can use in conjunction with the sorts of farming they are doing that can limit soil erosion.”

One group that might be willing to pay is Exhibit and Travel Group (ETG), a private entity headquartered in Chengdu, China. The company wants to build up to 10 hotels with a combined 4,000 guest rooms and 10,000 jobs on the island of Yap by the year 2015.

But the development might also contribute to sedimentation, and the government of Yap has yet to sign off. MCT and its partners are toying with the idea of proposing surcharges on utility bills and annual fees for sediment mitigation.

MCT and its partners have also looked outward, to commercial fishing fleets, and are investigating the possibility of placing surcharges on the fishing rights that governments and protectorates sell to commercial fleets.

None of the ideas have moved beyond the drawing board.

“Adding a few cents to the water bill doesn’t produce a good chunk of money,” says MCT director William Kostka. “And introducing the size of fees that would [produce a sizeable pool] might create a situation where people are over-taxed.”

As a result, MCT and the local partners it supports are drawing on expertise from a coterie of agencies active in the region. Their work is occurring in realms as diverse as funding-source sustainability, land-use planning in areas not embraced by the Micronesia Challenge conservation drive, delineation of ownership rights, and setting data parameters for measurement of the effects both of sedimentation from upland runoff and of efforts to mitigate it.

“We certainly don’t want to give up the idea [of PES],” says Kostka. “But we have to be careful not to push forward with something that does more harm than good.”

Building a Program

“Our goal is to identify what it takes to create programs that can be sustainably financed and then to get funding for those initiatives, including sedimentation prevention,” says Trina Leberer, TNC’s Guam-based Micronesia program director. “Monitoring is a big role, in terms of providing tools and expertise in measuring the overarching trends in general and effectiveness of management in particular.”

Given the multifaceted nature of both the agencies and the region’s logistics and cultural demands, work to devise solutions to reef sedimentation is progressing on several fronts. They include creating an endowment to supplement funds devoted annually to conservation by national governments and from the US, via it protectorates: Guam and the Northern Mariana Islands. Government sources and private donors continue to seed various endowment sub-accounts, which stand at around $10.5 million.

However, Leberer estimates that an endowment of around six times that size is necessary to generate the interest income to fully support local projects. And adds that $20 million is required annually if authorities across the five jurisdictions that comprise the region are to meet their conservation targets.

Hence, the near-term goal is to develop and implement models and programs that enfranchise locals in planning and decision-making when it comes to watershed management. By doing so, participants say, they will effect the sorts of behavior changes that are critical to long-term success.

At project level, TNC is working to create watershed alliances that shift responsibility for management from national boards and bodies to local residents. The group has helped to underwrite an information exchange that is aimed at implementing models used elsewhere in the Pacific and in Latin America.

Representatives from the California-based CSF, which in March conducted two weeks of course work aimed at providing the sort of referential framework in terms of definitions and base concepts that is necessary to collectivizing the efforts of a broad range of stakeholders. They see linking payments to future developments as one means of making conservation programs sustainable.

Education Works

Through the training program, CSF hopes to use its record of success to push for PES.

“The commitment and awareness of the importance of these activities to their communities is evident,” Kim Bonine, CSF’s training director, says of those she taught during the classes in March. “They may have had little previous exposure to economics, but this provides an opportunity for them to use these new skills and approaches to have a big impact in support of conservation, particularly in this region, where there are fewer actors involved.”

And US-based Rare Conservation is working within the framework of the Micronesia Challenge to support efforts by local groups to forge solutions that are best suited to the constraints of small populations and shallow pools of funds for conservation. At present, Rare is working at 11 sites, four of them land-focused, to promote the awareness of just how in activity in the watershed affects marine protected areas.

“The goal is to give the alliances tangible activity that they can get behind,” says Matt Lutkenhouse, a regional director at Rare Conservation in Arlington. “Sedimentation also is a problem with the marine protected areas that have been created in places like the Philippines. So, development of a PES-type solution is something that could be applied there, as well.”

The results from feasibility studies at several sites are expected at the turn of the year, as is a master plan from ETG that government officials in Yap have requested prior to voting on the hotel project’s approval. In addition to the empanelling of watershed alliances and Rare Conservation’s campaigns within the Micronesia Challenge , they will provide what the MCT hopes is a framework for establishing the PES-type compensation arrangements that make planned conservation sustainable.

Different Islands, Different Drivers

The challenge is daunting, in part because every island is different. In Palau, for example, a US-sponsored road built to ring Babeldaob significantly degraded marine habitats. And the effect of opening new areas of the island to development since the 50-mile circuit was completed in 2006 means the run-off from construction and agriculture poses a continued threat.

Meanwhile, Pohnpei has lost70% loss of its native forests over the last three decades thanks to growth in both population and in the popularity of sakau. Along with sedimentary run-off, the area’s coastal waters have declined in quality thanks to organic and untreated human and animal waste.

“There’s a lot of groundwork that needs to be done,” says TNC’s Victor. “Here in Palau, there’s a hydro-electric utility. And there’s a feasibility study underway looking at whether there’s a fee tolerance for upland protection among the locals. But that’s a first step in seeing whether conventional PES systems might work in the region.”

Tapping Existing Funds

Funding for the activities to-date have come from a variety of sources, including national government contributions to endowments for the Micronesia Challenge, matching funds from NGOs like TNC, donations from foundations like the Global Environment Facility, and from businesses and private citizens.

TNC’s Leberer says as much as $58m is necessary to produce the kind of returns from interest and investment that would supplement other recurrent sources and make funding sustainable for marine and upland protection and management. That’s where PES comes in.

“We need to be creative in helping our local partners find additional sources of funding to fully capitalize the endowment,” she says, noting avenues such as applying a tourist tax in places like Guam, which draws 1.3 million visitors a year, also are being explored. “There are not big pots of money here, so we need to cobble together grants and donations in addition to what the governments provide on an annual basis and make it work that way.”

Massive Ugandan Experiment Asks: Does PES Really Promote Sustainable Land Use?

25 May 2012 | Kwamya Julius Nyakoojo has been farming cocoa in Uganda’s Hoima District his entire life, but his farm’s yields aren’t what they used to be – and neither are the prices he receives for the newly-harvested beans. So, a few years back, he began clearing native forest to plant more cocoa trees. That didn’t sit well with the chimpanzees of the surrounding forest. They ended up devouring the fruits of his labor.

It’s a common theme in Uganda, where lush valleys, blue lakes, and stunning mountain vistas deliver ecosystem services that directly support more than 90% of the country’s people and provide a home to more species of primates than any other country on earth. But as cash-strapped farmers like Kwamya ratchet up production, they are coming into conflict with the living ecosystems that support them and the animals living there.

In Uganda, Kwamya’s actions matter, because a whopping 70% of forests are in the hands of private landowners and rural communities, and half of these have been degraded, with 86,000 hectares per year being lost to deforestation. Rural communities are among the key drivers of this degradation, because they harvest forests for building materials, medicine, charcoal, firewood and farming. If this continues, many of the species which Uganda is famous for – including the chimpanzees – may become extinct in the near future.

That’s why Kwamya and other farmers have joined in a massive experiment that goes by an equally massive title: “Developing an Experimental Methodology for Testing the Effectiveness of Payment for Ecosystem Services to Enhance Conservation in Productive Landscapes in Uganda.” Focusing on the Kibaale and Hoima districts of Western Uganda, this experiment aims to test the ability of Payments for Ecosystem Services (PES) to enhance the conservation of Ugandan biodiversity, specifically targeting productive landscapes. Coupled with intensive training in sustainable land-use and PES, residents of these communities are divided into two groups: one that receives payments for avoided deforestation, reforestation, adjusted agricultural activities, forest monitoring, and watershed protection (the “test” group), and one that does not (the “control” group).

Project developers have already used standard modeling procedures to establish baselines in Kibaale and Hoima and formulated two projections: one to predict what will happen with PES, and one to predict what will happen without it. When the pilot ends in April, 2014, the Chimpanzee Sanctuary and Wildlife Conservation Trust (CSWCT) will compare the predictions to the reality. If the results are positive, this hard data will be used to convince private sector investors that PES works.

The Coordinated Response

The four-year pilot project was developed jointly by a rare confluence of actors from government, civil society, the private and nonprofit sectors, and global multilateral organizations – including the Ugandan National Environment Management Authority (NEMA), the CSWCT, the United Nations Environment Program’s Global Environment Facility (UNEP-GEF), and others – each of which had its own goals and objectives.

Specifically, NEMA was looking to increase conservation efforts on private land, while CSWCT was looking to address deforestation threats in areas of declining chimpanzees’ habitat, while UNEP-GEF was looking to test whether PES mechanisms truly deliver measurable biodiversity and livelihood benefits

The Grand Vision

The project began in April, 2010, and will run untilApril, 2014 and has goals on three levels. At the local level, it aims to implement a successful PES project. At the regional level, it aims to build lasting capacity for PES design and implementation in Uganda. Finally, at the global level, it aims to deliver scientific data to inform policy and future project development.

The Test

Working with international scientists from Stanford University in the US, the World Bank and Innovations for Poverty Action (IPA), the project will measure impacts of PES in a sample size of eight sub-counties of Hoima and Kibaale including 1,400 villages. In half of the villages, residents are eligible for payments (treatment group), the others not (control group). Every village will receive capacity building on PES, exposure to forest cover change and climate issues, forest management interventions, and sustainable forest use options. With all of the villages receiving basic capacity building and sensitization, the project can more accurately isolate and measure the impacts of PES on biodiversity and livelihoods.

After capacity building and sensitization, residents of villages eligible for payments can chose to participate or not participate in the PES program. This “test” group is then offered a payment in return for contractually agreed activities. Those that are interested must submit an application and negotiate an individual contract.

These voluntary contracts are unique to each farmer. The farmers discuss the contract elements with project partners and CSWCT, and then it is finalized in a participatory process with landowners through focus groups and community organizations. Before beginning implementation, a contract and evaluation plan will also be created and agreed for each participating farmer. The farmer receives a payment based on forest area conserved and number of hectares reforested. The current upper limit is 35 USD per hectare per year with   seedlings for reforestation of the degraded forests or deforested areas. Cash will be distributed on a yearly basis, starting from the contract sign date.

The project, however, does not attempt to fully address opportunity costs of other activities with payments alone, according to Christine Akello, Senior Legal Officer at NEMA. “We are trying to broaden the entry point for communities by offering many resources, not just one existing resource everybody is targeting,” she says. “We seek to provide options and opportunities for involvement and participation.” The project at its foundation promotes sustainable use, not protection.

Current Progress, Challenges, and Next Steps

In February 2010, UNEP-GEF approved the project and by June of that year, the project steering committee had met and the census of private forest owners in Hoima was complete. Since December 2010, the project has completed stakeholder consultations in 70 villages. Forest assessments have been completed on all participating lands. Sensitization and workshops for leaders in Hoima have resulted in 635 finalized farmer contracts. CSWCT has delivered the first shipment of tree seedlings to participants engaging in reforestation of degraded areas, and will complete seedling distribution in Spring of 2012.

The Implementation Phase

The next steps are to begin implementing contractual obligations. CSWCT and NEMA are providing farmers with technical support to implement Best Management Practices for forest conservation. The impact evaluation scientists will monitor the PES scheme impact by closely following both social and ecological outcomes, ensuring compliance with contractual obligations. The first payments are scheduled to be delivered to the Kyabigambire subcounty on 4 August. Implementation, technical support, and monitoring will continue simultaneously until the project’s close in 2014.

The biggest challenges facing the project include the high expectations from farmers on payment levels, the lack of land tenure on target properties in forest corridors, the ongoing negotiation delays, and engaging additional finance sources. “They have not been clear about how it will perform,” says Kwamya. “There is a hope it will be a solution to our problems, but there are also fears—what trickles down to the farmers is not substantial. It is not enough to persuade somebody to be a conserver of the environment.”

Despite this difficulty, he is diversifying his cocoa farm to raise tree seedlings with technical support and financial compensation. Kwamya says, “Using my example, CSWCT has injected slightly above 5,000 USD into my farm’s operations over the years. “CSWCT also put in knowledge to dissuade me from certain practices, to completely revolutionize my landscape and my way of viewing my environment,” he says. “However the ordinary farmer must have more money to mitigate his needs… If the value that goes down to the farmer is not substantial, PES will still be a zero. It will remain on paper.”

Engaging the Private Sector

Generating payments which support farmer land-use changes requires more than just public and donor funds. The project’s biggest challenge lies ahead: even if it generates results, it still has to use those results to win over the private sector. NEMA and CSWCT plan to use data generated at the close of the pilot phase to approach private sector buyers in Uganda and internationally with concrete evidence and fact-based projections of social and environmental benefits.
While it will be 2014 at the earliest that this data is generated, private sector interest has already been piqued. In April of 2011, NEMA, CSWCT, Forest Trends, and The Katoomba Group jointly It attracted representatives from local cocoa distributors, national eco-tourism operators, and companies like Tullow Oil Uganda, Hydromax, ESCO Ltd, and BAT Uganda.

New Threats Enter the Mix

What project developers are finding, however, is that it’s very difficult to maintain experimental control when the real world is your Petri dish. Recently, oil has been discovered in the Hoima district of Uganda. This has led to controversial approval of an oil exploration and development project between Tullow Oil Uganda and The Ugandan Ministry of Energy. The areas affected by Tullow Oil project are predominately protected forest reserves in the high-biodiversity value Albertine Rift, Lake Albert Basin—the precise region of the planned PES project.

This adds extra weight to NEMA and CSWCT conservation efforts on private lands. As protected areas in this region become increasingly accessible to international industry, mitigating impacts through voluntary afforestation and reforestation is important to maintain the rich biodiversity in this area. Tullow Oil recognizes this need and has become an active participant in the PES project by joining the Technical Steering Committee and attending PES training workshops.

Global Implications

This is the first project of its kind in the UNEP-GEF portfolio. Never before has there been an effort to implement an experimental methodology to test the effectiveness of a PES scheme. The data on real versus expected results on biodiversity and livelihoods will generate vital information regarding the actual benefits of PES schemes involving rural communities in Uganda. On the national level, NEMA plans to use the experiment’s results to identify the type of conservation scheme best suited to the Ugandan context. The evidence about PES effectiveness will help the government to develop a replication strategy in other areas at risk of deforestation.

On the local level, if this project is successful, it has the potential to generate significant additional and sustainable financing for biodiversity conservation post-2014. This could change smallholder views to forest conservation as a livelihood opportunity.

And as for Nyakoojo? He’s already benefitting from the project. His previously unproductive cocoa plantation is now a demonstration landscape in environmental protection. He continues to produce cereals, bananas, and keeps goat and cattle, using manure management to minimize environmental impacts. He gives tours to community members involved in the PES project so they can view the potential of PES. Project developers hope that by 2014, smallholders and the private sector alike will be able to view not just the potential of PES in western Uganda, but the impacts as evidenced by this initiative.

 

Additional resources

Massive Ugandan Experiment Asks: Does PES Really Promote Sustainable Land Use?

25 May 2012 | Kwamya Julius Nyakoojo has been farming cocoa in Uganda’s Hoima District his entire life, but his farm’s yields aren’t what they used to be – and neither are the prices he receives for the newly-harvested beans. So, a few years back, he began clearing native forest to plant more cocoa trees. That didn’t sit well with the chimpanzees of the surrounding forest. They ended up devouring the fruits of his labor.

It’s a common theme in Uganda, where lush valleys, blue lakes, and stunning mountain vistas deliver ecosystem services that directly support more than 90% of the country’s people and provide a home to more species of primates than any other country on earth. But as cash-strapped farmers like Kwamya ratchet up production, they are coming into conflict with the living ecosystems that support them and the animals living there.

In Uganda, Kwamya’s actions matter, because a whopping 70% of forests are in the hands of private landowners and rural communities, and half of these have been degraded, with 86,000 hectares per year being lost to deforestation. Rural communities are among the key drivers of this degradation, because they harvest forests for building materials, medicine, charcoal, firewood and farming. If this continues, many of the species which Uganda is famous for – including the chimpanzees – may become extinct in the near future.

That’s why Kwamya and other farmers have joined in a massive experiment that goes by an equally massive title: “Developing an Experimental Methodology for Testing the Effectiveness of Payment for Ecosystem Services to Enhance Conservation in Productive Landscapes in Uganda.” Focusing on the Kibaale and Hoima districts of Western Uganda, this experiment aims to test the ability of Payments for Ecosystem Services (PES) to enhance the conservation of Ugandan biodiversity, specifically targeting productive landscapes. Coupled with intensive training in sustainable land-use and PES, residents of these communities are divided into two groups: one that receives payments for avoided deforestation, reforestation, adjusted agricultural activities, forest monitoring, and watershed protection (the “test” group), and one that does not (the “control” group).

Project developers have already used standard modeling procedures to establish baselines in Kibaale and Hoima and formulated two projections: one to predict what will happen with PES, and one to predict what will happen without it. When the pilot ends in April, 2014, the Chimpanzee Sanctuary and Wildlife Conservation Trust (CSWCT) will compare the predictions to the reality. If the results are positive, this hard data will be used to convince private sector investors that PES works.

The Coordinated Response

The four-year pilot project was developed jointly by a rare confluence of actors from government, civil society, the private and nonprofit sectors, and global multilateral organizations – including the Ugandan National Environment Management Authority (NEMA), the CSWCT, the United Nations Environment Program’s Global Environment Facility (UNEP-GEF), and others – each of which had its own goals and objectives.

Specifically, NEMA was looking to increase conservation efforts on private land, while CSWCT was looking to address deforestation threats in areas of declining chimpanzees’ habitat, while UNEP-GEF was looking to test whether PES mechanisms truly deliver measurable biodiversity and livelihood benefits

The Grand Vision

The project began in April, 2010, and will run untilApril, 2014 and has goals on three levels. At the local level, it aims to implement a successful PES project. At the regional level, it aims to build lasting capacity for PES design and implementation in Uganda. Finally, at the global level, it aims to deliver scientific data to inform policy and future project development.

The Test

Working with international scientists from Stanford University in the US, the World Bank and Innovations for Poverty Action (IPA), the project will measure impacts of PES in a sample size of eight sub-counties of Hoima and Kibaale including 1,400 villages. In half of the villages, residents are eligible for payments (treatment group), the others not (control group). Every village will receive capacity building on PES, exposure to forest cover change and climate issues, forest management interventions, and sustainable forest use options. With all of the villages receiving basic capacity building and sensitization, the project can more accurately isolate and measure the impacts of PES on biodiversity and livelihoods.

After capacity building and sensitization, residents of villages eligible for payments can chose to participate or not participate in the PES program. This “test” group is then offered a payment in return for contractually agreed activities. Those that are interested must submit an application and negotiate an individual contract.

These voluntary contracts are unique to each farmer. The farmers discuss the contract elements with project partners and CSWCT, and then it is finalized in a participatory process with landowners through focus groups and community organizations. Before beginning implementation, a contract and evaluation plan will also be created and agreed for each participating farmer. The farmer receives a payment based on forest area conserved and number of hectares reforested. The current upper limit is 35 USD per hectare per year with   seedlings for reforestation of the degraded forests or deforested areas. Cash will be distributed on a yearly basis, starting from the contract sign date.

The project, however, does not attempt to fully address opportunity costs of other activities with payments alone, according to Christine Akello, Senior Legal Officer at NEMA. “We are trying to broaden the entry point for communities by offering many resources, not just one existing resource everybody is targeting,” she says. “We seek to provide options and opportunities for involvement and participation.” The project at its foundation promotes sustainable use, not protection.

Current Progress, Challenges, and Next Steps

In February 2010, UNEP-GEF approved the project and by June of that year, the project steering committee had met and the census of private forest owners in Hoima was complete. Since December 2010, the project has completed stakeholder consultations in 70 villages. Forest assessments have been completed on all participating lands. Sensitization and workshops for leaders in Hoima have resulted in 635 finalized farmer contracts. CSWCT has delivered the first shipment of tree seedlings to participants engaging in reforestation of degraded areas, and will complete seedling distribution in Spring of 2012.

The Implementation Phase

The next steps are to begin implementing contractual obligations. CSWCT and NEMA are providing farmers with technical support to implement Best Management Practices for forest conservation. The impact evaluation scientists will monitor the PES scheme impact by closely following both social and ecological outcomes, ensuring compliance with contractual obligations. The first payments are scheduled to be delivered to the Kyabigambire subcounty on 4 August. Implementation, technical support, and monitoring will continue simultaneously until the project’s close in 2014.

The biggest challenges facing the project include the high expectations from farmers on payment levels, the lack of land tenure on target properties in forest corridors, the ongoing negotiation delays, and engaging additional finance sources. “They have not been clear about how it will perform,” says Kwamya. “There is a hope it will be a solution to our problems, but there are also fears—what trickles down to the farmers is not substantial. It is not enough to persuade somebody to be a conserver of the environment.”

Despite this difficulty, he is diversifying his cocoa farm to raise tree seedlings with technical support and financial compensation. Kwamya says, “Using my example, CSWCT has injected slightly above 5,000 USD into my farm’s operations over the years. “CSWCT also put in knowledge to dissuade me from certain practices, to completely revolutionize my landscape and my way of viewing my environment,” he says. “However the ordinary farmer must have more money to mitigate his needs… If the value that goes down to the farmer is not substantial, PES will still be a zero. It will remain on paper.”

Engaging the Private Sector

Generating payments which support farmer land-use changes requires more than just public and donor funds. The project’s biggest challenge lies ahead: even if it generates results, it still has to use those results to win over the private sector. NEMA and CSWCT plan to use data generated at the close of the pilot phase to approach private sector buyers in Uganda and internationally with concrete evidence and fact-based projections of social and environmental benefits.
While it will be 2014 at the earliest that this data is generated, private sector interest has already been piqued. In April of 2011, NEMA, CSWCT, Forest Trends, and The Katoomba Group jointly It attracted representatives from local cocoa distributors, national eco-tourism operators, and companies like Tullow Oil Uganda, Hydromax, ESCO Ltd, and BAT Uganda.

New Threats Enter the Mix

What project developers are finding, however, is that it’s very difficult to maintain experimental control when the real world is your Petri dish. Recently, oil has been discovered in the Hoima district of Uganda. This has led to controversial approval of an oil exploration and development project between Tullow Oil Uganda and The Ugandan Ministry of Energy. The areas affected by Tullow Oil project are predominately protected forest reserves in the high-biodiversity value Albertine Rift, Lake Albert Basin—the precise region of the planned PES project.

This adds extra weight to NEMA and CSWCT conservation efforts on private lands. As protected areas in this region become increasingly accessible to international industry, mitigating impacts through voluntary afforestation and reforestation is important to maintain the rich biodiversity in this area. Tullow Oil recognizes this need and has become an active participant in the PES project by joining the Technical Steering Committee and attending PES training workshops.

Global Implications

This is the first project of its kind in the UNEP-GEF portfolio. Never before has there been an effort to implement an experimental methodology to test the effectiveness of a PES scheme. The data on real versus expected results on biodiversity and livelihoods will generate vital information regarding the actual benefits of PES schemes involving rural communities in Uganda. On the national level, NEMA plans to use the experiment’s results to identify the type of conservation scheme best suited to the Ugandan context. The evidence about PES effectiveness will help the government to develop a replication strategy in other areas at risk of deforestation.

On the local level, if this project is successful, it has the potential to generate significant additional and sustainable financing for biodiversity conservation post-2014. This could change smallholder views to forest conservation as a livelihood opportunity.

And as for Nyakoojo? He’s already benefitting from the project. His previously unproductive cocoa plantation is now a demonstration landscape in environmental protection. He continues to produce cereals, bananas, and keeps goat and cattle, using manure management to minimize environmental impacts. He gives tours to community members involved in the PES project so they can view the potential of PES. Project developers hope that by 2014, smallholders and the private sector alike will be able to view not just the potential of PES in western Uganda, but the impacts as evidenced by this initiative.

 

Additional resources

China Uses Eco-Compensation
to Combat Water Shortages

As China expands economically, one of the largest resource constraints is clean drinking water, a problem being addressed in part by “eco-compensation.”   Now the central government is developing a nation Eco-Compensation ordinance.   A new paper out today details recommendations on what this new ordinance should look like.

25 November 2011 | As the People’s Republic of China (PRC) continues to expand economically, access to clean drinking water is an increasing problem.   For one in seven Chinese, drinking water does not meet national pollution standards—and 300 million rural Chinese simply lack access to safe drinking access.

The country is already spending 2.3% of its gross domestic product to address the problem, according to an estimate by the World Bank.   The spending is split between addressing the issues around freshwater scarcity and combating the direct impacts of water pollution.

To keep that cost from growing, the central and provincial governments are currently researching new ideas and methods for improving management of water resources.   Included in that is experimentation at every level of management with “eco-compensation” methods—a method that shares similarities with the more familiar “payment for ecological service” schemes.   The widespread use of eco-compensation has prompted the central government’s National Development and Reform Commission (NDRC) to develop a national Eco-Compensation ordinance.

According to the authors of a new paper published by the Asian Development Bank, “Eco-Compensation for Watershed Services in the People’s Republic of China,” the success of this ordinance and other innovations will have ramifications for global resources as well as PRC’s domestic water crisis.   The authors, Michael T. Bennett and Qingfeng Zhang, provide detailed recommendations for developing an effective national ordinance along with background on the use of eco-compensation within PRC and the recent innovations around water resource management.

The implementation of a national ordinance will have to overcome some institutional challenges, according to the authors. Central to that is the fact that management of water—a state-owned resource—is spread throughout multiple agencies, leading to water management that is “fragmented, uncoordinated (both horizontally and vertically), and lacking in sufficient legal structure and foundation.”

In addition to this challenge, the paper says that because national and provincial rules address eco-compensation, the incoming ordinance will have to complement these rules as well as the ability to evolve with and influence any environmental management system reforms in the PRC.

Focusing on the water aspect of the Eco-Compensation Ordinance, Bennett and Zhang developed three recommendations.

First, they say that eco-compensation should be utilized in the development of integrated river basin management.   Though this could be a challenge, according to the authors, there are many opportunities for utilizing eco-compensation and it could serve as a platform for bringing together the disparate parts of the current watershed protection.

Secondly, there is a need for flexibility within the ordinance to allow for innovative local-level solutions to the unique challenges that each watershed poses.   Instead of strict frameworks, the authors think that the ordinance should focus on outcomes, such as protection, restoration and improvement of key ecological service flows and environmental resources.   This, according to Bennett and Zhang, will also allow these local groups to better target funding.

Third, Bennett and Zhang emphasize that the ordinance must properly take into account the scale of the different actors involved in water resource management.     For example, as they point out, different stakeholder’s property rights and responsibilities over specific ecological service flows will determine the feasibility of developing eco-compensation schemes.

The authors also reiterate in this recommendation the need for delineating water resource rights and management, saying that the ordinance needs to anticipate and facilitate these changes.

Though the fate of eco-compensation will ultimately come down to if benefits outweigh the costs, there is already a strong foundation for the development of a national eco-compensation ordinance.   As this paper states, the water crisis in PRC will not disappear without all stakeholders working together to address watershed management and pollution issues.

 

Additional resources

China Uses Eco-Compensationto Combat Water Shortages

As China expands economically, one of the largest resource constraints is clean drinking water, a problem being addressed in part by “eco-compensation.”   Now the central government is developing a nation Eco-Compensation ordinance.   A new paper out today details recommendations on what this new ordinance should look like.

25 November 2011 | As the People’s Republic of China (PRC) continues to expand economically, access to clean drinking water is an increasing problem.   For one in seven Chinese, drinking water does not meet national pollution standards—and 300 million rural Chinese simply lack access to safe drinking access.

The country is already spending 2.3% of its gross domestic product to address the problem, according to an estimate by the World Bank.   The spending is split between addressing the issues around freshwater scarcity and combating the direct impacts of water pollution.

To keep that cost from growing, the central and provincial governments are currently researching new ideas and methods for improving management of water resources.   Included in that is experimentation at every level of management with “eco-compensation” methods—a method that shares similarities with the more familiar “payment for ecological service” schemes.   The widespread use of eco-compensation has prompted the central government’s National Development and Reform Commission (NDRC) to develop a national Eco-Compensation ordinance.

According to the authors of a new paper published by the Asian Development Bank, “Eco-Compensation for Watershed Services in the People’s Republic of China,” the success of this ordinance and other innovations will have ramifications for global resources as well as PRC’s domestic water crisis.   The authors, Michael T. Bennett and Qingfeng Zhang, provide detailed recommendations for developing an effective national ordinance along with background on the use of eco-compensation within PRC and the recent innovations around water resource management.

The implementation of a national ordinance will have to overcome some institutional challenges, according to the authors. Central to that is the fact that management of water—a state-owned resource—is spread throughout multiple agencies, leading to water management that is “fragmented, uncoordinated (both horizontally and vertically), and lacking in sufficient legal structure and foundation.”

In addition to this challenge, the paper says that because national and provincial rules address eco-compensation, the incoming ordinance will have to complement these rules as well as the ability to evolve with and influence any environmental management system reforms in the PRC.

Focusing on the water aspect of the Eco-Compensation Ordinance, Bennett and Zhang developed three recommendations.

First, they say that eco-compensation should be utilized in the development of integrated river basin management.   Though this could be a challenge, according to the authors, there are many opportunities for utilizing eco-compensation and it could serve as a platform for bringing together the disparate parts of the current watershed protection.

Secondly, there is a need for flexibility within the ordinance to allow for innovative local-level solutions to the unique challenges that each watershed poses.   Instead of strict frameworks, the authors think that the ordinance should focus on outcomes, such as protection, restoration and improvement of key ecological service flows and environmental resources.   This, according to Bennett and Zhang, will also allow these local groups to better target funding.

Third, Bennett and Zhang emphasize that the ordinance must properly take into account the scale of the different actors involved in water resource management.     For example, as they point out, different stakeholder’s property rights and responsibilities over specific ecological service flows will determine the feasibility of developing eco-compensation schemes.

The authors also reiterate in this recommendation the need for delineating water resource rights and management, saying that the ordinance needs to anticipate and facilitate these changes.

Though the fate of eco-compensation will ultimately come down to if benefits outweigh the costs, there is already a strong foundation for the development of a national eco-compensation ordinance.   As this paper states, the water crisis in PRC will not disappear without all stakeholders working together to address watershed management and pollution issues.

 

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Indonesia Bets on REDD With new Moratorium, but can it Deliver?

19 May 2011 | Indonesian President Susilo Bambang Yudhoyono on Thursday signed a two-year moratorium on logging in primary forests and dredging in peatlands to unlock up to $1 billion in seed funding from the government of Norway that could help the country earn billions more by saving tropical rainforests and capturing carbon in trees.

To earn a shot at that less-than-certain income, however, it will have to forego guaranteed billions in concessions from logging, pulp, and palm oil industries – an equation that prompted internal government debate over the definition of “primary forest”, and delayed the signing of the moratorium by five months.   The official text is expected to be released on Friday, and those definition are sure to be scrutinized by industry groups and environmentalists alike.

The Norwegian Pledge

The Norwegian government made the billion-dollar pledge one year ago, following Yudhoyono’s commitment to battle deforestation and reel in the country’s rapidly-rising CO2 emissions.   It is earmarked for building up the country’s capacity to measure and monitor its forests – a key step if the country is to earn carbon credits for reducing greenhouse gas emissions from deforestation and forest degradation (REDD).

That funding is to be paid out slowly over the 7-8 years, and is contingent on certain benchmarks – the implementation of this moratorium being one of the first. Indonesian and international observers are looking to the moratorium as an indication of the seriousness of the country’s commitment to the principles and objectives of REDD.

Yudhoyono had pledged to sign the moratorium on January 1, but faced stiff opposition from other officials and industry lobbyists who argued that REDD was less lucrative than palm oil, pulp, and timber.
 

Background

Indonesia’s history of unchecked deforestation earned the nation an unenviable place among the top greenhouse gas (GHG) emitters in the world, ranking third globally.   Even before securing this ignominious ranking, however, Indonesia had long been targeted with sustained criticism from environmental non-governmental organizations (NGOs) and foreign governments for its troubling environmental record.   It came as a major surprise for many in the international community as Indonesia began taking several serious steps toward initiating a nation-wide REDD program over the past year.

The singularity of Indonesia’s emissions profile (80% from forest and peatland degradation), has made the island nation a prime location for testing and demonstrating the potential for REDD on a globally-meaningful scale.   And yet, while many observers in the media are attuned to the major events occurring in Indonesian forest and climate change policy, few independent voices have provided a view of these events that goes beyond the national significance of the Indonesian REDD experiment.   Indonesia is an international focal point and laboratory for dealing with numerous critical dialogues including land tenure and indigenous rights reform, biodiversity conservation strategy, let alone the pivotal gateway it may hold for global carbon markets.
           

An Overview of REDD-Related news in Indonesia

On May 1, 2009, the Indonesian Minister of Forestry signed the Ministry of Forestry Regulation P.30/2009 on Procedures for Reducing Emissions from Deforestation and Forest Degradation, putting into motion the ongoing REDD saga.
       
REDD featured prominently throughout the climate talks of 2009, achieving its most prominent recognition in December 2009 with an explicit place in the Copenhagen Accord as well as insertion of language supporting a REDD mechanism in the formal negotiating tracks within the UNFCCC.  
           
In January 2010, Indonesia announced an audacious plan to reduce emissions by 26 percent from business as usual levels by 2020, with REDD being a major component of the plan. By mid-year Indonesia had reviewed its forestry laws to make them more compatible with REDD and was, with international support, building capacity on the ground to deal with issues of governance and monitoring.
     
In June 2010, Norway and Indonesia signed a letter of intent pledging US$1 billion from Norway to initiate a REDD program in Indonesia. The deal intended to aid Indonesia in achieving its emission reduction goals, realized primarily through the establishment of   2-year moratorium on concessions for forest-clearing activities slated to begin in 2011. Indonesia then went one step further, announcing a voluntary decision to halt concessions on peatlands immediately. However, disagreements on Indonesia’s part about what constituted “peatlands” made some question how committed the country is to enacting a credible moratorium.   As with forest conservation more generally, the “name game,” that is, the choice of definitions of “forest” and “peatland” used for these types of programs are politically, economically, and environmentally contentious and subject to heavy lobbying and pressure from various interest groups.

Following the announcement of the moratoria and progress toward a wide-scale implantation of the REDD plan, detractors—mostly environmental groups and scientists — began faulting Indonesia’s hesitation in reducing existing forestry concessions, citing concerns over the influence of the large palm oil and paper industry.

The eruption of a number of environmental scandals this summer involving Indonesian palm oil giant Sinar Mas added to fears that powerful industry interests could undermine forest conservation efforts. In one of the most-covered events of the summer, Greenpeace launched a campaign against Sinar Mas that convinced several large companies (including Burger King and Unilever) to cut Sinar Mas products from their supply chains. A moment of heightened tension came when Greenpeace published photos allegedly showing Sinar Mas clearing protected primary forests.

Indonesia’s REDD program appears to be moving forward, but is still characterized by confusion and uncertainty.   Several conflicting statements as to the status of disbursements of funds from the Norwegian pledge, as well as jurisdictional power-plays have been common.   Plans to form a ‘REDD council’, shifting power from the Forest Ministry to the new agency that would report directly to President Susilo Bambang Yudhoyono, were criticized by a third agency, the National Forest Commission, who claimed it would make forest management more complicated. In a gaff that received minimal press, the delayed distribution of the first $30 million from the $1 billion REDD fund in early October was announced by Environment Minister Gusti Muhammad Hatta, who said that Indonesia had not yet not completed necessary preparatory steps stipulated in the deal. The President’s special assistant on climate change, Agus Purnomo, quickly refuted the claim, saying a decision to postpone distribution of the funds had not been delayed, but that the REDD taskforce would be choosing which financial institutions would handle the funds that coming Monday.

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Roundtable Hopes Inclusiveness Will Lead to Cohesion in New Zealand and Australia

Cash-strapped governments around the world are turning to mechanisms that preserve endangered species by incorporating the cost of habitat destruction into the cost of development. The Environmental Law Roundtable of Australia and New Zealand (ELRANZ) is building policy from the ground-up by making sure everyone is involved.

27 April 2011 | Australia’s states and territories have been experimenting with market-like mechanisms that preserve biodiversity for years. Southern Australia’s BushBroker/Tender programs, for example, provide enduring and active examples of effective innovation, while other states have initiated pilot programs that test the effectiveness of mitigation banking in different regions.

Indeed, every Australian state and territory has either implemented policy on mitigation banking or is drafting it, and now the federal government is following suit.

But the feds find themselves in the unenviable position of having to synchronize policies that have evolved in isolation – something that can either elevate us all to agreed-upon best practices or drive us down to the lowest common denominator.

Australia’s National Environmental Law Association (NELA) is aiming for the high road, and it wants to include neighboring New Zealand as well.  That’s why NELA teamed up with New Zealand’s Resource Management Law Association (RMLA) to launch the Environmental Law Roundtable of Australia and New Zealand (ELRANZ) in 2008.

One of its first tasks was to publish a manual that provides resources and sample approaches to building on-the-ground projects, saying “Within the environment and planning law and policy disciplines, there is a need for raising awareness of best practice facilitation, creative visioning, meaningful stakeholder participation and other consensus building techniques.”

Since then, ELRANZ has aimed to engage a full range of stakeholders in the policy development process in both Australia and New Zealand.  Last year, it became an important component of NELA’s National Conference in Canberra – thanks largely to support from the International Union for the Conservation of Nature (IUCN).

The Canberra conference helped ELRANZ push the concept of biodiversity banking into the public eye – something that convener John Hayden hoped would contribute to the harmonization of policies across both countries and a model valuable to the IUCN and others.

From Many One: Stakeholder Involvement

ELRANZ isn’t so much promoting national policies in either New Zealand or Australia, but rather aiming to improve cohesion between states’ operations and encouraging the development of more efficient and effective offset systems and markets across the two countries.

These programs aim to engage a full range of stakeholders, which allows Australia to recognize many potential functions and roles for a national-level policy. This is arguably occurring earlier in schemes’ development than witnessed elsewhere and lends distinct optimism for emerging policy.

If the collaborative processes such as ELRANZ and its outcomes are allowed to translate up into real policy results, then a mature, comprehensive and effective national-level Australian policy could be expected. Such a responsive, progressive policy has the potential to move Australian industries forward more quickly than previously seen elsewhere. Stakeholders are capitalizing on opportunities to learn from other schemes where policy has taken time to develop and full benefits have been delayed by policy latency.

Building on the potential from getting the Round Table participants ‘round the table’, the ELRANZ session in Canberra brought to light the issues a unified policy would need to address. Improved cohesion and efficiency is desired, and this became even clearer when the many perspectives present at the Round Table had a chance to express why a national policy is desirable, drawing on their varying experiences.

Those interacting with offsetting in a legal capacity are pursuing national policy that improves legislative equity between jurisdictions, streamlining case law. Environmental resource managers and consultants wanted to see a policy supporting practical applications and facilitating inter-regional trading.

Aiming High

Despite extensive interest, even the established schemes of the United States are still exploring and piloting platforms for trading offsets between regions, making Australia’s inter-regional interest potentially ambitious. Round Table participants that actively pursuing offsets professionally, require policy that avoid the inefficiencies of requiring multiple offsets for project that impact both state and federally protected values, or cross federal and state lines. Such practical concerns give policy makers real issues to address but most importantly provide insight into how to achieve truly functional policy. While inter-regional trading remains an evolving process internationally, Australian policy may be well positioned to offer progress for addressing this.

One of the largest entities with stakes in the shape of national policy is the Department of Defense, represented at the Round Table.  As one of the nation’s biggest landholders, the Department is placed to be a major component of offset supply and demand, even if most trades remain internal. Most importantly, the Department expects national policy to offer much needed reassurance that offsetting work they do ‘counts’ – both economically and for reputational relationships with the community. Without it, this potentially significant player in the offset market could remain detrimentally dormant, hamstringed by operations spanning state and federal geographic boundaries. In this regard, the policy needs expressed at the ELRANZ most of all reflect the desire for mitigation and offsetting to take full advantage of economies of scale and wider-scale planning and achieve optimal efficiency.

Broader scale policy issues were also prominent: a definitive qualification regarding what is and is not acceptable as an offset and establishing a common language amongst the variations current stakeholders are communicating across. If the ideas and opinions of the Round Table are some indication of the form policy may take, then these are points to take note of. Some reflect well-established international trends, such as the need for clear definition and entrenchment of offsets being like-for-like. Representatives present used terms such as ecological lift, net environmental benefit and additionally in relation to how an offset should be quantified.

Formalizing values or areas not open to offsetting was an important issue for a number of stakeholders. This no-go area idea generates much discussion in both New Zealand and Australia, but interestingly is rarely a significant component of the overseas policies both countries look towards as examples. Very real concerns for preventing ‘commercial trade-offs’ parallels this, and is such strong a sentiment in the region that it is hard to imagine a policy neglecting to directly consider this. Therefore the no-go-area aspect of offset policy may be one that the Australasian region pioneers for international policy best practice.

The mitigation hierarchy is one of the most notable components of international best practice. Round Table agreement was widespread regarding the necessity for strict adherence to achieve a legitimate offset. Opinions were more varied when talk turned to specifically how the sequence should be followed and actions selected. Legal representatives questioned the strength of current obligations to follow the sequence. They called for clarity in how such decisions are made, moving from one step to another. Principles of maximal feasibility and economic analysis were amongst those discussed. The urgent need for national guidelines and clearer policy were the only consensus observable. Without this clarity offsetting and offset policy expanding would largely falter economically. In combination with concerns for ‘avoid only’ areas, it will not be enough for mitigation hierarchy policy to stop at requiring the sequence be followed. It must establish a strong, transparent decision-making process to be effective.

Participants agreed that such macro-level, overall ideas appear well established – it was now time to address more specific issues such as metrics and national guidelines. These topics generated the most interest, being what most participants had hoped to gain insight on from the event. Even with only tabling these aspects at the Round Table, to many it was the networks, connections and exchanges of ideas possible after discussions closed provided the most fertile sources for progress.

Stakeholder and Government

The Round Table discussions are an interesting measure of the pace the market is moving. It indicates considerable momentum present across Australia and New Zealand. National-level policy discussions timely and stakeholders are showing they are willing and able to engage on this level.  From the Round Table the contribution of stakeholders emerges clearly in many regards. Equally highlighted is the far less clear-cut role for government and legislation.

Of the issues raised during the Round Table none divided opinion more notably than the role of government and issues of liquidity. Private-sector representatives presented achieving adequate levels of market liquidity as the major issue to overcome. They highlighted that if only a few trades occur, then the industry will remain small and weak and the advantages of the market will remain elusive. Liquidity problems may be a result of the unit traded – the design of the credit. Australia most advanced trading system is in the state of Victoria where their smaller variety of more well defined ecosystems (compared to areas such as Queensland and New Zealand) has lead some participants to question the reliability of assuming comparative success in other regions through applying the Victorian model. Instead perhaps larger credit markets (such as Queensland) require a more tightly defined unit or credit, where the smaller Victoria market can focus on operating under a tight process of measurement instead (such as the Habitat Hectares approach currently in use). Naturally, these different approaches suggest differences in trading, scientific weighting and systems’ economics which are held as highly important considerations by the stakeholders present, seemly irrespective of any industry or perspective they represented.

Economic concerns were raised again regarding offset supply, especially by rural landowners who are optimally positioned to conduct conservation and generate offsets and credits. Some suggested that government could have a central role here, supporting initiatives around  ‘local champions’ and other bottom-up representatives that foster participation. Alternatively, it was suggested that positive examples by ‘big business’ would act as powerful incentives. Others however felt a business presence could be deterring. This debate over the role of business characterized the afternoon’s discussions.

The importance of incorporating biodiversity values into land prices was one point of concurrence, acknowledged as an important mechanism to generate supply by creating economic incentives, sending market signals to rural landowners, and providing tangible evidence of the benefits available from biodiversity conservation.

Michelle Gain of (Project Manager, Institute for Sustainable Resources, Queensland University of Technology, Brisbane, Australia) drew on experience in the United States to demonstrate the potential of the entrepreneurial sector. She argued the active fostering of entrepreneurship is the absent key to bolstering Australian markets and filling these gaps the Round Table had expressed. This is because entrepreneurship is able to generate considerable private investment to drive offsetting markets, as financial incentives are created and the government is able to take the role of regulator not controller.

Such regulatory (rather than directory) role for government was not universally supported by the Round Table, notably questioned by public conservation sectors. One concern was that private investment through entrepreneurship makes enforcement and monitoring more challenging. Secondly, the maintenance of rights and engagement with rural landowners and their communities could be jeopardized. Such an approach might not align easily with the types of social concerns within Australia that some participants represented. Debate continued with the concept of ‘critical mass’: if entrepreneurship could grow the market to a suitable size, enforcement and monitoring costs and logistics are expected to ease and negate such cost-related disadvantages. Some suggested this could even be turned to an advantage.

With the afternoon drawing to a close the role of entrepreneurship and government remained an exposed yet unresolved topic, highlighting the complexity of liquidity issues and divides that remain between stakeholders. Despite the drive and capacity to develop policies of national and international standards, remaining debates indicate that ‘one policy does not a system make’. Australia’s maturity and awareness at one level may be overshadowed by the complex and recurring business versus government debate. Stakeholder engagement can only offer many things that Australia is well positioned to take advantage of, but a silver bullet is not one of them. Without overshadowing continued momentum and optimism, this was the take home message that participants were only too willing to recognize.

Looking to the Future

The conference and the continued involvement of stakeholders gives NELA and ELRANZ valuable insight into the formation of the policy paper about offsets. This is the value that this type of organization can provide. Bringing together perspectives from multiple sectors, the organization can provide government representatives with a well-rounded policy recommendation, with the hope of improved, inclusive biodiversity and offsetting policy firmly in the sights.

The paper and the processes it has pioneered in Australia will also provide non-governmental stakeholders with invaluable information and experience to form on-the-ground projects and take environmental markets in Australia and New Zealand towards a positive, and hopefully progressive, future industry.

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China Transacts First Panda Standard VERs

Answering China’s call for intensified emissions targets, the nation yesterday saw its first transaction of voluntary carbon credits piloted under the domestic Panda Standard. The credits – purchased from a bamboo reforestation project by a large Chinese real estate firm – signal Chinese companies’ willingness to pay for (literally) home grown carbon reductions.

30 March 2011 | Yesterday, the China Beijing Environmental Exchange (CBEEX) and BlueNext announced the first transaction of pilot voluntary carbon credits under China’s Panda Standard – the nation’s own domestic third-party standard for voluntary carbon reductions.

One day after Chinese officials surprised the world with their higher-than-expected five-year emissions and energy intensity targets, the Panda Standard partners – which also include Winrock International – announced the sale of 16,800 voluntary emissions reduction credits (VERs) to domestic buyer Franshion Properties.
 
A subsidiary of the state-owned Sinochem Group and one of the nation’s leading real estate companies, Franshion purchased the VERs via CBEEX, for which BlueNext is also a strategic partner.

“The Panda Standard serves as a key reference for China’s fledgling carbon market, including the price of tradable carbon, the validation process, and the supervision system,” said Mei Dewen, CBEEX General Manager, in an interview following the announcement.

The price of the credits – at $9.14/tCO2e – was lower than the going rate for credits under the UN’s Clean Development Mechanism but higher than the average price fetched by forest carbon credits on the voluntary carbon market.

This is perhaps due to the unique nature of the inaugural sale and project itself, a bamboo reforestation project covering up to 59,000 hectares in China’s Yunnan Province. The project is indicative of the Panda Standard partners’ goals, including quality emissions reductions and poverty alleviation in the region.

Parlez Vous AFOLU?

At the 16th UN Conference of Parties in Cancun (COP16), held in December 2010, Agence Française de Développement signed an MOU with CBEEX and BlueNext to pursue these goals as it developed the standard’s first pilot project in the Yunnan Province.

In an earlier gesture of Sino-French cooperation, the French Global Environment Fund (FFEM) pledged in April 2010 to work alongside the Administrative Centre for China’s Agenda 21 (ACCA21) to craft the Panda Standard’s bamboo reforestation methodology.
 
The methodology fits under the Panda Standard’s agriculture, forestry and land use (AFOLU) specifications, for which the initial public comment period closed in late January 2011.
 
The Panda Standard partners agreed to an initial focus on AFOLU, which dovetails with the desire of its stakeholders – including China’s National Development and Reform Commission (NDRC) and State Forestry Administration – to pair poverty alleviation and carbon emissions reductions.

Mechanisms and Rumors of Mechanisms

The Panda Standard, CBEEX and its partners aren’t the only show in town. Throughout 2010, several major carbon market players – and the Chinese government itself – announced domestic initiatives in an effort to stay in front of the government’s emerging climate targets.

In August 2010, the Chinese government introduced low-carbon pilots and related exchanges in five provinces and eight cities throughout the nation – several of which had already made significant progress toward their mandates by the year’s end.

In September, Pacific Carbon Exchange (PCarbX) and Shanghai Environment and Energy Exchange (SEEE) signed an MOU to exchange technical best practice and foster partnerships between their respective members.

The Innovation Center for Energy and Transportation (iCET) also announced at COP16 its partnership with CBEEX, Los Angeles-based The Climate Registry and software company Misys to operate and promote the China-specific Energy and Climate Registry.

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Green Gold: How Carbon Finance can Help Mongolian Herders

Mongolia’s GDP is set to surge as mining interest move into the country in a big way, but its agriculture sector is suffering in the wake of unsustainable practices that use up topsoil and contribute to climate change. One program aims harness the carbon markets – and the mines – to promote sustainable herding and reduce carbon emissions.

Ninth in a Series

15 November 2010 | The right financing changes everything.   This is what participants in the Investment Fair at the International Conference on Agriculture, Food Security and Climate Change at the Hague sought two weeks ago.

A participant in the fair, the Mongolian Society for Range Management (MSRM), supported by the Green Gold Pasture Ecosystem Management Programme, makes it possible for Mongolia’s herder community to restore degraded pastures by connecting them to finance for sustainable land management in the carbon markets.   The Pasture Ecosystem Management Project was developed in response to Mongolia’s steadily overgrazed and eroding pastures (among the largest in the world) — and in preparation for the dramatic changes that are about to happen to this land-locked country.

Today, 41% of Mongolians make their living as herders of sheep, horses, cattle, goats and yaks, ranging over the country’s vast grasslands that cover 70% of the national land area.   But the national GDP, long based on herding and agricultural products, is preparing for a dramatic turn.   Next year, it is expected to double as the mining of mostly untapped natural resources — such as coal, gold, silver, copper, uranium and zinc — expands dramatically.

Enkh-Amgalan Tseelei, the project manager from MSRM, wants to make sure the herders are not forgotten.   The purpose of the project is to “implement a carbon finance project to combat pasture desertification and restore pasture productivity in Arkhangai aimag (province) located in Western Mongolia.”

“For Mongolians, pasture is really green gold: socially, ecologically, culturally and economically,” says Tseelei. “It really is the basis for our existence.”

The Threat

Currently, that pasture land is threatened: 70% of it has gone through desertification.   While the government is attempting to address the fact that 60% of the population is below the poverty line, Tseelei says its methods are not the most beneficial for herders.   “The government policy was not really appropriate for the issues that herders were facing,” she says.  

She thinks that this project can act as an example for the government that typically sends cash handouts and disaster relief to aid the nomadic herding communities. Temporary solutions, like the government purchase of expensive animal feed from Russia during the winters, solves little, she says. Instead, Tseelie advocates that the government set policies and extend financing to build up herders’ ability to raise their own income and manage their resources to maintain their productivity in future generations.

In response to economic hardships, many of the herders increased their stock of animals, leading to overgrazing and poor quality meat and an undeveloped dairy sector.  

“It is a classic tragedy of commons, herders would like to earn income and get out of poverty,” says Tseelei, “but this is done at the cost of the pasturelands.”

She explains that beyond simply being herders, they need to learn how to be entrepreneurs in a market economy.

“Everyone used to be employees of a state company and now they are responsible for everything themselves; herders are at a loss now,” says Tseelei.  

In addition, these herders must deal with the hardships of climate change, which is accelerating the rate of desertification and decreasing the productivity of animals as they adapt to cold.

Protecting the Livelihoods of Mongolian Herders

The project is hoping to reverse that, assisting the herders in the transition to entrepreneurs and creating economic incentives to encourage more sustainable herding practices.   These sustainable herding practices can lead to multiple benefits for the environment and for the herders.

The establishment of Pasture User Groups (PUG) is at the core of this project.   Each herder has the opportunity to engage with this group and assist in determining rules for their local area. Large and small herders will have equal rights in these PUGs, assuring that neither group has too great an influence.

During monthly meetings, the PUGs will develop community-based management structures, increasing cooperation and providing an opportunity to develop pasture and land management plans.     “All the herders in the groups have to follow the rules and become part of the pasture,” says Tseelei.

The practices specified in this plan include: grazing management on natural pastures, rotational grazing, designation of winter-spring reserves, the resting of degraded grasslands and a limit to the number of livestock will be included as aspects to these plans.

While the state law does not recognize the ability of herders to exclude anyone from pasture land—which is mainly state owned—Soum (county) governors can utilize county laws to approve the MSRM project.   These governors will have final approval on each PUGs’ land management plans.

Beyond assisting with developing better practices, the MSRM will assist PUGs in developing mutual aid societies.   The concept is that each herder will provide a small cash payment, as little as $25, to a fund managed by village level associate pasture groups.   From this savings fund, herders can borrow at a 3% interest rate.   In essence, this is an affordable financial source—unlike high interest bank loans.   These provide the farmers financial support through the long off-seasons.

“In brief, (the project) protects the long-term interest of the ecology through short term economic needs, combining them both,” says Tseelei.   “The PUG is based on the notion to protect, introducing proper grassland management.   We support this institution through meeting economic needs.”

MSRM will be a part of each step in this process, establishing the PUGs and offering support as they develop land management plans.

Where’s the Beef for Carbon Investors?

Sustainable land management and the resulting rehabilitation of overgrazed pastures can, according to a pre-feasibility analysis, yield increased soil carbon sequestration and emissions reductions from efficient livestock management.

MSRM is currently seeking a carbon investor that will support the project development, issue carbon payments and sign an Emission Reduction Purchase Agreement with MSRM.   This partner will also assist in the development and implementation of the carbon validation and verification.

The income from carbon reduction will be directed to the village-level groups to provide collective benefits.   “We can channel these resources through the PUG institution model so economic incentives are channeled through this institution and village level associations,” says Tseelei.

Though the PUG will disseminate the funding, each institution involved in the project will be responsible for an aspect of carbon emission reduction.   Beginning at the local level, PUGs are responsible for implementing grazing practices and fodder production.   Soum-level NGOs will monitor carbon services, surveying activity and production of the herders.MSRM then will supervise this carbon monitoring and assist with the implementation of improved management activities.  

Benefitting the Environment and the Economy

MSRM hopes that they can transform these sustainable practices into cold-hard cash for the herders seeking to partner with them.

At first glance, reducing herd sizes may seem like a good way to decrease one’s income.   But with the help of the MSRM, the herders will be rewarded with supplemental income and a higher yield on the products they sell.

This model, Tseelei believes, will exist as an example for the government, providing a way to channel the assistance through the herder community in a way that will encourage better management of the grassland and decreased stocking rate.   Though the herders will still have a choice not to participate, the project offers specific economic incentives.

For example, understanding and instituting the best feeding and processing practices in the dairy sector can increase the pastoralist’s income by 200 to 500%, according to one study of the dairy product processing activities.

Additionally, a Payment for Ecosystem Services scheme could provide supplemental income, as the change in practices will lead to higher quality soil and decreased carbon emissions.   MSRM is still seeking investors to purchase these carbon credits.

MSRM is also considering how to best work with the expanding mining business, which is currently 22% of the GDP and includes both foreign and domestic investors.   While this could involve carbon credits, it could also include other aspects of the land management projects.

For the long-term, Tseelei and her team believe the herders must find a more direct route to the expensive boutiques in Milan, Paris and New York who sell their cashmere wares and other animal products.     With the decreased number of stock and adoption of more sustainable practices, the product they produce will be of higher quality and value.   MSRM and the PUGs will then be able to market these products to a higher end market.

When the products are marketed, they will be showcased as natural and environmentally friendly.   MSRM is hoping to include that they are carbon certified, a key aspect of the project.   In addition, instead of sending these raw materials to Chinese manufacturers, MSRM would like the manufacturing to take place in Mongolia.   This would shorten the supply chain and increase the profits for the herders.

Even when the accumulation of carbon in the soil slows and eventually stops over time, the increased value of their products may lead to longer-term sustainability for the herders and the environmentally-friendly practices despite a decline in carbon payments.

However, the challenge still exists that they do not have a connection to the higher market.   Since Mongolia’s products are not known at the international level, Tseelei says they need experts to connect them directly with these higher-end markets.

Moving Forward

Tseelei sees this conference in the Hague as a good first step for connecting carbon emissions and agriculture, but she hopes that the momentum gathered here will not be lost.

“Everyone is totally committed, from organizers to participants, to really make some product out of this,” says Tseelei. “People have realized that we have really little time left and that we need to get into more action.”

She has learned from the other participants, meeting individuals who have had longer-term experience with grassland management.

“At the same time, it’s not just speeches,” says Tseelei.   “It’s a chance to meet some real investors.”   Indeed, she was able to meet companies and individuals that have expressed interest in the project.

Additional resources

Vietnam Implementing Nationwide Payments for Forest Ecosystem Services

The government of Vietnam has spent two years piloting regional schemes that use economic incentives to preserve forests by getting businesses that benefit from them to pay people who preserve them.   Now it’s taking the scheme nationwide.

30 June 2010 | HANOI |Forest Trends President Michael Jenkins closed out last week’s Global Katoomba Meeting here with a call for governments to scale up activities that aim to reduce pollution by incorporating the value of nature’s services into the economy.

“It’s all about scale,” he said. “We have to move from pilots to programs, and from programs to markets.”

At the same meeting, Vietnamese Deputy Prime Minister Nguy?n Thiíªn Nhí¢n announced that his country was moving on to step two of Jenkins’s sequence with an ambitious nationwide system of Payments for Ecosystem Services (PES) under a new entity called the Forest Protection and Development Fund.

Prime Minister Nguy?n T?n D?ng will officially launch the fund by ministerial decree in the next few weeks, Nhí¢n said.  

Minister of Agriculture and Rural Development Cao Duc Phat added that his ministry co-sponsored the Katoomba Meeting explicitly to jump-start a campaign of awareness-building around PES schemes in general and the Fund in particular.

The Scheme

Phat’s Ministry of Agriculture and Rural Development (MARD) will administer the Fund, which will collect money from entities that benefit from healthy forests and distribute it to individual households that work to maintain those forests.  

“In the past, we raised revenues through tax, which meant it ended up in a general state budget,” says Nguyen Tuan  Phu, who coordinates the Prime Minister’s agriculture policy.   “Now, the government plays only a supporting role by transferring the entrusted money from the payers to the payees through the Forest Protection Development Fund.”

The payments will only cover watershed services, and only those delivered by forests.   A separate ministry, the Ministry of Natural Resources and Environment (MONRE), hopes to develop PES schemes covering watershed services delivered by wetlands.

Building on Success

Ministerial decrees in Vietnam are analogous to executive orders in the United States, and this one builds on lessons learned in two years of pilot projects that MARD carried out in the provinces of Lam Dong in the south and Son La in the north.   At the Katoomba Meeting, Nhí¢n urged international organizations that supported the pilots to help with implementation of the national scheme – a theme Phat echoed early in the proceedings.

“We acknowledge that, in order to succeed, Vietnam needs to cooperate even more closely with the international community,” Phat said. “The 17th Katoomba Conference Ha Noi 2010 will be a good opportunity not only for Vietnam but also the entire world to strengthen international cooperation in this aspect for the benefits of our global environment, health and livelihood.”

The Structure

Like the pilots in Lam Dong and Son La (which we examined in detail here), the national scheme will resemble classic Payment for Watershed Services (PWS) schemes such as the one New York City implemented in the 1990s and others being implemented across Latin America and piloted across Africa.

Like those schemes, the Fund will transfer payments from industrialized users of water to rural farmers, most of whom will be paid to protect highland catchments that nourish watersheds.   As a result, it will act as both an environmental protection mechanism and a rural development program.

“In Vietnam, most rivers start from steep and high mountains in the north and the west and flow to the east sea,” said Nhí¢n. “Therefore, watersheds have important roles in protection and maintaining of water resources for socioeconomic development, especially in providing water for hydropower and water supply companies.”

Most of the payers will be state-owned entities.

The Fund will assess payments using the “K-Coefficient” developed in the pilot program.   This coefficient is based on the type of forest being protected, how it’s used – and, theoretically, the type of ecosystem service being delivered.

A company in a watershed with a protected forest being used explicitly for watershed maintenance will, therefore, pay 2% of its income to the fund, while a company in a watershed with a production forest being used for logging will only pay 0.5%.   (See Vietnam Leads Southeast Asia in Payments for Ecosystem Services for details.

Getting Ready for REDD

Although the pilot schemes have been deemed a success, they have not generated opportunity costs high enough to discourage illegal farming.

“A farmer can earn $400 per year with one hectare of corn,” says Phuc Xuan To, who is the Forest Trends Specialist for Forest Trade and Finance in Southeast Asia.   “With PES, however, he’ll get about $20, and that’s just not enough to stop deforestation.”

Indeed, says To, illegal farming proved to be a continuing challenge in the Son La pilot area, and will likely continue under the national scheme until more income can be generated for subsistence farmers living in the highland catchment forests.   That will likely require carbon payments for farmers who reduce greenhouse emissions from deforestation and forest degradation (REDD).

The country is in the process of developing a REDD strategy and was one of the first to be selected as a pilot country of the UN-REDD program and the Forest Carbon Partnership Facility (FCPF).

Jenkins believes it can play a leadership role in climate-change talks culminating this year in Cancun.

“I feel it would be a natural partnership for Vietnam to reach out to Mexico, which is the host of COP 16, and for countries like Vietnam and Mexico – who are relatively neutral in the negotiating process – to bring home an agreement on forests,” he said.

The Challenge of Scaling Up

To sees two challenges to scaling the pilot schemes up to a national level.

“The first is administrative,” he says.   “We’re moving from simple payments within one jurisdiction to payments from one jurisdiction to another, because some of the watersheds spread across different provinces.”

That, he says, may require the creation of one entity for payments within a province and another for interprovincial payments.

“The other is tenure,” he says.   “With production forests, the payments are easy, because the land has been distributed to individuals.   With protected and special-use forests, the land is in government hands, and it’s not clear how the payments will be distributed.”

These two concerns will add up to one big one if the whole scheme isn’t transparent enough for people to follow the money.  

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Vietnam Leads Southeast Asia in Payments for Ecosystem Services

In just a few short years, Vietnam has begun ramping up one of the world’s most aggressive schemes designed to preserve nature by embedding its value in the economy.   Like Brazil, Vietnam’s programs are based on user fees with heavy government oversight, and they’re getting results.   You can find out more by tuning in to this week’s Katoomba Meeting in Hanoi.

NOTE: This is the tenth in a series of articles leading up to and supporting the 17th Katoomba Meeting, which takes place this week in Hanoi and can be followed online here.

21 June 2010 | A “miracle”: That’s what many news agencies and policymakers call Vietnam’s rapid development of PES (Payments for Ecosystem Services). The nation’s program is held up by PES advocates as a model for the rest of Southeast Asia. And in fact, the Vietnamese model has already been adopted in Cambodia, Laos, and Thailand.

Just how successful is it? A few years ago, the PES concept was completely new to Vietnam. In 2008, the government’s Decision 380 on the “Pilot Policy for Payment for Forest Ecosystem Services” got the ball rolling by determining who were the buyers and sellers. By 2009, it generated total revenue of 77 billion Vietnam Dong (approximately US $4 million).

The Forests of Lam Dong

The success of Vietnam’s PES policies is particularly reflected in Lam Dong, one of two provinces selected for implementing the pilot phase. PES schemes are being distributed to 3,400 poor forest-dwelling households in Lam Dong, who are protecting 104,000 hectares of forest. When the payments are completed, each household will receive US $500 a year, a 400% increase in income.”

Located in the most upstream area of the Dong Nai river basin, more than 60 percent of Lam Dong is covered by forest. This area is crucial to the health of the river.

Thirteen state entities manage the vast majority of these forests. These include management boards of protection and special use forests, state forest enterprises, and private enterprises that rent the land for agro-forestry production and ecotourism.  

Implementing Decision 380

To implement Decision 380, Lam Dong authorities determined the economic value of ecosystem services, identified buyers and sellers, and established organizational and institutional structures for the distribution of payments.

Around 516,800 hectares of forest were identified as important, with potential for providing ecosystem services. Water regulation, soil protection, and scenic landscape values were determined as important services of this forest area and were economically measured according to these functions. (Other, more standard services such as carbon sequestration and biodiversity conservation were not accounted for during the piloting phase.)

Three watershed areas were selected as pilot sites. These areas provided ecosystem services to four buyers: two hydropower plants, one water supply organization, and one tourism company.

Calculating Payments

One of the most difficult parts of implementing Decision 380, of course, was calculating payments.

“There is no existing literature on how much the company should pay,” said a member of the policy drafting team in charge of determining payment figures. “We consulted many literatures, and international organizations also helped us.”

The team consisted of members of the Legal Department of the Ministry of Agriculture and Rural Development (MARD), the Office of the Government, and the Ministries of Finance and of Justice.

Eventually, the team developed a complicated equation for calculating payment level. The payment level for hydropower plants using water as a production input was determined at 20 VND (0.125 cents) per one kilowatt hour of electricity produced. For water supply companies, it was 40 VND (0.25 cents) per one cubic meter (m3) of water supplied.

Payments for Ecotourism

The team had difficulty in calculating the payment level for tourism companies, which benefit from landscape beauty provided by the forest. Different stakeholders were consulted about payment levels, including tourism companies themselves, with the end result being that the payment for these services was determined to be 0.5-2 percent of the companies’ gross revenue.

“We suggested the figure to the province officials and they said they are okay with it,” the team member said. “We also suggested the figure to some tourist companies and they said they can afford it.”

The K Coefficient

However, according to the 2004 “Law on Forest Protection and Development,” there are three different types of national forests:

  • Protection forest (rí¹ng phí²ng hí´), which accounts for 30 percent of the total forest area, is set aside for protection of watersheds, soil and the environment;
  • special use forest (rí¹ng dí¢c dung), which accounts for 10 percent, is intended for nature conservation, protection of ecosystems and flora and fauna gene resources, and historical, environmental, and cultural sites; and
  • production forest (rí¹ng san xuí¢t), which accounts for 60 percent, is the source of wood and forest-based products and is meant to contribute to ecological protection.

To account for these different types of forest, as well as the different levels of services that can be provided in different geographical locations, the team introduced a “K coefficient.” The K coefficient also recognizes the status of the forest — rich, average, or poor — as well as its origin: Did the forest occur naturally, in other words, or was it planted? Each of these factors is associated with a different monetary value.

Where Payments are Distributed

Since early 2009, the provincial Peoples’ Committee has requested the four buyers to pay the service fee.   The total annual revenue derived from the four buyers is about 47 billion VND (US $2.8 million). Using the K coefficient, three different levels of payments were suggested: 290,000 VND ($16) per ha for water regulation, 270,000 VND ($15) per ha for soil protection, and 10,000 VND ($0.5) per ha for scenic landscape values.

Describing the dilemma in the top-down versus voluntary nature of PES, a member of the policy drafting team said, “We have just changed from a highly-centralized economy to a market-oriented one; we are at an intersection. As our level of awareness is low, the government has to request the buyers to pay.”

Ten percent of the total payment collected from service buyers will be used by the government agency managing the payment, while the remaining 90 percent will be distributed to service providers, per Article 11 of Decision 380. If the service providers are government-owned organizations (e.g. management boards of protected areas or state forest enterprises), they are allowed to keep 10 percent, with the rest going to individuals, individual households, or rural communities who receive contracts from the state-owned organizations.

Payments to Local Households

To ensure that local households were able to derive benefit from these revenues, local authorities maintained their own contract arrangements with local households. Currently, $2.8 million is being paid to 3,400 local households. On average, each household is contracted for around 20 ha of forest from the enterprises. When payment will be completed, each household will receive $500/year, a 400 percent increase in income.

Lam Dong and the Future of Vietnamese PES

Lam Dong’s success story will probably play a major part in forming a national decree on forest PES. The Vietnamese government is already drafting the decree, which may be passed by the Prime Minister in the second half of 2010.

PES proponents believe that once the decree is scaled-up to the national level, the derived revenues could reach $1 billion. This figure — together with buzz in the state media about the positive results of the pilot projects — has strongly driven the rapid development of PES policy and practice in Vietnam.

Millions of dollars in funding from both government and overseas development assistance have been committed to these initiatives for years to come. Thanks to its rapid development of PES, the Vietnamese government is already realizing many of its goals. It is combating rural poverty by helping communities to protect forests and improve local livelihoods, and it is establishing a sustainable source of private funding for forest protection and rural development to fill current shortcomings in the state budget.

Business and Biodiversity Offsets Program Teaming with Local Stakeholders in Vietnam

Like all countries, Vietnam is struggling to preserve nature in the face of economic growth.   Biodiversity offsets may provide one part of the solution, and will certainly be a hot topic at the Seventeenth Katoomba Meeting there on June 23 and 24.   Ecosystem Marketplace examines the legal status of biodiversity offsets in Vietnam and how the country hopes to get it right.

3 June 2010 | On April 22, 2010, the Government of Vietnam, through the Ministry of Agriculture and Rural Development (MARD) and the Ministry of Natural Resources and the Environment (MONRE) held an initial workshop with the Business and Biodiversity Offsets Program (BBOP), a program of Ecosystem Marketplace publisher Forest Trends, to discuss the potential for Reprint Guidelines for details on republishing our articles.

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Asian Environmentalists to Explore Ecosystem Markets at Katoomba XVII

Cash-strapped governments around the world are experimenting with market-based schemes to preserve nature by recognizing its economic value.   In June, Hanoi will host the 17th Katoomba Meeting to explore the role that ecosystem markets can play in Southeast Asia.

19 April, 2010 | In his younger days, Vietnamese farmer Hoang Van Thang made a name for himself hunting birds.   Now in his 60s, he’s protecting the birds and their habitat.

“We need to preserve wildlife for the next generation,” he told the author of a report on the web site of the Hanoi National University of Education’s Mangrove Ecosystem Research Centre.

So he and roughly 30 other volunteers spend much of their time patrolling small patches of mangrove forest near his village in Nam Dinh Province, about 150 kilometers south of Hanoi, removing illegal snares and keeping an eye out for tree-cutters.   Their actions seem to be having an impact.

“Our team hasn’t seen any cases of bird snaring for a long time,” he says.   “And local people don’t cut down the mangroves anymore.”

But the areas they patrol are just a tiny part of a 7100-hectare natural park, the bulk of which is manned by an understaffed team of park rangers.   Funding for those rangers and the larger scheme within which they operate comes from charitable donations and taxes.

These funds pale in comparison to the needs of farmers, ranchers, and crabbers – all of whom inadvertently put tremendous stress on the mangrove forests, many of which still haven’t recovered from the Vietnam War.

To take the pressure off mangroves and other ecosystems, the government of Vietnam is exploring financing schemes that replace the economic incentive to destroy mangroves with an economic incentive to preserve them.   These schemes begin by recognizing that mangroves aren’t just pretty places for nature lovers – they are part of a critical ecosystem that feeds the local economy.

Short-Term Gain; Long-Term Loss

Nature and commerce have been at odds for centuries, with nature clearly getting the worst of it – especially in the developed world.   The dynamic has accelerated in the last half-century, and in the developing world as well, where subsistence farmers often must choose between feeding their families and preserving fragile ecosystems.

But the apparent conflict between commerce and nature is a false one, because in the long run commerce is not opposed to nature.   In fact, commerce depends on nature, because everything we buy, sell, eat, and produce is ultimately derived from nature – and not always in the most obvious way.   Mangroves, for example, provide shelter for vulnerable fish and breeding ground for shrimp.   They also shield the coast from slow erosion and sudden storms; they extract impurities from water and pull carbon dioxide from the atmosphere, depositing it in the ocean floor – thus helping to reduce the greenhouse effect and slow climate change.

Thang’s actions, therefore, aren’t just good for birds.   They’re good for coastal farmers, offshore fishermen, the tourism industry – and anyone threatened by climate change.  

Payments for Ecosystem Services

Each of these groups has a vested interest in the health of the mangroves that Thang is voluntarily protecting.   They should, in theory, be the ones paying the most to guard the mangroves that deliver the so-called “ecosystem services” upon which their livelihoods depend.
 
“Payments for Ecosystem Services” (PES) schemes begin with the premise that ecosystems are worth more alive than dead, but they work in several different ways.  

Some begin by identifying the economic value of the services provided by living ecosystems and then persuading those who benefit the most to pay for its upkeep.

Others work by determining the amount of pollution that an ecosystem can handle and then auctioning off permits that emitters can then buy and sell among themselves.   This are generally not called PES, but instead referred to as “cap-and-trade”.

Either way, the goal is to promote the most efficient use of valuable resources by letting government establish the rules and leaving the market to find the best way to proceed within that framework.

Apples and Air

All of these services provide tangible benefits to people who receive them – just like apples and oranges do.   Unlike apples and oranges, however, the benefits of ecosystem services are spread diffusely among different people, leaving little incentive for any individual to pay for them.

You can buy an apple, in other words, and you can buy an orange – but you can’t buy the clean air you generate by saving a mangrove tree.   What’s more, if you grow an apple or an orange in a way that dumps insecticides into water, you spread that cost among scores of people who might not even be aware of it.  

Pollution is called an “externality”, because its cost is not borne by the person who creates the pollution, but rather by society at large.   Society – in the form of government – has responded by passing laws against pollution and the wanton destruction of nature.  

Such laws work quite well in many cases, but they can often be overly restrictive.   They also create little incentive to find new and innovative solutions, and are often expensive to supervise.

PES schemes offer a new tool that is designed to encourage larger-scale and longer-term preservation of living ecosystems by incorporating the economic value of nature’s services into our economy.   Rather than simply banning certain practices, PES schemes aim to calculate the cost of environmental degradation and incorporate it into the cost of production.   This way, someone who runs a clean apple orchard that doesn’t muddy nearby streams will pay less for his externalities than someone whose orchard dumps pesticides and other chemicals into local water.

Who Should Pay?

In a straight PES scheme, you begin by figuring out who should pay, who should receive, and how the payments are measured.   Mangrove guardians like Thang, for example, might be able to earn a commission from fishers if they can prove that their activities increase the number of healthy fish in surrounding waters.   They could also earn commissions from tour boat operators, because mangroves often support the coral reefs that attract tourists and divers.   Easiest of all: they can collect carbon payments from industrialists who want to reduce their “carbon footprint” by paying men like Thang to help them capture a percentage of their industrial emissions in trees.

The ecosystem services of a mangrove forest can, therefore, be broken into specific “products”: namely, the protection of species (which are a sign of an overall environmental resiliency), the shielding of coastal areas, the filtration of water, and the sequestration of carbon, among others.

In this example, the carbon payments would come from a cap-and-trade scheme such as the ones outlined in the Kyoto Protocol’s “flexibility mechanisms”.   Climate-change negotiators are now working on a successor to the Kyoto Protocol, and current proposals make it possible for factories to offset their industrial emissions by preserving or restoring a patch of rainforest, thus capturing carbon in trees.

The most advanced cap-and-trade program to date, however, has nothing to do with carbon.   Instead, it has to do with sulfur dioxide, which is the leading cause of acid rain.

The United States launched its Acid Rain Program (http://en.wikipedia.org/wiki/Acid_Rain_Program) in the 1990s with a cap on sulfur dioxide emissions.   A “cap” is the overall amount of pollution allowed into a system, and the government issues allowances based on that cap.   Companies that emit sulfur dioxide receive some allowances for free and have to buy others.   Then the government begins lowering the cap, and companies that reduce their emissions faster than the cap drops can earn a profit by selling their allowances, while companies that are slow to reduce emissions have to pay more for them.   This creates an incentive to reduce emissions in the most efficient way possible, and emissions of sulfur dioxide in the United States are now more than 65% lower than they were in the mid 1970s.

Mitigation Banking and WQT

Cap-and-trade can also be applied to wetlands, biodiversity, and water – where it’s called “mitigation banking” and “water quality trading” (WQT).

Pioneered in the United States, mitigation banking draws its strength from two laws: the Clean Water Act (CWA) and the Endangered Species Act (ESA), each of which contains provisions that, in a nutshell, say that anyone who damages the habitat of an endangered species or dredges or fills certain kinds of wetland has to make sure he does so in a way that results in no net loss of habitat or wetland.

The law makes it clear that companies have to first look for ways to prevent damage to the environment.   If, however, they can prove that their project is worthwhile and that some environmental damage is unavoidable, they can proceed – provided they restore wetland and/or habitat of equal or greater environmental value than what’s destroyed.

This has led to the proactive restoration of degraded wetland and habitat across the United States as so-called “mitigation bankers” restore marginal farmland to its natural state in the hopes of selling credits to people building roads and houses nearby.   In some cases, it’s resulted in healthier habitat than existed before the construction took place, and the model could be tweaked for use across Asia.

Likewise, WQT schemes work by determining how much pollution a body of water can handle, and then letting farms and factories trade among themselves to encourage the most efficient way to reduce runoff into lakes, rivers, and streams.

A Tool in the Belt

None of these schemes is a panacea, and many are still in the early phases of development, but each has the potential to become a valuable tool in the effort to build a sustainable economy for tomorrow.

Their implementation, however, requires a re-thinking of the role of government, the role of the private sector, and the role of civil society.   Just as we need to abandon the idea that commerce and environmentalism are in opposition to each other, we also need to recognize that all sectors of society have common goals.  

A sustainable economy is one that incorporates all of society’s goals and values – in part by recognizing all of the costs of production.

This will lead to more men like Thang working to preserve nature’s services for future generations – and not as volunteers, but as providers of an ecosystem service.

Steve Zwick is Managing Editor of the Ecosystem Marketplace.   He can be reached at [email protected].

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