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REDD+ Financing Efforts
Leave Pilot Projects In Limbo
Author: Steve Zwick

About This Series

This article is the fourth in a continuing series built on the findings of REDDX, Forest Trends' REDD+ Expenditures Tracking Project which aims to provide transparency to the global efforts to slow climate change by saving forests and reducing greenhouse gas emissions from deforestation and forest degradation. Learn more about the initiative HERE

Part One:
Tracking REDD+ Finance: Separating The Payers From The Posers provides an overview of the project and lays out its objectives.

Part Two: REDD Funding: The Horror Story That Isn't examines the cumbersome accounting behind international aid in general and REDD finance in particular.

Part Three: Germany Beats Fast Start Finance But Sees Need For More Scale reviews the results of Germany’s Fast Start Finance period and reasons why they failed to meet their REDD+ commitment targets but succeeded in other areas.

Part Four:
REDD+ Financing Efforts Leave Pilot Projects In Limbo tells the story of a Ghanaian businessman seeking to launch a pilot project but is struggling to find funding from both international donors and private investors.

Part Five: The World Bank And The UN-REDD: Big Names, Narrow Focus provides a detailed overview of the biggest funding efforts of REDD+ as well as their interactions with each other.

Part Six: Congo Basin Forest Fund Steps Up For REDD+ describes how the Congo Basin Forest Fund functions, who are the funders and lessons learned.

Part Seven: Brazil, Indonesia, And DRC Cooperate On Deforestation, See Future In REDD takes a high-level view of the impact of multilateral financing efforts on Brazil, Indonesia, and the Democratic Republic of Congo to date, and examines the prospects for REDD moving forward.

Ghanaian businessman John Addaquay believes REDD+ can jump-start sustainable agriculture across central Ghana, and scores of experts agree. Private investors, however, won’t take the plunge until they know what works and what doesn’t, and his quest for pilot funding from international donors shows just how daunting that can be.



Fourth in a series.





8 November 2012 | The Harmattan Trade Wind is an unrelenting blast of life-sucking dryness that roars down from the Sahara and across Ghana before passing into the Gulf of Guinea. It hits hardest from mid-November through March – the “dry season” – and leaves a swath of chapped lips, cracked skin, and parched earth.

For relief there’s shea butter – a creamy emollient crushed from nuts that drop off shea trees throughout the long wet season, beginning around April. 

That's when men start working their farms and women head into the forests to harvest the shea bounty – both for home use and for processing plants that sell the butter to skin-care companies around the world.

But the farming and foraging end when the Harmattan sets in. The rivers dry; the fields bake, and it's the men who then head out to the forests – not to harvest nuts, but to chop trees for wood and cash.

It's a practice that, for centuries, spared the shea trees.

“There was a taboo against chopping them,” says John Addaquay, who employs roughly 150 women as harvesters. “But that’s changing.”

Displaced migrants, charcoal producers, and – increasingly – desperate farmers have begun chopping shea in the dry season. It’s a one-time use that depletes the renewable supply of shea butter and leads to rainy-season shortages, which lead to more dry-season desperation, which leads to more chopping and lower harvests.

“Even the farmers have no choice,” says Nana Okofo Adjapong, a regional chief in Nkoranza South, a district in Ghana just south of the Volta River.  “Without irrigation and modern implements, they can’t work the land in the dry season, so they chop the trees.”

Fewer trees mean less business for Addaquay and The Pure Company, which is the shea processor that he co-owns with cosmetics supplier Vicdoris, Ltd. In addition to paying local women, the company pays a concession to Okatakyie Agyeman Kudom IV, the region’s paramount chief, who has direct control over an 8,000-hectare mosaic of woodland savanna and forest.

Confronted with a dwindling harvest, Addaquay and Kudom began looking for ways to put more money into farmers’ pockets so they could get through the dry season without killing the shea bounty.

“We looked at irrigation, and we considered planting faster-growing trees they could harvest,” says Addaquay. “We also looked at fruit trees and beekeeping, and we found it all works in some places but not everywhere.”

Hope For forests

Early last year, Addaquay saw a request for proposals (RFP) that seemed tailor-made to help him address the problem.

It had been issued jointly by Ghana’s Forestry Commission and its Ministry of Lands and Natural Resources, and it said the government was looking to fund projects that would test ways of using a carbon finance mechanism known as REDD (reduced emissions from deforestation and forest degradation) to save endangered forests for their carbon content.

More accurately, it was looking to fund REDD+ projects, which add in activities that go beyond just saving endangered forest.

“The National REDD+ Steering Committee … is … inviting proposals from individuals, companies, and various institutions, both local and international, for the piloting of REDD+ projects in Ghana,” it said.

“I thought I’d found the missing link,” he says. “REDD+ is designed to save forests, and we wanted to save forests.”

Into the Labyrinth

Addaquay told Kudom about the RFP, and together they set out to learn about REDD+.

“We didn’t really know what it involved then,” says Addaquay – echoing the sentiment of similarly green-minded entrepreneurs across the developing world.  “We thought we could just plant trees and get money.”

Building on their attempts to foster alternative livelihoods in communities around Kudom’s 8,000 hectares, they drew up a plan that would funnel REDD+ payments into projects that jump-start non-timber businesses, and then they submitted their proposal to the Forestry Commission.

Within a month, Addaquay was invited to a REDD+ workshop that the Forestry Commission was holding at its headquarters in Accra. This workshop, he learned, was paid for by the “REDD Readiness Fund”, which is one of two funding mechanisms that had been set up by the World Bank’s Forest Carbon Partnership Facility. The Readiness Fund had also paid for Ghana’s REDD+ Readiness Preparation Proposal (R-PP), a 60-page blueprint for building governance institutions in Ghana.

The workshop was part of the FCPF’s efforts to help the country implement the R-PP, and it's there that he learned about the complexities of REDD+ and the challenges of measuring, verifying, and validating carbon sequestration. He also realized that his project provided exactly the kind of “learning by doing” opportunity that the Forestry Commission was looking to support.

As he moved further into the process, however, he found that such interest doesn’t always translate into funding. International donors like the World Bank and various national entities like the Norwegian Agency for Development Cooperation (Norad), for example, each come with their own specific mandates, philosophies, and sets of restrictions that aren’t always designed to support pilot projects like his.

But even before he could even begin to contemplate international support, he had to face a more existential dilemma: his project as conceived was just too small for anyone to take seriously.

Building Community Forestry: The Challenge of Scale

When he left the workshop, Addaquay’s mind was racing.

REDD+, he realized, would provide only small amounts of income for the community around Kudom’s forest – far less over time than, say, beekeeping – but it may be enough to help him get other community projects off the ground. The problem, however, was scale: less than 5,000 of Kudom’s 8,000 hectares were forested, and only part of that would ever qualify for REDD. Given the complex accounting mechanisms he had just learned of, that was just too small a piece of land to even contemplate turning into a viable REDD project.

“Most project developers won’t talk to you if you have less than 200,000 hectares, and the bare minimum is 30,000,” says Addaquay.  “We needed to scale up if we were to have a chance.”

He knew that he wasn’t alone. After all, most sub-Saharan landowners have small parcels, and many of them were also talking about REDD+. If he could find a way to bring several landowners together, it would have knock-on benefits for landowners across the continent.

Kudom got the ball rolling by raising the issue within the Nkoranza Traditional Council, a parliament of four dozen traditional leaders who together control more than 200,000 hectares of forested savanna. Kudom is the Council’s president, and his opinions carry weight.

Addaquay, meanwhile, started looking for technical support from John Mason, Founder and CEO of the Nature Conservation Research Centre (NCRC), an environmental non-profit that helps local communities develop economically viable conservation programs. 

Mason told Addaquay about Kenya’s Kasigau Corridor REDD+ Project, which implemented REDD+ on private ranchland in part by providing alternative income for subsistence farmers. Addaquay realized that he could go one better: knitting scores of villages and hundreds of farmers into a project that could be replicated across Africa. This had never been done before, and he’d need pilot funding to get the ball rolling.

Using the Kasigau project as a model, Addaquay and Mason drew up a more detailed proposal and presented it to Victor Attafua, who runs Vicdoris Ltd. Attafua liked the idea and agreed to fund another workshop – this time for local chiefs at Kudom’s palace.

The Presentation

At the two-day workshop, Addaquay and Mason explained how REDD+ could provide bridge financing to enable the development of agriculture and other activities that each village would identify on its own. They explained that this was a pilot project, and that REDD+ was new and untested, but that they felt it was worth a shot.

When they took a vote, every single chief opted to give it a try.

Mason then contacted researchers at Oxford University for help surveying the region’s trees, shrubs, and grasses – and found the project could also be used to test new methods of incorporating biodiversity benefits into a REDD+ project.

They christened it the Vicdoris REDD+ Project and drew up a 21-page proposal, which they sent to the Forestry Commission in March – the same month that Ghana received $3.4 million from the FCPF to move forward on REDD+.

“At that point, we thought there’d be some funding or grant of support that would help us, because it’s all new to everybody in Ghana,” says Addaquay.

“If REDD+ is going to work in Ghana, it’s going to start from a project or landscape level initiative,” says Rebecca Asare, the technical leader of NCRC’s program on payments for ecosystem services. “REDD+ is tricky, so we have to first do it at a scale where you can learn how to do it and what the challenges are.”

When Piloting Isn’t

The Vicdoris REDD Project is one of seven that the World Bank identified as eligible for funding under the Readiness Fund, but the scope of that funding is currently limited by Paragraph 27 of the FCPF’s Readiness Grant Project Information Document (PID):
 
“The activities to be financed by the FCPF in support of the REDD+ Readiness Program in Ghana are limited to analytical studies, capacity building, and consultation processes at the national and sub-national levels and do not include the implementation of site specific REDD+ programs on the ground,” the PID says. “Through the Readiness Program, the government is expected to identify priority investment needs required to achieve the goals of REDD+. These investment needs will be financed by public and private donors, investors, MDBs, and the Government itself, and not by the FCPF Readiness Grant.”

Within the World Bank, he learned, there are no less than three initiatives designed to help developing countries build institutions to support REDD+.  While the FCPF is focused almost exclusively on creating a REDD infrastructure, the Forest Investment Program (FIP) and BioCarbon Fund are free to offer more targeted support to projects like his. What’s more, the FCPF has two funds: the Readiness Fund, which helps countries build up their REDD+ governance structures, and the Carbon Fund, whose funding commitments kick in after the readiness phase is complete. Like the BioCarbon Fund and the FIP, the Carbon Fund could fund individual projects – but not until early next year. While the BioCarbon Fund is supporting REDD+ projects by purchasing early-stage offsets, project developers are split over whether the prices on offer will even cover start-up costs.

The Project Funding Gap

This leaves Addaquay in the same position as scores of others, according to preliminary findings of REDDX, Forest Trends' REDD+ Expenditures Tracking Project, which aims to document the flow of REDD+ funding from donors to recipients and highlight which REDD+ activities are being financed in the current funding landscape. During the REDD Readiness phases between 2010 and 2012, multilateral funding institutions such as The World Bank through the FCPF and the Forest Investment Program (FIP) as well as the UN-REDD Programme (UN-REDD) have focused more on developing capacity in countries with the idea that REDD+ demonstration projects will be financed once the capacity building and planning stage is complete.

Other donors that many believed would step in to fill the gap have largely failed to do so, leaving groundbreaking projects that could inform the process in a sort of limbo.

“Everybody has their idea about what is needed and useful and it doesn’t necessarily line up with the reality of how we roll these things out and how we learn by doing," says Asare. "Ghana’s REDD initiative is bottom-up learning from doing and yet there’s nothing to support the doing."

Other Funding Opportunities

Addaquay has sought private investors in the United States and Europe, but they all say the same thing: he’s trying too many new things for them to feel comfortable taking a plunge.

Last month, the Forestry Commission arranged a workshop in Kumasi to keep the chiefs updated, but Adjapong, the regional chief, says many of them are losing interest.

“We’re coming into the dry season now,” he says. “People are focused on more immediate needs.”

As for Addaquay, he says the Forestry Commission is doing all it can, and is confident something will give.

"But we haven’t had any financial support yet,” he says. “It’s getting a bit scary.”

NEXT: We take a deep dive into the World Bank’s forest carbon finance apparatus, and examine the competing philosophies regarding pilots vs capacity.
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Steve Zwick is Managing Editor of Ecosystem Marketplace. He can be reached at szwick@ecosystemmarketplace.com
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