Following the REDD+ Money Trail

Kristina Van Dexter

REDD+ and financing have been focus topics this week at Nagoya as delegates discuss efforts to halt biodiversity loss.  A report launched this week examines REDD+ projects already underway, with an emphasis on infrastructure and financing.  Here is a breakdown of the report:

REDD+ and financing have been focus topics this week at Nagoya as delegates discuss efforts to halt biodiversity loss.   A report launched this week examines REDD+ projects already underway, with an emphasis on infrastructure and financing. Here is a breakdown of the report:

21 October 2010| A new report from the Conservation Finance Alliance, “National REDD+ Funding Frameworks and Achieving REDD+ Readiness – findings from consultation,” takes a look at REDD+ activity in six countries and explores opportunities for synergies between private and public financing, methodology development and capacity building for scalable REDD+ projects.  

With recommendations based on stakeholder input, the report analyzes the roles of NGOs and environmental funds during the REDD+ readiness phase and in preparing countries for a national-scale REDD+ mechanism.  

There is $4.5 billion in ‘Fast Start’ funding for REDD+ committed during the 2010-2012 ‘readiness’ phase of REDD+, with much of it going towards capacity building and the design of financial architecture to prepare countries for REDD+. This report is meant to spur discussion about REDD+ at the national and international level between policymakers, the private sector NGOs and academic institutions.

With such a significant sum of money on the table, the debate in the international community is focused on distribution.   While donors are working with countries and NGOs to develop financial architecture for REDD+ and aligning this with existing institutional arrangements, there has been a lack of coordination between government ministries, agencies and regional offices. Further complicating the issue are disagreements about community engagement and land tenure, the taxation of REDD+ revenues, and uncertainties regarding REDD+ regulations.

In 2010, PricewaterhouseCoopers conducted stakeholder consultation on how REDD+ funding is being managed on a national scale.   They interviewed representatives from government, civil society, academia and the private sector in six countries: Brazil, Cambodia, the Democratic Republic of the Congo, Indonesia, Madagascar and Peru. The analyses of these interviews are presented in six case studies in the report.

The specific objectives of the case studies were to determine current REDD+ funding flows from international sources to national and project level, including the identification of existing national and sub-national funding structures which manage and deliver REDD+ funding; investigate barriers to achieving a scalable equitable effect and efficient REDD+ funding structure able to distribute and manage relevant portion of the $4.5 billion ‘Fast Start’ funding; and, finally, to identify alternative funding models that could be used by funders in the future to distribute and manage the fast start financing and the financial flows likely when REDD+ activities are funded through a market mechanism.
Of the $30 billion in ‘Fast Start’ funding promised in Copenhagen in December 2009, $4.5 billion is being directed at forest emissions. Specifically, this money will go towards supporting institutional and technological capacity building for REDD+. In addition to the $4.5 billion from the REDD+ Partnership, multinational funds and bilateral agreements (think Norway-Indonesia $1B deal with the first installment to be delivered this year) are suppporting many national and sub national projects already underway.

Public and private financing will play complimentary roles throughout the three phases of REDD+ readiness.  
Like the inadequate institutional framework to manage REDD+ funds, there is also insufficient informational and technical capacity within the government; a lack of distributional mechanisms to channel REDD+ funding efficiently and equitably; and regulatory and legal uncertainties related to taxation, land tenure and carbon rights–as well as political risk.

The report tracks current REDD+ funding flows and explores opportunities within existing small-scale arrangements. While there is already significant private sector investment for REDD+ flowing into developing countries, public financing is necessary to develop the financial infrastructure, regulatory systems, and government capacity for a scalable REDD+ scheme.   Case studies in the report highlight these existing small-scale projects that may provide valuable models and lessons for the national REDD+-readiness process.

The report also investigates potential barriers to funding future REDD+ activity at scale and identifies opportunities for leveraging the capacity of environmental fund and NGOs to focus on capacity building for financial, technical, informational, and legal systems.

“National REDD+ Funding Frameworks and Achieving REDD+ Readiness” offers a practical guide for governments, donors, and NGOs towards a path of REDD+ implementation and scalability. The report is being launched in Nagoya this week, perhaps offering some direction for stalled international REDD+ negotiations after disagreements amongst policy makers and stakeholders have led the REDD+ Partnership to cancel its meetings at the CBD.

Additional resources
Kristina Van Dexter is a research assistant at Ecosystem Marketplace, focusing on Forest Carbon Markets. She is currently finishing up a masters degree at the George Washington University in environmental science and natural resource policy, with a focus on environmental markets, conservation biology, and indigenous land tenure and resource rights. She can be reached at [email protected].

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