US, UK, Norway Launch Next-Stage REDD Finance Mechanism Under World Bank

Steve Zwick

Norway, the US, and the UK on Wednesday said they would direct $280 million of their funding for REDD+ into jurisdictional efforts designed to ensure that results-based money flows to projects that promote sustainable agriculture – and in a way that encourages the involvement of major corporates.

COP 19 Coverage

We covered the COP from beginning to end, with a narrow focus on REDD and those issues still under discussion. Here is the bulk of our coverage, with a few breaking stories omitted.

Demand For Forest Carbon Offsets Rises As Forestland Under Carbon Management Grows sets the stage for Warsaw with a deep dive into the state of forest carbon markets around the world.

REDD, CDM Likely To Find A Place In New Climate Agreement: UNFCCC Executive Secretary Christiana Figueres offers hope that the troubled CDM market and REDD projects will be included in the international climate deal expected to be finalized in 2015.

Understanding Carbon Accounting Under The UN Framework Convention is a work in progress designed to explain in simple terms the complexity of carbon accounting under the emerging “REDD Rulebook”.

Indigenous Leaders Stand Up For Active Role In REDD relates what indigenous leaders expect from forest-carbon finance

REDD Reference Levels Share Stage With Broader Land-Use Issues In Warsaw outlines the issues on the table at the beginning of the talks.

In Warsaw As In California, Forest Carbon Carrot Needs Compliance Stick  explores the need for compliance drivers to boost demand for forest carbon offsets.

Forest, Ag Projects Can Combine Adaptation And Mitigation: CIFOR Study  highlights the missed opportunities to link multiple benefits in projects that aim to tackle the impacts of climate change.

Dutch Platform Turns Landscapes Talk Into REDD Reality examines a new platform unveiled in Warsaw that could serve as a model for future public-private partnerships for financing REDD+ projects.

The REDD Finance Roundtable: A Quick Chat With EDF, WWF, and UCS takes stock of the talks on the eve of the final REDD agreement.

For REDD Proponents, No Regrets  examines the early success of REDD pilot projects despite sluggish progress made in securing policy and financial support at the national and international levels.

US, UK, Norway Launch Next-Stage REDD Finance Mechanism Under World Bank examines a financing mechanism designed to support performance-based payments down the road.

After the talks, we began digging into the decisions and themes of the two-week talk, and will be rolling these stories out as they take shape.

Unpacking Warsaw, Part One: The Institutional Arrangements explores the last-minute deal that lays rules for governing REDD finance through 2015.

Unpacking Warsaw, Part Two: Recognizing The Landscape Reality explores the thinking behind the growing emphasis on “landscape thinking” in climate finance.

Unpacking Warsaw, Part Three: COP Veterans Ask, ‘Where’s The Beef?’ explores the reaction of carbon traders to the Warsaw outcomes and offers a peek into the year ahead.

Further stories in this series will explore the impact of individual decisions within the rulebook, the role that the rulebook can play in helping existing projects nest in jurisdictional programs, and the impact of the rulebook on the private sector.


21 November 2013 | WARSAW | Norway, the United States, and the United Kingdom yesterday unveiled a new financing initiative designed to save endangered rainforests by promoting climate-safe agriculture in developing nations. It will be targeted to smaller forest countries and to individual states within larger nations and will operate under the World Bank’s BioCarbon Fund, with money being based on emission-reductions achieved.

Dubbed the Initiative for Sustainable Forest Landscapes (BioC ISFL), it will initially select between 4 and 6 jurisdictions – beginning with Ethiopia’s Oromia state – and funnel between $30 and $50 million into each of them once reference levels are established. While most of the funds themselves had already been committed or announced for REDD+ (Reducing Emissions from Deforestation and Degradation plus pro-forest activities), the new initiative offers a clue into how the funds will be deployed.

They could, for example, be used to promote sustainable agriculture practices that reduce pressure on forests, said Todd Stern, the US Special Envoy for Climate Change. In his scenario, REDD+ finance would be used to promote sustainable agriculture, and private companies would be expected to step up by making long-term commitments to purchase products that are harvested sustainably.

“Grants and technical assistance along with purchasing offsets will support sustainable agriculture and REDD,” he said. “The private sector will purchase sustainably-made products and then sell forest-friendly commodities. That’s a core part of this initiative.”

In another scenario, the funds could be used to provide insurance for projects that are climate-safe but economically risky.

“This combination of incentives creates a powerful dynamic, where there is both up-front support for forest stewardship and demand-side pull for forest-friendly products,” said Stern.

Edward Davey, the UK’s Secretary of State for Energy and Climate Change, said there is plenty of demand-side pull, and implied that up-front support would be targeted to 10 countries.

“We know that we can begin to address 87% of the world’s remaining deforestation with support and action in 10 countries,” he said. “And we know that consumer goods companies with over $3 trillion in annual sales are getting behind the Tropical Forest Alliance in an effort to remove deforestation from their supply chains.”

A fact sheet distributed at the launch event offered statements of support from Unilever CEO Paul Polman, Mondolēz International Vice President Christine McGrath, and Climate Change Capital CEO Alfred Evans.

Who Gets Funding?

Beyond Oromia, states and countries will be selected based on their degree of REDD readiness and political will, as well as on a case-by-case analysis of their agriculture sectors – clearly in keeping with the “landscapes” theme that has dominated side events here this year.

While no other states beyond Oromia were officially named, both Colombia and Indonesia participated in the launch, and former Guyanian President Bharrat Jagdeo made a rousing impromptu appearance.

All three countries are developing the kind of carbon accounting infrastructure that can handle performance-based funding, and all have leaders who seem committed to saving their forests.

Colombian President Juan Manuel Santos, for example, has vowed to eliminate deforestation by 2020. Indonesian President Susilo Bambang Yudhoyono risked his political future by taking on the powerful palm oil lobby. And Jagdeo – who stepped down because he reached his term limit – is a strong advocate of conservation who has never been shy about demanding performance-based conservation.

On Wednesday, Colombian Environmental Vice Minister Pablo Abba Vieira Samper outlined a program called “Amazon Vision” that’s clearly designed to funnel REDD finance to the right agents, while Indonesian Deputy Minister Heru Prasetyo outlined Yudhoyono’s impressive steps to restructure the economy along green lines, and Jagdeo made an impassioned plea to prevent the gains made to date from evaporating.

What is New and Where Does it Sit?

The BioC ISFL will run under the BioCarbon Fund (BioCF), which is part of the World Bank* and has been piloting REDD+ readiness initiatives since 2005. Davey said the new initiative differs from those pilots in two ways.

“First, it’s not acting at the project or national level but at a sub-national/jurisdictional or state level,” he said. “This is because we believe scaling up REDD will be easiest at this jurisdictional level.”

Second, he said, the BioC ISFL is explicitly aimed at promoting those activities that companies have long claimed will make it easier for them to remove deforestation from their supply chains.

“There is evidence that private-sector companies want to be involved,” he said. “We want to make it possible for them to be involved.”

The Overhaul

But “being involved” requires something to be involved in – and that something is often far from green.

“Over the last half-century, we have come to see our forests as the fuel that drives development,” said Indonesian Deputy Minister Heru Prasetyo. “Our entire economy is built on this premise, and that’s not easy to change.”

From that perspective, he says, forest conservation is a new solution, and climate change is a new problem. Both the solutions and the problems are facing push-back from what he called the “business-as-usual” paradigm.

Who’s Paying What?

Most of the money for the first tranche will come from funds already committed, but the new initiative offers clarity into how it will be spent. Harvey said that other countries have also expressed an interest in joining the initiative.

Norway said it would direct “up to” $135 million into the new initiative and extended its previous commitments through 2020 – a major boost, given the change in government there. Tine Sundtoft, the Norwegian Minister for Climate and the Environment, also announced additional grants of up to $100 million for the FCPF by year-end.

The UK earmarked £75 million ($120 million), which Davey said would come from the £3.8 billion International Climate Fund that began deploying money in 2010 and will continue to do so through 2016.

The US said it would contribute $25 million, and a source in the delegation said some and maybe all of it would be on top of previous commitments. Stern said the $25 million was just the first tranche of funds that will top $250 million. “We hope this new initiative can break down the myth that we have to choose between either development or the environment,” said Stern. “It’s a false choice.”

Germany also participated in the launch, but is not on the list of contributors to the BioC ISFL. Peter Altmaier, the country’s Environment Minister, said Germany would add another €12 million (about $16 million) to its Early Movers program, which is already making results-based payments to the Brazilian state of Acre – to the tune of 2.5 million credits at an undisclosed price.

“REDD+ needs more funding than what Germany, Norway, the United Kingdom, and the United States pledged today,” said Pipa Elias, REDD+ expert for the Union of Concerned Scientists. “But the way they are targeting it – that’s encouraging.”

Some of the funds will be performance-based, and be couched in terms of a carbon price. That price, however, has not been determined and is likely to be handled on a case-by-case basis.

Following New REDD Rules

One of the prime achievements of this year’s COP is agreement on clear rules for establishing reference levels and how to measure, report, and verify (MRV) changes in carbon stocks and attribute them to specific activities. The new initiative will aim to follow those rules where possible – but also reserves the right to develop its own methodologies. That provision will not sit well with some developing countries, many of which say they cannot afford the transaction costs that fragmented rules bring.

*We initially identified the BioCarbon Fund as being part of the Forest Carbon Partnership Facility, which it is not.


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

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The REDD Rulebook

The “Rulebook” is actually a collection of seven decisions that together provide guidance on how countries can harvest available data to create reliable snapshots of their forests over time and to use these snapshots to create deforestation reference levels that will be recognized by the UNFCCC.

The decisions govern, among other things, modalities for monitoring national forests, addressing the drivers of deforestation and forest degradation, and measuring, reporting and verifying activities designed to reduce greenhouse gas emissions.

It’s still, however, not clear what sort of payoffs that data will yield long-term, and for that there’s a work program for developing results-based finance in support of REDD and a new set of arrangements between the COP and the Green Climate Fund. The decisions also include a mechanism for helping developing countries deal with loss and damage from climate change.

The final decision reached is the one covering institutional arrangements for REDD finance moving forward.