1

Annex A – ICF Key Performance Indicators most relevant to forests

KPI 1 Number of people supported by ICF programmes to cope with the effects of climate

change

KPI 3 Number of forest-dependent people with livelihoods benefits protected or improved as a

result of ICF support

KPI 4 Number of people whose resilience has been improved as a result of ICF support

KPI 5 Number of direct jobs created as a result of ICF support

KPI 6 Net change in greenhouse gas emissions (GHG) in tonnes of (tCO2e) reduced or

avoided

KPI 8 Number of hectares where deforestation and degradation have been avoided through

ICF support

KPI 10 Value of ecosystem services generated/protected as a result of ICF support

KPI 11 Volume of public finance mobilised for climate change purposes as a result of ICF

funding

KPI 12 Volume of private finance mobilised for climate change purposes as a result of ICF

funding

KPI 13 Integration of climate change in national planning as a result of ICF support

KPI 14 Level of institutional knowledge of climate change issues as a result of ICF support

KPI 15 Extent to which ICF intervention is likely to have a transformational impact

2

Annex B – Cross-Government strategy for climate finance for forests

Strategic objectives

The ultimate objective of UK’s international climate finance is to support poverty reduction now

and in future, sustaining progress to 2030 and beyond.

UK Climate finance therefore needs to help countries to identify and build new, more

sustainable, more inclusive patterns of growth and development that:

Reduce poverty today and for future generations.

Help countries, communities and individuals to manage risk and build their

resilience to the effects of climate change now and in future.

Shift to cleaner, low carbon approaches and technology in currently high and low

emitting developing countries to prevent emissions now or in years to come, with a

focus on energy, transport, agriculture, forestry and cities.

Ensure effective management of - and equitable access to - land, water, forests;

clean air for current & future generations.

Interventions in forest and land use aim to address the complex drivers of deforestation and

secure development and climate benefits, delivering outcomes across all of these ICF

objectives:

Three departments—DFID, DECC and Defra—collaborative to further HMGs objectives for

forests and land use, drawing on their respective comparative advantages.

Expected results

Investments in forests and land use will generate livelihood benefits for tens of millions of forest

dependent people; deliver significant economic and poverty reduction benefits; protect vital

ecosystem services; leverage reciprocal private sector action through global commodity supply

chains; achieve significant greenhouse gas emissions reductions; and support many developing

countries, including LDCs, to develop and implement national and local strategies to achieve

climate and development outcomes. See below table for sample results from current

Greenhouse gases

Agriculture and land use change constitutes 24% of global emissions.

Development

1.3bn of the world’s poorest people depend on forests for their livelihoods.

Ecosystems

Forests support 80% of terrestrial biodiversity and 75% of the world’s accessible drinking water.

Adaptation

Forests improve resilience to extreme weather events e.g. flash flooding in Nepal.

Women and girls

Women in forest-dependent communities are the primary users of forest resources.

Leverage

Consumer goods companies worth £2Trn in annual sales are aiming to halt their deforestation impacts.

UK investments are targeted at:

Supporting sustainable, climate-resilient growth: working at national and subnational level to strengthen

governance, clarify land-tenure, implement sustainable land-use planning, raise agricultural productivity,

and ensure sustainable use of natural assets (including biodiversity) to support growth;

Driving innovation and creating new partnerships with the private sector: leveraging and accelerating

commitments to remove deforestation from agricultural commodity supply chains

Supporting the negotiations and building an effective international architecture: Incentivising forest

nations to develop and implement ambitious REDD+ programmes to realise the potential of forests and

land-use to global mitigation.

Meeting the development needs of the poorest and most vulnerable, particularly women and girls:

helping some of the most marginalised communities in the world to gain secure rights over forests upon

which they depend improves their livelihoods and helps to build resilience.

3

investments, committed in the 2011-16 SR period which will continue to run through the 2016-20

period.

Sample results from current ICF investments

Example

initiative

Investment

made

Key expected results Attributed

NPV

Cost-

benefit

ratio

BioCarbon

Fund

£50m DECC 6.5m tonnes of CO2e avoided or

captured

Livelihoods of 15,000 forest-

dependent people improved

£69.8m of private finance leveraged

300,000 hectares of forest conserved

or established

£321m

4.41

FGMC £250m DFID 39m hectares of forest protected over

25 years, with related

CO2e avoided emissions

£13bn increase in forest taxes for

public revenue

NB. FGMC results based on

international programme to which the

UK contributes.

N/A 52

IFSLU £60m DFID 102,000 hectares avoided

deforestation

17 MTCO2e avoided emissions

58,000 improved livelihoods impacted

£602m 6.52

Brazil

bilaterals

£35m Defra Reduce deforestation by 145,000

hectares, restore 410,000 hectares of

forests. 23 MTCO2e avoided

emissions

6200 smallholders supported.

£345m 5.5

ICF forests and land use interventions contribute to a range of ICF Key Performance Indicators,

four of which are specific to interventions in the sector: supporting a reduction of poverty

amongst forest dependent people (KPI 3); creating sustainable jobs in forestry and agriculture

(KPI 5); avoiding deforestation (KPI 8); and supporting ecosystems services (KPI 10). KPI 8 on

avoiding deforestation has to date been treated as the headline indicator for interventions in the

sector. Based on the expected results of a sample of interventions funded in the first ICF period

(2011-16), a further UK commitment of funding to forests and land use as set out below would

result in an additional 4-5m hectares of avoided deforestation (an area equivalent to

approximately 25% of the UK).

Interventions also make an important contribution to wider gender objectives. Deforestation

strikes disproportionately at the most marginalised and vulnerable groups. Women in forest-

dependent communities are primary users of forest resources and are particularly affected by

deforestation. Women often lack equal rights to land ownership and forest resources essential

for their livelihoods, and have no legal rights to compensation when deforestation takes place.

ICF forests and land use programmes are focused on equitable solutions which protect and

enhance livelihoods, including for women and girls in forest-dependent communities.

4

Projected level of spend

Reflecting this potential, the ICF has operated with a notional 20% aim for spening in the forest

and land use sector subject to high quality programmes being available to invest in.

Commitments were lower in early years but increased significantly as new scalable programmes

became operational. DECC have invested at a rate of c. 25% in forests and land use for 2013-

15. Demand for support is high: 23 countries bid successfully for support through the FIP 12

through the FCPF Carbon Fund.

The potential for partnership with the private sector is strong, through aligning commitments to

remove deforestation from supply chains for palm oil, soya, beef and paper with support for

policy reform and strengthened enabling environment. This could yield significant additional

investment flows. There are also opportunities to explore innovative ways to leverage private

finance.

Capacity constraints in developing countries mean that substantial efforts are required to

mobilise spending. Reflecting lessons from the first ICF period, further efforts are needed to

improve delivery of multilateral programmes aimed at reducing greenhouse gas emissions from

deforestation. HMG staff capacity is a further factor to consider.

Subject to Spend Review outcomes and the overall trajectory and quantum of climate finance, it

is likely to be feasible and desirable to retain the notional 20% spend target, though this should

be carefully caveated and kept under review. If climate finance levels remained relatively steady,

this would allow HMG to signal a steady level of support for deforestation-related programmes. If

climate finance levels increased, a corresponding increase in climate finance for forests and land

use would indicate a scaling of ambition, reflecting the scale of finance required to achieve

transformational change in this critical period. Without strong and visible donor engagement,

developing countries and private companies could step back from the ambitious commitments

made to date.

Delivery channels

A diverse set of multilateral and bilateral instruments have been established since 2011 which

are now becoming operational. Future funding would largely be managed through these existing

vehicles.

Evidence

The Brazilian state of Acre has decoupled deforestation from development, reducing

deforestation by 60% in 2010 compared to a 1996-2005 baseline, while increasing its real GDP

by 62% since 2002. This was achieved through a range of incentive programmes focused on

sustainable forest management, zero-deforestation agriculture and support for indigenous

peoples. This is an example of success which can inform other efforts.

The New Climate Economy Report estimates that sustainably managed forests generate more

than US$6,000 per hectare per year in aggregate value, with values coming mainly from non-

remunerated ecosystem services. There is strong evidence to show that correcting this market

failure is critical to stopping deforestation.

REDD+ corrects this market failure through placing a value on forest carbon. Evidence collected

during the first ICF period shows that in some contexts REDD+ results-based payments have

helped to secure significant gains, but finance alone is often insufficient to achieve intended

results, particularly in contexts of weak governance.

Important evidence published by the World Resources Institute underlines the importance of

governance and clear land tenure. The UK’s experience with implementing the flagship Forest

Governance, Markets and Climate programme has also generated a strong body of evidence

around how to approach this issue. This has shown that a focus on core economic issues, such

as trade, can have a powerful effect on driving change. There is potential to replicate elements

of this approach in other international markets for agricultural commodities.

5

Evidence shows that different approaches are required to work more effectively with the private

sector, but further efforts are needed to identify those with the greatest potential to leverage

action by the private sector at scale.

Evidence also clearly points to the need to work in both MICs and LICs, as well as working to

aligning market and industry norms around sustainable land-use given the important role of the

private sector in driving land use change in a context where much deforestation is driven by

international markets, where operators are multi-national and highly mobile. Measures to

address deforestation in one location can very quickly displace the problem elsewhere, and it is

important that ICF forestry interventions target all countries where deforestation is taking place.

Overall, the available evidence is still limited, and we are only just beginning to pilot approaches

at scale. There is good evidence based on specific locations, such as Acre, or specific

commodities, such as timber. The work supported through the ICF is focused on testing and

demonstrating a range of instruments in partner countries where the drivers of deforestation,

enabling environment and capacity are varied. Maximising impact and working at scale will

almost certainly require a range of approaches with mutually supportive objectives, with some

differentiation of approaches in MICs and LICs.

6

Annex C- Status of current REDD+ finance

The New Climate Economy (NCE) 2014 report recommended significantly scaling-up REDD+

finance, combined with private sector efforts to extend zero-deforestation supply chain

commitments for key commodities, to avoid emission of an additional 1 GT CO2e per year from

2020 and beyond, incentivising a global transformation to low-deforestation development.1

Over 90% of current finance is from public sources, and with over 20 donors, the top five

(Norway, the United States, Germany, Japan and the United Kingdom) represent 77% of the

overall total. 2 It is difficult to calculate with accuracy finance levels for REDD+, due to fluctuating

exchange rates as well as inconsistency across various sources. The information here is based

on DECC’s own analysis based on a number of key sources of information.

Based on our assessment, fifty-six countries are participating in one or more multilateral funds

focused on ‘REDD+ readiness’ (Phase I). Total funding available for this first phase is

approximately $1.1 billion.3 This includes grants of up to $3.8 million from the FCPF Readiness

Fund for 45 countries (based on progress these countries may request an additional grant of up

to $5m). 23 countries are developing and implementing national REDD+ strategies through the

UN-REDD initiative. While disbursement was slow to begin with, it has picked up in all initiatives

(though the ISFL, established in November 2013, is still in early stages of development). A little

under 20 per cent of available readiness funding has been disbursed.

The financial needs of the subsequent process of implementing REDD+ plans are expected to

be significantly greater. Many forest nations are now ‘ready’ or in final stages of preparation to

implement their REDD+ plans, however commitments and disbursement of upfront and results-

based REDD+ implementation support (Phase II and III) do not yet adequately reflect this need.

Only two funds provide upfront/fast-initiation funding to implement REDD+ plans at scale and

prepare for longer term results-based finance (Phase II): arguably, because it is quick to make

it’s first results based payments, KfW’s REDD Early Movers Programme (REM) functions this

way; and the Climate Investment Funds’ Forest Investment Programme (FIP) makes more

traditional upfront grant payments. Based on DECC’s estimates currently up to 15 countries

could seek Phase II funding through these funds if they develop in the way we expect them to.

In the FIP, countries bid for support for projects; whether this is focused on readiness activities

(Phase I) or site-specific implementation (Phase II) depends on the state of readiness of the

participant country and where it chooses to focus its bids.4 The FIP estimates that approximately

half of its allocated and half of its approved funding to date has been focused on Phase II

implementation.5 The percentage of both total and allocated funds disbursed for Phase II is low

(less than 3 per cent and approximately 4.7 percent respectively).

Two major multilateral initiatives – FCPF-C and the ISFL – have established mechanisms

designed to deliver results-based payments, the ultimate objective of REDD+ (Phase III). Up to

24 countries are in, or considering applying to, the pipelines of these two funds. The two funds

have up to $660m available to pay for results. But it will be a number of years before any results-

based payments will be disbursed through either fund – 2018 at the earliest.6 While the FCPF

1 New Climate Economy, Seizing the Global Opportunity, 2015 2 “The State of REDD+ Finance”, Norman and Nakhooda, 2015 http://www.cgdev.org/publication/state-redd-finance-working-paper-378 3 Note all figures quoted are (i) subject to change due to fluctuating exchange rates and (ii) gross and therefore inclusive of administrative and

other program overhead costs, unless otherwise noted. (The information available on these costs is inconsistent between programmes and it is not possible to compare them on a net of overhead cost basis. 4 FIP, Semi-Annual Operation Report, May 2015.

5 Of allocated resources, 48.5 per cent is for site-specific investments and 51.5 per cent for phase I activities (as categorised by the FIP). For

approved funding, the split is 44 versus 56 per cent. See paragraphs 57 and 58 in FIP, Semi Annual Operation Report, May 2015. (In accordance with this, this analysis splits FIP funding 50-50 between Phases I and II). 6 In each case, a country would have to: (i) finalise, present and have approved a programme; (ii) negotiate a contract to sell verified emissions

reductions; (iii) undertake at least a year of activities to produce emissions reductions; and (iv) have its reductions verified. The Democratic

7

Carbon Fund has been building an impressive pipeline, results-based payments are not

expected to flow until 2019.

There is no definitive source for information on bilateral REDD+ funding; the two major sources

are the Voluntary REDD+ database (VRD)7 (which contains self-reported data) and REDD-X8

(which contains data independently verified by the REDD-X team for 14 countries up to 2012.

Many of the bilateral programs captured in the VRD are relatively small in scale but there are

exceptions.

Reports indicate Norway provides a significant amount of its REDD+ funding bilaterally. The

VRD lists Norway has having committed $1927.99m in support for REDD+ overall (multilateral

and bilateral), including significant pledges of results-based payment (Phase III) in Brazil ($1bn),

Indonesia ($1bn) and Guyana ($250m). Both the Amazon Fund, Brazil (bilateral funding from

Norway and Germany) and the Low Carbon Development Strategy program in Guyana (funded

by Norway) have disbursed results-based payments, as has the German REM programme in the

state of Acre, Brazil.

Reports indicate, while Germany’s support is not of the same scale, Germany has a number of

not insignificant bilateral programs; for example, a commitment of $25m to Brazil’s Amazon

Fund, a $12.5m project being planned in Cameroon and $15.96m for readiness and

demonstration activities in Ecuador.9

REDD-X provides an interesting perspective on the state of disbursement - with two important

caveats of its limited sample size and that it only tracks funding to 2012. On average 28.7 per

cent of committed funds have been disbursed. But this masks significant variation; from 69 per

cent of the $90m committed to Tanzania, to 32 per cent of the $820m committed to Brazil10, 11

per cent of the $61.5 million committed to the Democratic Republic of Congo, and 4 per cent of

the $2444m committed to Indonesia.

Republic of Congo is the only country that currently has met the eligibility requirements to present a programme design to the FCPF; even at the fastest speed imaginable the contract would not be signed before 2016, and then it would take at least another two years to produce and verify results. 7 Hosted by the Food and Agriculture Organisation, see record here 8 See REDDX website here 9 For all of these programmes, see relevant country pages on the VRD 10 Though disbursement has moved on considerably in Brazil since 2012

8

Major multilateral REDD+ funds providing support at jurisdictional scale

Detailed assumptions and sources behind these calculations are described below.

Countries participating in multilateral REDD+ funds

Phase I

Phase II

Phase III

Country FCPF Readiness

Fund11

UN-REDD

National Program

12

BioCF plus ISFL

FIP13

REM BioCF ISFL T3

FCPF Carbon Fund

Argentina Early Idea

Bangladesh Grp 3

Belize

11 The FCPF Readiness Fund provides initial grants of $3.6-3.8m. Countries may apply for an additional $5m grant from FCPF if they demonstrate significant progress in readiness. 12 UN REDD also provides ‘targeted support’ to countries through its Support to National Action- Global Program , but as these activities are very targeted and specific (e.g. funding to support stakeholder engagement over a period of a few months)countries receiving this kind of support from UN REDD are not included in the calculation of the number of countries receiving Phase I support. 13 There were 8 countries in the original FIP pilot (Group 1). Six further countries were added to the fund in May 2015 (Group 2). In addition, nine countries can receive up to $2.25m each for the development of investment plans, on the explicit understanding that there is no FIP funding available to support the implementation of those plans (Group 3).

Total committed funds ~$1.099bTotal allocated funds ~$834.5m Disbursed ~$206.6mCountries supported: 56

Total committed funds ~ $436mCountries supported: Up to 15

Total committed funds ~$725mCountries/Jurisdictions in pipelines: 16

Phase I(strategy, planning and

‘readiness’ preparations)

Phase II(upfront support for

implementation)

Phase III(results-based support for

implementation)

FCPF Readiness Fund

$369m total funding $196m allocated

$55.2m disbursed45 countries supported

FIP

$785m total funding; roughly 50-50 phase I and II$501m allocated

$13.9m disbursed14 countries (8 in original pilot + 6 new)

+ 9 countries limited Phase I support

UN REDD

$256.2m total funding$137.5m disbursed

XX countries national program support(XX countries targeted support)

BioCF plus ISFL

$81m total funding $0 disbursed

4 countries in pipeline

FCPF Carbon Fund

$451.2m total funding $0 disbursed

8-9 countries will be supported (based on current funding available)

11 in pipeline; up to +10 may apply Oct

REM

$88m total funding$25m allocated $10m disbursed

1 jurisdiction supported

BioCF ISFL Tranche 3

$261m total funding $0 disbursed

4 countries in pipeline

9

Bhutan

Bolivia

Brazil Grp 1 Acre

Burkina Faso Grp 1

Cambodia Grp 3

Cameroon Grp 3 Early Idea

CAR

Chile Pipeline

Colombia

Costa Rica Pipeline

Cote d’Ivoire Grp 2 Early Idea

DRC Grp 1 Pipeline

Dominican Republic

Early Idea

Ecuador Grp 2

El Salvador

Ethiopia

Fiji Early Idea

Ghana Grp 1 Pipeline

Guatemala Grp 2 Pipeline

Guyana Grp 3 Early Idea

Honduras Grp 3

Indonesia Grp 1 Pipeline

Kenya

Lao PDR Grp 1 Early Idea

Liberia

Madagascar Early Idea

Mexico Grp 1 Pipeline

Mongolia

Mozambique Grp 2 Early Idea

Nepal Grp 2 Pipeline

Nicaragua Early Idea

Nigeria

Pakistan

Panama

PNG

Paraguay

Peru Grp 1 Pipeline

Philippines

ROC Grp 2 Pipeline

Rwanda Grp 3

Solomon Islands

Sri Lanka

Sudan

Suriname

Tanzania

Thailand

Togo

Tunisia Grp 3

Uganda Grp 3

Uruguay

Vanuatu

Vietnam Pipeline

Zambia Grp 3

10

Information on disbursements for each of the funds funding Phase I activities

The FCPF Readiness Funds grant disbursements were (all in World Bank fiscal years): 2010

$1m; 2011 $1.1m; 2012 $2.5m, 2013 $4.9m; 2014 $8.2m; 2015 estimated $16m. In addition,

$26.6m has been disbursed to non-World Bank delivery partners14.

The FIP disbursed $5.4m in 2014, a 63 per cent increase from a cumulative disbursement total

of $8.5m at end 201315.

UN REDD disbursed approximately $6.9m in 2009; $12.9 in 2010; $19.5m in 2011; $26.2m in

2012; $32m in 2013 and $40m since January 201416.

BioCF ISFL has not yet disbursed any funding.

Basis for calculation that a little under 20 per cent of multilateral readiness funding has

been disbursed

Total funding for Phase I activities across the four multilateral funds considered in this section is

approximately $1.1b. FIP funding is spread 50-50 between Phases I and II. Total funding

disbursed by the four funds (at time of writing) is $206.6m. This equates to 18.72 per cent of

$1.1b. (Note this calculation does not take into account administrative or other overhead costs).

Basis for the calculation that less than 3 per cent of total multilateral funding for Phase II

has been disbursed.

Total funding for Phase II is estimated at $436.5m; based on 50 per cent of FIP total funding

($785m divided by two) plus 50 per cent of REM funding ($88m divided by two). Total disbursed

funding for Phase II is estimated at $11.95m; based on 50 per cent of FIP disbursed funding

($13.9m divided by two) plus 50 per cent of REM disbursed funding ($10m divided by two). This

equates to 2.7 per cent. (Note this is based on the assumption that all FIP funding is split 50-50

between Phases I and II and REM funding is split 50-50 between Phases II and III.)

Basis for the calculation that approximately 4.7 per cent of allocated multilateral funding

for Phase II has been disbursed.

Total allocated funding for Phase II is estimated at $263m; based on 50 per cent of FIP allocated

funding ($501m divided by two) plus 50 per cent of REM allocated funding ($25m divided by

two). As noted above, total disbursed funding for Phase II is estimated at $11.95m; this is 4.5

per cent of allocated funding. (Note this is based on the assumption that all FIP funding is split

50-50 between Phases I and II and REM funding is split 50-50 between Phases II and III.)

Basis for the calculation that FCPF and BioCF have up to $660m available to purchase

verified emissions reductions

The FCPF has no more than $420m available for the purchase of verified results17. The basis for this is the calculation that administrative costs will be at least 8 per cent of total funds. As yet it is unclear what the total administrative costs for the BioCF IFSL will be. The World Bank charges a one-off 2 per cent fee from each contribution for general administrative costs, up to 4 per cent for initiative level expenses and 0.75 per cent for business development. Supervision and implementation charges (e.g. management costs) will differ by each window and at this early stage in the fund’s development, the World Bank has provided no reliable forecasts of these. For

14 FCPF Dashboard, April 2015. 15 See paragraph 68, FIP, Semi-Annual Operations Report, May 2015, 16 All figures taken from information provided on live UN REDD website, accessed on 23 July 2015 17 FCPF, Setting the Stage for Early Ideas, Twelfth Meeting of the Carbon Fund, April 2015.

11

the purpose of this analysis, we have assumed similar costs to the Carbon Fund, making a total of approximately 8 per cent. This equates to $20.88m from the total funding of $261m. The estimate of total maximum funding available for verified results payments is therefore $660.12m.

Basis for calculation of average disbursement rate according to REDD-X information

The disbursement rates for the fourteen REDD-X countries are set out below. To get an

average, these rates have been divided by 14. Brazil: 32 per cent; Colombia: 47 per cent; DRC:

11 per cent; Ecuador: 67 per cent; Ethiopia: 6 per cent; Ghana: 16 per cent; Guyana: 10 per

cent; Indonesia: 4 per cent; Liberia: 58 per cent; Mexico: 5 per cent; PNG: 8 per cent; Peru: 48

per cent; Tanzania: 69 per cent; Vietnam: 21 per cent.

12

Annex D - Rationale for continuing to focus on REDD+

and lessons learned that inform our approach The Impact of REDD+ Finance

Since 2006, approximately USD$8.7 billion of international public funding has been disbursed or

allocated for REDD+ activities or funds in 80 recipient countries. Based on reports over 90% of

the finance is from public sources, and with over 20 donors, the top five (Norway, the United

States, Germany, Japan and the United Kingdom) represent 77% of the overall total.18

Forest nations are now making steady progress towards receiving REDD+ support, with some

‘early movers’ already agreeing significant results-based payment agreements.

Major REDD+ jurisdictional-scale results-based payment agreements to date

Countries Date Funding

commitment

Carbon

price

Max. potential VERs19

funded

Brazil-Norway 2008 $1bn $5/T 200MTCO2e

Indonesia-Norway 2010 $900m $5/T 180MTCO2e

Guyana-Norway 2009 $250m20

$5/T 50MTCO2e

Peru-Norway-

Germany

2014 $>250m (tbc)21

$5/T

50MTCO2e

Germany-Acre

(Brazil)

2012 $20m $5/T

4MTCO2e

Total: $2.42bn 484MTCO2e

Although significant REDD+ finance has been available since 2008, there is relatively little

empirical evidence to date on results and impact. The complexity of transforming land-use

models and the multiple actions involved in addressing deforestation requires a time-scale much

longer than other sectors, and attribution is difficult.22

REDD+ results (large-scale reductions in

carbon emissions) take time to generate.

The NCE report highlights the role of REDD+ finance as a “transitional tool to strengthen reforms

intended to implement sustainable land use policies and ramp up law enforcement….[facilitating]

the politically and sometimes financially costly transition toward public policies and private

practices that build forest capital.”23 It points to the political symbolism of REDD+ payments to

strengthen the hand of reformers to overcome political and economic vested interests, to

facilitate the creation of a more level playing field for sustainable producers.24

The majority of finance to date has supported readiness activities. National ‘readiness’ initiatives

in many countries have helped lay the foundations for subsequent success by, for example:

building government and delivery partner capacity; determining baseline ‘reference levels’ to

track performance; developing safeguard systems; and clarifying forest and carbon tenure

rights.25

There are also suggestions that REDD+ finance has helped: catalyse policy changes;

improve coordination among relevant government ministries and key institutions; encouraged

civil society engagement; improved understanding of carbon emissions from deforestation, as

well as deforestation drivers; and raise political and other stakeholder awareness of forest

protection and sustainable development.26

18 Norman and Nakhooda, The State of REDD+ Finance, 2015 19 Verified Emission Reductions 20 Includes some complementary capacity building support not capped by results 21 Total Norwegian contribution including upfront funding is $300m, Germany’s contribution has not yet been disclosed 22 Lee and Pistorius, The Impacts of International REDD+ Finance, 2015 23 New Cliamte Economy, Better Growth Better Climate, 2014 24 Ibid. 25 Lee and Fishbien, Early Lessons from Jurisdictional REDD+, Nature, 2015 26 Lee and Pistorius, The Impacts of International REDD+ Finance, 2015

13

There is evidence to suggest REDD+ finance has helped catalyse some impressive

commitments from recipient countries.27

For example, the Emission Reduction Program Idea

Notes in the FCPF Carbon Fund have included the following:

- In Guatemala, the introduction to Congress of a draft framework law, “PROBOSQUES”

(pro-forests) that will mandate $70m per year of the national budget for investment

exclusively in REDD+ activities

- In Peru, a commitment to put 534,000 properties, 270 rural communities and 100

indigenous communities under formal land title, emulating Brazil’s successful “Critical

Counties” system28

- In the Democratic Republic of Congo (DRC), confirmation of a moratorium on new

industrial logging concessions;

- In the Republic of Congo (RoC), a new “forest code” that will establish a moratorium on

palm oil concessions.29

In Colombia, negotiations on REDD+ finance under KfW’s REDD for Early Movers Programme

has arguably encouraged the inclusion in national legislation a reference to the Colombian

Amazon programme to reduce deforestation in the Colombian Amazon to zero by 2020, subject

to strong donor support.30

In Indonesia, the $1bn REDD+ agreement with Norway is also credited with helping tilt the

balance, encouraging Indonesia embark on comprehensive reforms to land use policies,

customary land rights, regulations and law enforcement to meet a pledge to reduce greenhouse

gas emissions 26% by 2020 (41% subject to international support).31,32

In Brazil, Guyana and Indonesia, Norway’s substantial pledges on REDD+ finance are credited

with “elevating the position of REDD+ on the national agenda, catalysing action to address

critical bottlenecks in REDD+ readiness, broadening government and civil society participation

and stimulating national debate on REDD+.”33

While Brazil’s steady decline in deforestation

rates predates REDD+ finance, the Amazon Fund has helped remove Alta Floresta from the

“high deforesting municipalities” list, and reforested or recovered over 6000 hectares of

degraded areas, helped implement a rural environmental registry and generally raised capacity.

Arguably, it has also helped maintain political support for progressive policies.34

Another lesson learned to date is that initial political/ministerial interest and engagement can

“run out of steam” if the REDD+ finance does not materialise at scale, beyond initial readiness

disbursements.35

With no clear signal on availability of long-term, sustainable sources of finance

to support the transition to sustainable land-use, generating the political interest is more

challenging. Results-based finance for REDD+ is needed in greater volumes to increase the

ambition and success of REDD+ programmes.36,37

The incentive provided by REDD+ finance can be enhanced by combining donor finance with

other economic incentives. The New Climate Economy believes a significant proportion of the

support required to achieve an additional 1 GT CO2e per year mitigation from forests by 2020

can come from leveraging deforestation-free supply chain commitments alongside scaled-up

27 Lee and Fishbein, Early Lessons from Jurisdictional REDD+, Nature, 2015 28 Bid document accessible here 29 Bid documents accessible here and here 30 President Santos, Feb 13 2015, recorded here 31 Forum for Development Studies: Norway and REDD+ in Indonesia, 2015 32 Centre for Global Development, The Indonesia-Norway REDD+ Agreement: A Glass Half-Full 33 Creed and Nakhooda, REDD+ Finance Delivery: Lessons from Early Experience, 2011 34 Lee and Pistorius, The Impacts of International REDD+ Finance, 2015 35 Ibid. 36 The New Climate Economy, 2014 37 CGD Working Group report , Scaling Up Performance-Based Transfers to Reduce Tropical Deforestation, in press

14

finance for REDD+.38

This approach is being piloted in the BioCarbon Fund ISFL initiative,

where landscape-level programmes are combining upfront technical assistance with ER

programmes and public-private partnership agreements (e.g. brokering offtake agreements for

commodities produced in certified low-deforestation jurisdictions).39

The majority of results-based payment agreements that forest nations have struck to date are

funded by Overseas Development Assistance from donor governments.40

REDD+ was originally

envisaged as a mechanism that would ultimately connect large-scale, cost-efficient mitigation

from forests with global carbon markets.41

However, these deep global carbon markets have yet

to emerge. The voluntary carbon market currently accounts for around 10% of total funding to

reduce deforestation.42

Though the voluntary carbon markets remain relatively small (c.

87MtCO2e/$395m in 2014), forest credits are increasingly becoming the unit of choice, in the

last two years overtaking renewable energy as the most popular project type.43

There are encouraging signs, however, that long-term, sustainable sources of finance for

REDD+ may emerge in the near future. The Green Climate Fund has the potential to support

significant REDD+ emission reduction programmes in the future, though it is yet to develop the

modalities to enable this. There is growing interest in access to REDD+ credits as part of a

global market-based mechanism under International Civil Aviation Authority, due to be decided

in 2016.44

Japan’s Joint Crediting Mechanism and California’s cap-and-trade programme are

other potential sources of demand. Further US state-level offsetting programmes may develop

under the federal Clean Power Plan. Parties to the UNFCCC may also choose to use

international offsets including REDD+ to meet their 2020 or 2030 mitigation targets.45,46

The next few years will provide important “proof of concept” for REDD+ as a value-for-money,

politically feasible and environmentally effective mechanism for reducing emissions and

delivering other important co-benefits. While REDD+ payments are not intended to be made in

perpetuity, they will play an important bridging role in supporting the low-carbon transformation,

including long-term sustainable land-use practices.47

Lessons from early implementation of REDD+ initiatives

DECC’s future finance for forests will need to take into consideration lessons learned from early

implementation of REDD+. These lessons include:

Importance of political commitment and leadership. Ownership of a shared REDD+ or Low-

Emission Development (LED) vision by political leaders and other key stakeholders is essential

to program success. Political will of leaders has been central to success stories to date and is

reported by REDD+ practitioners as the single most important factor in success.48 Early

conceptions of REDD+ as a means to compensate countries and pay actors their “opportunity

costs” do not address the need to transform the development paradigm and may perpetuate

dependencies on external financing. Countries must view protection of high-value forest systems

as integral to achieving their long-term development goals.49

Importance of high levels of capacity. Large ‘jurisdictional’ REDD+ programmes can offer

significant economies of scale and do have the capacity to transform forest nations’ domestic

action.50,51 However they are also very complex, multi-sector and technical undertakings. They

38 New Climate Economy, Seizing the Global Opportunity, 2015 39 BioCarbon Fund, Private sector engagement approach available here 40 Ibid. 41 Eliasch, Climate Change: Financing Global Forests, 2008 42 Scaling Up Performance-Based Transfers to Reduce Tropical Deforestation, CGD Working Group report, in press 43 Forest Trends, State of Voluntary Carbon Markets, 2015 44 Based on DECC discussions with key government and NGO stakeholders 45 USAID, REDD+ Supply and Demand 2015-2025, 2015 46 Meridian Institute, Options for the EU to Generate Adequate, Predictable and Sustainable Financing for REDD+, 2015 47 Lee and Pirstorius, Impacts of REDD+ Finance, 2015 48 Ibid. 49 Fishbein and Lee, Early Lessons from jurisdictional REDD+ and Low Emission Development Programmes, Nature, 2015 50 CGD, The Indonesia-Norway REDD+ Agreement, 2015

15

present a significant coordination challenge. In many cases the capacity of forest nation

governments, local jurisdictions and delivery partners is insufficient to progress the design and

delivery of robust REDD+ programmes quickly. REDD+ practitioners report this as the single

greatest risk to successful delivery of their initiatives.52 DECC should consider how its existing

initiatives and further investments can help unblock this widespread capacity bottleneck.

REDD+ finance alone cannot address all the upfront investment needs. The scale and

flexibility of REDD+ finance does not yet meet all forest nation needs.53 Whilst there is evidence

that reducing deforestation is achievable in some cases at low cost and with high returns54 in

many cases both significant upfront and results-based finance will be required.55 Insufficient

financial resource is reported as the second greatest risk to successful delivery of REDD+

initiatives.56 Forest nations and delivery partners tend to raise their own financial stake in their

REDD+ programmes (through public budgets or by securing private finance) when they have

secured futures contracts for results-based payments. As it takes time to secure these contracts,

there is often a significant upfront investment gap which can set back implementation by several

years. In some jurisdictions there is a significant risk that policymakers and practitioners will lose

interest and enthusiasm for a programme if they are not seeing activity on the ground.57,58 DECC

should consider how existing or new initiatives could address this investment gap.

REDD+ finance would have more impact if better coordinated. The lack of coordination of

donor finance is cited by many recipient countries as a source of frustration, with overlapping

programmes, and different theories of change raising the administrative burden.59 This can even

occur within a single donor institution that has multiple but uncoordinated programs in a single

country or jurisdiction.60,61 To meet their finance needs, recipient governments are in some cases

applying to multiple funding mechanisms, for example: capacity building support through a local

development agency (e.g. DFID, GIZ or USAID); upfront support for forests programmes through

the Forest Investment Programme; and results-based finance through the FCPF Carbon Fund.62

The resources required to manage multiple sources of finance is particularly challenging for

least-developed countries and impacts absorptive capacity. The World Bank is responding to

this challenge by offering its clients a “programmatic approach”, forest and landscape financial

packages that provides seamless and more holistic support to countries.63 DECC continues to

work closely with key donors including Norway, Germany and the United States, but progress in

delivering more coordinated donor finance on the ground has been limited.

Delivery mechanisms also face capacity constraints Just as there are absorption constraints

for recipient countries, delivery vehicles themselves face resource constraints which limits the

pace and scale of expansion. Donors have pressed the World Bank to increase the resources to

speed up delivery of the Carbon Fund and ISFL, and there has been a recent expansion of

resource in the Carbon Finance Unit. The slow pace of implementation of existing programmes

and delivery of finance has been a source of frustration for many in the REDD+ community.

Maintaining current momentum and meeting future demand for REDD+ finance will require

multiple credible delivery mechanisms working at maximum capacity.

Importance of early learning and demonstration. Establishing solid delivery plans and

completing REDD+ ‘readiness’ preparations (e.g. MRV and safeguards) are important

precursors to REDD+ results-based payments. It takes time to put these building blocks in place.

51 New Climate Economy, 2015 52 Ibid. 53 IEG, Independent Review of the FCPF, 2012 54 New Climate Economy, 2015 55 Lee and Fishbein, Lessons from early implementation of jurisdictional REDD+, Nature, 2015 56 Ibid. 57 Ibid. 58 CGD, The Indonesia-Norway REDD+ Agreement, 2015 59

Lee and Pirstorius, Impacts of REDD+ Finance, 2015 60 Climate Focus report for the CIFs, Linkages between the Forest Investment Programme and REDD+ performance-based payments, 2015 61 Lee and Fishbein, Lessons from Early Implementation of Jurisdictional REDD, Nature, 2015 62 Climate Focus report for the CIFs, Linkages between the Forest Investment Programme and REDD+ performance-based payments, 2015 63 See readout of the Prince of Wales Forests Event January 2015 available here

16

However there is a pressing need to demonstrate that for countries that have advanced furthest

in readiness adequate and predictable results-based finance will flow.64 In addition as so little of

this finance has flowed to date there is relatively little available experience of the strengths and

potential pitfalls for different approaches to results-based payment. A concerted effort to

advance REDD+ jurisdictions at the cutting edge of ‘readiness’ could generate very valuable

lessons to inform the methods of a much larger body of support e.g. the FCPF and Green

Climate Fund.

REDD+ results-based finance approach has limitations. Results-based payment (R-BP) is

intended to improve efficiency of donor finance; recipients invest upfront and are only

compensated if measured results are achieved.65 This provides an incentive to maximise

benefits and minimise costs and places delivery decisions in the hands of recipients, increasing

their ‘ownership’ of projects.66 This approach to donor finance deliver suits interventions where

many indirect inputs are required, which are hard to account for, as is often the case in

multifaceted jurisdictional programmes to address deforestation.67 However there are some

practical challenges to applying a purist R-BP approach for REDD+. In some countries, the

upfront investment required is significant and difficult to secure. This is particularly challenging in

least-developed countries where government budgets are lower and capital harder to raise.68 It

is also challenging in countries where deforestation is harder to measure, particularly in the case

of high-forest-low-deforestation (HFLD) countries that have little historical deforestation but could

be expected to lose fairly substantial areas of forest under a BAU development trajectory.69

64 See for example: Global Canopy Programme, Interim Finance for REDD: The Need for a strategic intervention 2015-2020, 2014 65 Clist, 12 Principles of Payment By Results in International Development, University of Oxford, 2014 66 Draft CGD Working Group report , Scaling Up Performance-Based Transfers to Reduce Tropical Deforestation, unpublished 67 Clist, 12 Principles of Payment By Results in International Development, University of Oxford, 2014 68Fishbein and Lee, Early Lessons from jurisdictional REDD+ and Low Emission Development Programmes, Nature, 2015 69 Gustavo et al., No Forests Left Behind, PLOS Biology, 2007

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Annex E – Potential Sources of Future Demand for REDD+ Credits

The following information summarises the findings of the January 2015 report: REDD+ SUPPLY AND DEMAND 2015–2025 by the FOREST CARBON, MARKETS AND COMMUNITIES (FCMC) PROGRAM70 The report modelled the following demand scenarios: Status Quo demand represents the demand currently observable from the voluntary market and Japan along with fixed dollar funds from results-based programs including the Forest Carbon Partnership Facility’s Carbon Fund, Initiative for Sustainable Forest Landscapes, and REDD Early Movers. The per-tonne price assumption used for the fixed dollar funds impacts the demand in the Status Quo scenario. Results-based payments from Norway are considered separately within the Status Quo scenario.

The Compliance Growth demand scenario includes Status Quo plus the potential future demand from regulations or national credit purchases that may be seen in developed and developing countries along with potential demand from the aviation sector. The ambition of these policy measures drives variability in demand.

Blue Sky demand represents the most aggressive and least likely demand scenario and is based on strong domestic action by national governments to limit the impacts of climate change. The main

The demand estimates did not include the Green Climate Fund (GCF) as pledges and allocation of funding were unknown when the analysis was conducted. Assuming the GCF started operations during 2015–2025, demand for REDD+ could be expected to increase from this source. The report estimated that if US$1 billion of the GCF was spent on REDD+ at US$5 per ton, this action would create an additional 200 million metric tons of carbon dioxide equivalent (200 MtCO2e) in additional demand.

The demand estimates also did not include demand from any United Kingdom, Germany, and Norway pledge to scale up results-based payments.

Under the Compliance Growth scenario, the report found demand varied between 429 and 1,188 MtCO2e during the 2015–2025 period resulting in oversupply at low demand projections and undersupply at high demand projections. It estimated demand from Australia, aviation, California, and the U.S. Clean Power Plan. The report did not consider demand from Japan’s Joint Crediting Mechanism, which is another potential source of demand.

- Australia has removed its cap-and-trade bill but remains committed to meeting its 2020 greenhouse gas (GHG) emissions target of 5 percent below the 2000 levels. This target implies a potential cumulative shortfall of 421 MtCO2e during the 2014–2020 period, which could be made up of a mix of international and domestic actions, including REDD+.

- International aviation is moving toward a market-based mechanism to achieve carbon neutrality from 2020. If REDD+ offsets are included, this shift could generate up 142 MtCO2e in new demand during the outlook period.

- California already has implemented cap-and-trade legislation that allows for the potential inclusion of REDD if additional rules are promulgated. California and Mexico recently signed a Memorandum of Understanding to enhance cooperation to reduce GHG emissions, which could spur a forest carbon market in California.

70 Accessible here

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- The United States Administration proposes to limit carbon pollution via the Clean Power Plan, which may add to demand. Potential litigation may block or create delays for this initiative.”

Under the Blue Sky demand scenario, it estimated 3.5 GtCO2e during the 2015–2025 period. The Expanding Supply scenario captures the impact of significant new programmatic supply potential from the GCF (442.1 MtCO2e – (excluding Brazil) and Brazil (4,380.30 MtCO2e total, including 2,978.30 MtCO2e claimed from states participating in the GCF). Together, the potential Expanded Supply adds 4.8 GtCO2e in total during the 2015–2025 period). This amount is added to Potential Supply to achieve a total supply of 5.4 GtCO2e (490.9 MtCO2eq/yr).

However, the report noted that at present the Brazilian federal government is not claiming that its national reductions are offsets or credits and currently does not seek to bring them to market. It is also unclear if the Brazilian states participating in the GCF will be able to bring some or all of the emission reductions generated at the national level to market through state-level REDD+ initiatives. Acre is the most likely and is included in the Potential Supply scenario.

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Annex F – Results-based Payment Approaches

1. Results-based payment (R-BP) has the capacity to improve the efficiency of programmes by

linking support to performance against pre-agreed measures. In a pure R-BP architecture

recipients must invest first and will only be compensated if measured results are achieved.71

This provides an incentive to maximise benefits and minimise costs. It also places delivery

decisions in the hands of recipients, increasing their ‘ownership’ of projects.72,73 It may be

most appropriate where many indirect inputs are required as part of the intervention which

may be hard to account for – as is often the case in multifaceted jurisdictional programmes to

address deforestation.74

2. R-BP approaches have been applied successfully to other aid sectors most notably in health

and education. Some examples are below.

Health sector Education sector

GAVI Immunisation Services Support, DFID

Reproductive Health Voucher Programme,

KfW

Green Star Maternal Health Voucher System,

USAID

Cash-On-Delivery Ethiopia pilot, DFID

Rwanda education sector budget support,

DFID

3. DFID’s Chief Economist worked with Paul Clist of the University of Oxford to define 12

principles for the application of Results-Based Payment to aid projects. Several of these

principles are relevant to REDD+ as illustrated below.

Principle Read across to REDD+

The performance measure should accurately

reflect the underlying variable of interest

In REDD+ forest cover is used as a proxy for

changes in CO2 emissions. Correlation is very

high.

The potentially distortive effects of focussing

on a particular performance metric should be

handled carefully to avoid negative unintended

consequences.

It is for this reason that REDD+ initiatives

employ rigorous safeguard systems.

R-BP is more appropriate where there is low

observability of effort e.g. where monitoring of

actions/inputs is difficult or costly.

For complex jurisdictional REDD+ programmes

a multiplicity of activities is normally required.

Incentive programmes aimed at direct agents

of deforestation may be easier to account for.

Policy reforms and governance improvements

less so.

If a donor can only contract over a relatively

short time horizon (e.g. under five years) the

control of the recipient may be low.

REDD+ R-BP contracts are typically for at

least five years. Many are much longer for

example the BioCarbon Fund will agree

contracts of 10 years or more.

4. Reviewers of REDD+ initiatives show that they have succeeded to draw the substantial

political and social attention needed to make a big difference in reducing deforestation, both

in countries providing transfers as well as those receiving them.75 Performance-based

agreements can provide policymakers with a clear centerpiece for building domestic

71 Clist, 12 Principles of Payment By Results in International Development, University of Oxford, 2014 72 CGD Working Group report , Scaling Up Performance-Based Transfers to Reduce Tropical Deforestation, in press 73 Birdsall and Savedoff, CGD, accessed here 74 Clist, 12 Principles of Payment By Results in International Development, University of Oxford, 2014 75 CGD Working Group report , Scaling Up Performance-Based Transfers to Reduce Tropical Deforestation, in press

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consensus on priorities and goals in the land use sector and entail a level of transparency

that can help domestic champions to monitor progress and maintain support.76

5. The Norwegian partnerships show that the payment needs to be large enough to make it

worth a country’s effort to take the difficult political and institutional measures needed to

change behaviours, but it does not need to fully compensate for costs undertaken or

opportunities missed to influence decisions substantially.77

6. With relatively little money (compared to $140 billion in ODA) and little risk of loss of money,

results-based funding to reduce deforestation has had influence in Guyana and Indonesia

just by having it on the table. The public visibility and transparency of the agreement (e.g

Norway agreements are published on both funder and recipient websites) gives credibility to

the political commitment to take the difficult measures needed to achieve results.78

7. R-BP is needed in greater volumes increase the ambition and success of REDD+

programmes.79,80 However there are some particular forest nation circumstances where their

application faces greater challenges. The first is where significant upfront investment is

required and difficult to secure. This may be a more common situation in some of the poorest

forest nations where budgets are lower and capital harder to raise.81 The second is where

deforestation is harder to measure, particularly in the case of high-forest-low-deforestation

(HFLD) countries that have little historical deforestation but could be expected to lose fairly

substantial areas of forest under a BAU development trajectory.

76 Perakis and Savedoff, Does Results-based Aid Change Anything?, 2015 77 CGD Working Group report , Scaling Up Performance-Based Transfers to Reduce Tropical Deforestation, in press 78 Ibid. 79 The New Climate Economy, Better Growth Better Climate, 2014 80 CGD Working Group report , Scaling Up Performance-Based Transfers to Reduce Tropical Deforestation, in press 81Fishbein and Lee, Early Lessons from jurisdictional REDD+ and Low Emission Development Programmes, Nature, 2015

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Annex G – Existing REM programme in Acre

1. The Brazilian state of Acre has rapidly reduced its deforestation by 60% while growing its

economy at twice the Brazilian average and significantly improving performance against

social indicators of development such as infant mortality and illiteracy. It has done so with a

progressive state government, re-elected to five consecutive terms since 1998, committed to

governance improvement, consolidating sustainable growth in already-deforested areas and

enforcing legal protection of standing forest. 87% of the state remains primary tropical

rainforest under increasing levels of legal protection.82

2. The state has not yet achieved its zero deforestation ambition. It has identified a substantial

shortfall in the available state budget, relative to the costs of up-scaled incentive

programmes that would be required to complete the transition to zero-deforestation.83

3. To address this need Acre approached KfW’s REM programme and negotiated a $25m

contract for support based on verified emission reductions which will be used as follows: (i)

70% allocated to projects with direct agents of deforestation and forest conservation

including rubber tappers, Brazil nut collectors, fisheries (ii) 30% to support government

initiatives to reduce deforestation.

4. The programme has progressed strongly with REM disbursing all of its funding early (after

circa. two years) and now seeking additional donor support to continue the partnership.

82 Environmental Defense Fund, Acre: Low-emissions, high-growth sustainable development in the Amazon, 2015 83 Ibid.

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Annex H – Major Multilateral REDD+ Funds

1. Below is a summary of the main features of the funds. The team that developed the business

case analysed a much larger set of information, which is available on request.

The UN REDD Programme

2. UN REDD is a joint Food and Agriculture Organisation (FAO), United Nations Development

Programme (UNDP) and United Nations Environment Programme (UNEP) initiative. It

provides REDD+ ‘phase I’ (readiness) support, including technical assistance to help

elaborate REDD+ plans, building capacity for MRV, stakeholder engagement, management

of co-benefits, national-level REDD+ governance, financial management and knowledge-

sharing.84 The REDD programme is developing a new strategy for 2016-2020, proposals for

that include maintaining focus on establishing national REDD+ readiness and streamlining

governance.85

3. Operational since 2007, the programme has 63 registered partner countries, 24 with

approved funding allocations, 18 of which are in implementation. There is scope within

existing funding to allocate funds to one more country programme. Committed donor funding

is $240m from 6 donors, with Norway’s share by far the majority stake at $210m. There is

currently no UK contribution to the fund. The average allocation to forest nations, net of

admin costs, is $9m.86

The Forest Investment Programme

4. FIP is a funding window of the Climate Investment Funds (CIFs). It is delivered through the

CIFs’ Multilateral Development Bank partners (MDBs). A small proportion of its support

assists countries develop investment plans to reduce deforestation. The larger proportion of

its funding is upfront grants incentivise successful delivery of these investment plans. Typical

activities funded include support for sustainable forestry, non-timber forest enterprises, low-

deforestation agricultural practices, strengthened forest governance, and institutional

capacity building.87 This could be classed as a mix of REDD+ phase I (readiness) and phase

II (implementation) support with the majority the latter. Implementation is led by forest nation

governments or other local delivery leads.

5. Operational since 2009 FIP has allocated all of its current $785 financial commitments to 14

countries. Allocations of grants to support countries’ investment plans range from $30-60m.

$13.9m (c. 2%) of total funds had been disbursed to forest nations as of December 31

2014.88 The FIP has 8 donors, with the UK the second largest at a share of £223m (30% of

total funds).

The BioCarbon Fund Initiative for Sustainable Forested Landscapes (ISFL)

6. The BioCarbon Fund ISLF is a multilateral initiative delivered by the World Bank. The

objective of the Fund is to promote and reward reduced greenhouse gas emissions in

multiple sectors (focused on addressing deforestation but also incentivising climate smart

agriculture and even energy low-carbon projects) in an integrated ‘landscape’ approach. The

ISFL has two tranches of support (i) BioCF+ which supports planning, capacity building and

piloting of a landscape plan (mainly REDD+ phase I) and (ii) T3 results-based payments for

verified emission reductions (phase III). Implementation is a mixture of Bank and recipient-

executed funding with emphasis on the latter. The programme targets jurisdictions with high

interest from major progressive private sector commodity supply chains, aiming to leverage

support in public-private partnerships.89

84 External evaluation of the UN REDD Programme, 2014 85 The UN-REDD Programme: draft strategic framework 2016-2020, 2015 86 UNDP factsheet available here 87 CIF 2014 Annual Report available here 88 World Bank data available at here 89 See BioCarbon Fund ISFL website here

23

7. Operation since 2013, the ISFL is targeting support at 4-5 countries with high levels of

readiness, significant ambition to reduce deforestation and significant potential for public-

private partnerships. Total commitments to date are $363m, 24% in BioCF+ and 76% in T3.

It has four donors with the UK (DECC and Defra) the largest at $117m (49% burden share).

Funding is notionally fully allocated (though not yet legally committed) to four countries

(Colombia, Ethiopia, Indonesia, Zambia), an average programme size of $90m before

deduction of admin costs. At current funding levels the ISFL may be able to partner with one

additional country to achieve a reasonable level of over-programming as a mitigation for

under delivery risk.90

The Forest Carbon Partnership Facility (FCPF)

8. FCPF is another multilateral initiative delivered by the World Bank, the most widely-

subscribed REDD+ mechanism to include a results-based payment component. It assists

forest nations with technical assistance grants to build REDD+ strategies and take REDD+

readiness steps (e.g. establishing MRV systems) though the FCPF ‘Readiness Fund’

(REDD+ phase I). It also provides results-based payments for verified emission reductions

through the FCPF Carbon Fund (phase III) to incentivise delivery of ambitious REDD+ plans.

Plans are executed by forest nations and their local delivery partners. FCPF works at

national and subnational scale with forest nation governments and delivery partners

responsible for delivery.

9. The FCPF Readiness Fund (FCPF-R) currently totals $369m from 15 donors, with Norway

the largest at $113m and the UK a minor donor at $5.8m. The Carbon Fund (FCPF-C) is

larger at $451.2m and the UK has a more significant stake in it of $84.5m (third behind

Norway and Germany - 18% burden share). 47 forest nations are partnered with FCPF-R

with 32 receiving grants.91. FCPF-C has over-programmed the pipeline for carbon payment

with 11 country programmes accepted but with funding presently committed sufficient for 8-9

(average contract size of c $60m). A further 5-10 bids to FCPF-C are expected in October so

donors (including DECC) are considering if additional funding can be made available.

The REDD for Early Movers Programme (REM)

10. REM is currently small bilateral initiative delivered by KfW but planning to upscale and work

with other donors. REM promotes increased ambition and delivery of REDD+ plans in the

most advanced forest nations. It selects jurisdictions with high emission reduction potential,

high levels of REDD+ readiness, strong political commitment to addressing deforestation and

strong evidence of the feasibility of achieving results in the near term. It is different to other

REDD+ initiative. It makes payments almost immediately to help address the upfront

investment needs of REDD+ programmes but with a results-based conditionality that

incentivises strong forest nation ‘own contribution’. REM assesses the jurisdiction’s REDD+

plan and identifies areas where donor investment could be deployed effectively to generate

additional benefits and take the programme further. It caps these investments on the basis of

deforestation result, establishing the systems of results-based payment. Delivery is assured

by KfW but the responsibility of the forest nation and its delivery partners.

11. Operational since 2013 REM is funded by the German Ministry BMZ and has one operational

$25m programme in Acre, Brazil. REM aims to focus intensive engagement with a further c.

5 further “early movers”, but will require additional funds to do so. Norway has recently

pledged additional funds to help upscale the programme (with an initial allocation of $50m);

BMZ also plan to upscale funding. Future windows are expected to be significantly larger in

scale than Acre’s so present commitments of funding are insufficient for even one additional

programme.

90 DECC, Annual Review of the BioCarbon Fund, 2015 91 See FCPF website here