ANNUAL REPORT for FISCAL YEAR 2011

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THE FOREST CARBON PARTNERSHIP FACILITY

Demonstrating activities that reduce emissions from deforestation and forest degradation

This report covers the Forest Carbon Partnership Facility for the period from July 1, 2010 through June 30, 2011, referred to as fiscal year 2011 or FY11.An online version of the report is available at www.forestcarbonpartnership.orgNote: All dollar amounts are in U.S. dollars (US$) unless otherwise indicated.

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Acronyms

AusAid AustralianAgencyforInternationalDevelopmentAWG-LCA AdHocWorkingGrouponLong-termCooperativeAction(underUNFCCC)CAR CentralAfricanRepublicCF CarbonFundCOP ConferenceoftheParties(totheUNFCCC)CSO CivilSocietyOrganizationDPs DeliveryPartnersDRC DemocraticRepublicofCongoER EmissionReductionER-PIN EmissionReductionsProgramIdeaNoteERPA EmissionReductionsPaymentAgreementESMF EnvironmentalandSocialManagementFrameworkFCPF ForestCarbonPartnershipFacilityFIP ForestInvestmentProgramFMT FacilityManagementTeamFY FiscalYear(WorldBankfiscalyear,July1throughJune30)GEF GlobalEnvironmentFacilityIDB Inter-AmericanDevelopmentBankIPCC IntergovernmentalPanelonClimateChangeIPProgram IndigenousPeoplesandotherForestDwellersCapacityBuildingProgramLaoPDR LaoPeople’sDemocraticRepublicMRV Measurement,Reporting,andVerificationNGO Non-GovernmentalOrganizationOECD/DAC OrganisationforEconomicCo-operationandDevelopment’sDevelopment AssistanceCommitteeOP OperationalPolicy(oftheWorldBank)PA ParticipantsAssemblyPC ParticipantsCommitteeREDD ReducingEmissionsfromDeforestationandForestDegradationREDD+ REDDplusconservationofforestcarbonstocks,sustainablemanagementofforests, andenhancementofforestcarbonstocksREL ReferenceEmissionLevelR-PP ReadinessPreparationProposalSBSTA SubsidiaryBodyforScientificandTechnologicalAdvice(underUNFCCC)SESA StrategicEnvironmentalandSocialAssessmentSFM SustainableForestManagementTAP TechnicalAdvisoryPanelUNDP UnitedNationsDevelopmentProgrammeUNFCCC UnitedNationsFrameworkConventiononClimateChangeUN-REDD UnitedNationsCollaborativeProgrammeonReducingEmissionsfromDeforestation andForestDegradationinDevelopingCountriesWBI WorldBankInstitute

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C O N T E N T S

EXECUTIVE SUMMARY 5

1. TURNING POINT 7

1.1 Increased Momentum and Resources for REDD+ 8

1.2 Increased Ownership 10

1.3 Leveraging Strengths of Partners 14

2. STRENGThENING REDD+, ACCElERATING lEARNING 19

2.1 Fast-start learning 19

2.2 Building on the International Framework for REDD+ 27

2.3 Knowledge Sharing and Capacity Building 29

3. ThE CARBON FUND 33

3.1 From Readiness to Performance-Based Payments 33

3.2 Operationalizing the Carbon Fund 34

4. FY11 FINANCIAl REPORT OF ThE FACIlITY 37

4.1 The FCPF Budget Process 37

4.2 The Readiness Fund 37

4.3 The Carbon Fund 44

5. CONClUSIONS AND ThE ROAD AhEAD 47

Contents

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ThisreportmarksthethirdyearofimplementationoftheFCPF.ThefirstthreeyearshaveseenthedevelopmentoftheFCPFandREDD+attheglobalandnationallevels.RemarkableprogresswasachievedintheUNFCCC,aninternationalREDD+Partnershipwasestablished,andglobalinitiativessuchastheFCPF,theUN-REDDProgramme,theForestInvestmentProgrammeandtheGEF’snewSFM/REDD+windowweresetuptoassistforestcountriesintacklingtheREDD+challenge.Underthisnewinternationalframework,dozensofforestcountrieshavestartedformulatingbroadstrategiesandinvestinginactivitiesontheground.

ExecutiveSummary

TheFCPFhasbecomeacentralpieceinthenewREDD+institutionallandscape.IthascreatedanormativeframeworkforREDD+Readinesscenteredontherobustassessmentofcountry-ownedproposals,fostereddomesticthinkingaboutandactionforREDD+,andincentivizedgreatercooperationamongnationalandinternationalentities.ThepastyearsawtheFCPFachievesomekeymilestonesincludingthesigningofthefirstReadinesspreparationgrantsforseveralforestcountries,theadoptionoftheCommonApproachtosafeguardsamongMultipleDeliveryPartnersundertheReadinessFund,thestartofoperationsoftheCarbonFund,andthecompletionofthefirstevaluationoftheFacility. TheCarbonFundhasnowentereditsoperationalphaseandwillprovideperformance-basedpaymentstoaboutfiveprogramsfromcountriesthathavemadesignificantprogresstowardsREDD+Readiness.EmissionReductionsPaymentAgreementswillonlybeenteredintoundertheCarbonFundforprogramsfromREDDCountryParticipantswhoseReadinessPackagehasbeenassessedbytheParticipantsCommittee.TheCarbonFundwillthusofferadditionalincentivesforcountriestogetreadyforREDD+andundertakethenecessaryinvestmentsaswellaspolicyandregulatoryadjustments. ThefirstevaluationoftheFCPFhasnowbeencomplet-ed,whichrevealsthemainstrengthsandweaknessesoftheFCPF.Thestrengthsoftheinitiativeincludethecapac-itythatisbeingbuiltforREDD+incountries;theestablish-mentofacommonframeworkforReadiness;atranspar-entandeffectivegovernancestructure;therecognitionofcountryownership,theleadroleofcountrygovernmentsinthecontextofREDD+;thefacilitationofgreaterdonorcoordination;andthecreationofaspaceforIndigenousPeoples,localcommunitiesandcivilsocietytoengageinforestsectorreformsandotherreformsrelevanttoREDD+.

TheFacility’smainweaknesseshavebeentheslowpaceoffinancialcommitmentsanddisbursementsfromtheFCPFReadinessFund;theflatrateofFCPFgrantsregardlessofneeds;thelackofin-countryprocurementcapacity;theneedformoreWorldBankstafftoworkontheFCPFatthecountrylevel;insufficientcommunicationsandoutreachabouttheFCPF;andthecreationofunrealisticexpectationsastothescaleandtimingofREDD+benefits. TheseweaknessesarealreadybeingaddressedinavarietyofwaysbytheFacilityManagementTeam—throughtheaccelerationofduediligenceonReadinessgrantswherefeasible;theopeningoftheReadinessFundtoDeliveryPartnersotherthantheWorldBank(toenhanceReadinessservicecoverage)combinedwiththereinforcementofWorldBankstaffworkingonFCPFoperations;thepossiblevaryingofgrantsizeinaccordancewithneeds;thesupporttoin-countryprocurementexperts;andtherecruitmentofcommunicationsstaffdedicatedtotheFCPF. Theabovemeasuresshouldaddresstheweaknesseswithoutcompromisingquality.Inparticular,theCommonApproachtosafeguardsapprovedbytheParticipantsCommitteeinJune2011createsalevelplayingfieldamongDeliveryPartners.OncetheyenterintoTransferAgreementswiththeWorldBank—whoactsastrusteeoftheFCPFReadinessFund—theywillbeoperatingunderaframeworkthatensuressubstantialequivalencewiththeWorldBank’ssocialandenvironmentalsafeguardspoliciesandproceduresapplicabletotheFCPF. Thenextyearwillpresentnewchallengesandexcitingopportunities,amongwhichthequestionsastohowtooptimizeresourcesallocationwithintheFCPF,whethertoreopentheFCPFtomoreREDDCountryParticipants,andhowtomeasurecountryprogresstowardsREDD+Readinesswillbeparamount.

The past year saw the FCPF achieve some key milestones including the signing of the first Readiness preparation grants for several forest countries... the start of operations of the Carbon Fund, and the completion of the first evaluation of the Facility.

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TheForestCarbonPartnershipFacility(FCPF)isaglobalpartnershipfocusedonreducingemissionsfromdeforestationandforestdegradation,forestcarbonstockconservation,thesustainablemanagementofforests,andtheenhancementofforestcarbonstocksindevelopingcountries(commonlyreferredtoasREDD+).TheFCPFcomplementstheUNFCCCnegotiationsonREDD+bydemonstratinghowREDD+canbeappliedatthecountrylevelandbydrawinglessonsfromthisearlyimplementationphase.

TurningPoint

TheFCPFconsistsoftwoseparatemechanisms,eachunderpinnedbyamulti-donorfund—theReadiness FundandtheCarbon Fund.Governmentsandprivateorpublicentitiesmakingtheminimumfinancialcontribution(US$5million)totheReadinessFundareknownasDonor Participantswhilegovernmentsandprivateorpublicentitiesmakingtheminimumfinancialcontribution(US$5million)totheCarbonFundareknownasCarbon Fund Participants.ThedevelopingcountriesparticipatingintheFCPFareknownasREDD+ Country Participants.

The Facility pursues four strategic objectives:

(a) ToassistcountriesintheirREDD+effortsby providingthemwithfinancialandtechnical assistanceinbuildingtheircapacitytobenefit frompossiblefuturesystemsofpositiveincentives forREDD+;

(b) Topilotaperformance-basedpaymentsystem forREDD+activities,withaviewtoensuring equitablebenefitsharingandpromotingfuture large-scalepositiveincentivesforREDD+;

(c) WithintheapproachtoREDD+,totestwaysto sustainorenhancelivelihoodsoflocal communitiesandtoconservebiodiversity;and

(d) Todisseminatebroadlytheknowledgegainedinthe developmentoftheFacilityandtheimplementation ofReadinessPreparationProposals(R-PPs)and EmissionReductions(ER)Programs.

Toachievetheseobjectives,theFCPFReadiness Fund supportsparticipatingcountriesintheirpreparationforREDD+astheydevelopthenecessarypoliciesandsystems,inparticularbyadoptingnationalstrategies;developreferenceemissionlevels(RELs);designMeasurement,Reporting,andVerification(MRV)systems;andsetupREDD+nationalmanagementarrangements,including

theproperenvironmentalandsocialsafeguards.TheFCPFCarbon Fund,inturn,willprovideperformance-basedpaymentsforverifiedEmissionReductionsfromREDD+programsincountriesthathavemadeconsiderableprogresstowardsREDD+Readiness. TheFCPFcompleteditsthirdfullyearofoperationonJune30,2011.Thispastyear(FY11)wasmarkedbysomeimportantdevelopmentsonthepathfromREDD+Readinesstocarbonfinance.

Highlights from FY11 include the following:

> ThreecountriessignedReadinessPreparation grantagreements:theDemocraticRepublicof Congo(DRC),Indonesia,andNepal;

> EightcountriessubmittedR-PPsforformal assessmentandwereallocatedgrantfunding bytheParticipantsCommittee(PC),withthree morecountriespresentingdraftR-PPs.Asofthe endofFY11,atotalof24countrieshadeither submittedR-PPsforformalassessmentor presenteddraftR-PPs,andalmostUS$65million hadbeenallocatedinReadinessPreparationgrants to18countries;1

> ACommonApproachtoEnvironmentaland SocialSafeguards(the“CommonApproach”)for MultipleDeliveryPartnerswasapproved,allowing theFCPFtoleveragestrengthsofentitiesother thantheWorldBank,namelymultilateral developmentbanksandUNagencies,toenhance thecoverageofReadinessservicestoREDD+ countries;

The FCPF also continues to serve as a forum for exchanging ideas, information, and building capacity for the global REDD+ community.

1Tanzaniaisamongthe19countrieshavingsubmitteditsR-PPfor formalassessmentbutitdidnotrequestagrantallocation.

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> TheFCPFcompleteditsfirstprogramevaluation whichyieldedanassessmentofprogressmadeso farandguidanceonhowtostrengthentheFCPF; and

> TheCarbonFundbecamefullyoperationalinMay 2011,bringingtobearthesecondmechanismof theFacility,whichisessentialinproviding incentivesforvaluingstandingforests.

ThesedevelopmentshavebroughttheFCPFtoaturningpoint.WhilethefirstthreeyearsweremostlydedicatedtoestablishingtherightframeworksandprocessestoensurethatREDD+wasbeingtackledinacomprehensivefashion,theattentionisnowturningtotheimplementationofnationalReadinessprogramsandtheinitiationofperformance-basedincentivesystems. Inaddition,theFCPFmobilizedmorefundingforREDD+,bringingtotalcommittedandpledgedfundingforthetwofundsasofJune30,2011toUS$444million,representingasignificantportionoftotalmultilateralREDD+funding. Furthermore,theFCPFalsocontinuedtoserveasaforumforexchangingideas,information,andbuildingcapacityfortheglobalREDD+community. Asinpreviousyears,theFCPFalsosupportedanumberofcapacity-buildingactivitiesamongIndigenousPeoplesanddeepenedtheunderstandingofthesocialdimensionofREDD+throughcountryR-PPsubmissionsandexchangesheldwithrepresentativesofforest-dependentIndigenousPeoplesandlocalcommunitiesattheglobal,regional,andnationallevels.

1.1. Increased Momentum and Resources for REDD+

1.1.1. Setting Sail: Eight New Allocations

DuringFY11theR-PPformulationgrantscontinuedtobeexpended(seeFigure1)andthefocusincreasedontheformulationandpresentationofcountryR-PPs.TheseR-PPssymbolizedsignificantachievementsforeachofthesubmittingREDD+countriesastheyplayacriticalroleincreatinganationaldialogueonREDD+,bringtogethernationalstakeholders,andprovidearoadmapforgoingforward.EightcountriespresentedtheirR-PPsforformalassessment(Cambodia,Ethiopia,LaoPDR,Liberia,Peru,Tanzania,Uganda,andVietnam).Oftheseeight,allexceptTanzania,whichhasalternativebilateralfunding,wereallocatedReadinessgrants.ThreemorecountriespresenteddraftR-PPs(CentralAfricanRepublic(CAR),Colombia,andNicaragua).

1.1.2. Grants for Readiness

AsamajorstepforwardintheReadinessprocess,ReadinessPreparationgrantagreementsweresignedwiththeDRC,Indonesia,andNepal.ThiswasmadepossiblebytheapprovalofWorldBankmanagementandBoardofExecutiveDirectorsofthesafeguardsapproachtobefollowedundertheFCPFReadinessFund,consistingofaStrategicEnvironmentalandSocialAssessment(SESA)andanEnvironmentalandSocialManagementFramework(ESMF). Inaddition,PC7decidedtosmooththedisbursementprocessofReadinessPreparationgrantsbynolonger

dividingthegrantsintotwoinstallments,wherethelatterinstallmentwasonlyreleasedaftersubmissionofaprogressreportonutilizationofthefirstUS$2milliondisbursement.Thesedevelopmentsareexpectedtoexpeditethegrantdeliveryprocess. TheduediligenceproceededforcountrieswhoseR-PPswereassessedbythePCandstepsweretakentoaddresstherequirementsincludedinthePCresolutions.

1.1.3. Additional Funding for Readiness

FY11alsosawtheincreasedcapitalizationoftheReadinessFund,withnewcommitmentsfromCanada(US$41.4million),Germany(US$26.0million),andItaly(US$5million).ThesethreecountriesthusbecameDonorParticipants.Inaddition,Agence Française de DéveloppementandFinlandincreasedtheircontributionstotheReadinessFundbyUS$5.8millioneach.GermanyandtheEuropeanCommissionalsomadepublicpledgesduringFY11,ofUS$14.5millionandUS$5.8millionrespectively,bringingthetotalamountcommittedandpledgedtotheReadinessFundasof30June,2011toUS$232million.

1.1.4. Moving towards Results-Based Payments

FY11wasawatershedyearfortheFCPFastheCarbonFundbecamefullyoperational.TwoconditionshadbeensetfortheoperationalizationoftheCarbonFund.First,aminimumcapitalizationofUS$40millionwasrequiredundertheFCPFCharter.Second,theearlyCarbonFundParticipantschosetowaituntilatleasttwoadditionalprivateentitieshadsignedParticipationAgreementstoensurethattheFundstartedoperationsasapublic-privatepartnership.ThefirstconditionwasmetinSeptember2010andthesecondinMay2011,withCDCClimatand

BPTechnologyVenturesjoiningtheCarbonFund,signal-ingthegrowingconfidenceoftheprivatesectorinREDD+.ThisdevelopmentallowedtheorganizationalmeetingoftheCarbonFundtotakeplacebeforetheendofFY11.ThemeetingagreedonthegoalsoftheFundatthethree-year,one-yearandsix-monthhorizons,approvedtheFY12bud-get,anddiscusseddraftRulesofProcedurefortheFund.Thisconcludedatwo-yearlongprocessofupdatingandadjustingthecontentsoftheFCPFInformationMemoran-dumchapterontheCarbonFund.TheresultingoperationalmodalitiesoftheCarbonFundwereconsignedtoanIssuesNote,finalizedinDecember2010,andanamendmenttotheFCPFCharter’sArticle12ontheCarbonFund. TheavailabilityofCarbonFundresourcestobeallocatedtofutureEmissionReductionsPaymentAgreements(ERPAs)isexpectedtoprovidefurtherincentivestocountriestoprogresssignificantlyandspeedilytowardsREDD+Readiness.

1.1.5. Country Implementation Support and Advisory Services

TheReadinessMechanismofferstechnicalassistancetoREDD+countriesintheformoftwocloselylinkedsetsofactivities:(1)CountryImplementationSupport,consist-ingofassistancewithR-PPpreparation,andfiduciaryandsafeguardsupportfromWorldBankcountryteams;and(2)CountryAdvisoryServices,comprisedofthecoordinationbyandfeedbackfromtheFacilityManagementTeam(FMT)andWorldBankstaffonaspectsofReadinesswork.VisitsbyWorldBankandFMTstaff,insomeREDDCountry ParticipantsjointlywithUN-REDDrepresentatives,haveprovideddirectonsitetechnicalinputascountriesad-vancetowardspreparationoftheReadinessPreparation

Figure 1: Formulation Grant Disbursement by REDD Country Participant (US$, thousands)

Uganda

Republic of Congo

Nepal

Liberia

Lao PDR

Kenya

Ghana

Ethiopia

DRC

Costa Rica

Colombia

Cameroon

40 140

87 108

nActualCash Disbursement FY10

nActualCash Disbursement FY11

Disbursed FY10 $959Disbursed FY11 $1,082

TOTAL Disbursed to end of FY11 $2,041

91 109

75

50

200

100

177

139

134

55

123

169

107

100

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55

180

195

200

182

173

169

200

191

200

161

134

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PC Bureau

Argentina

Australia

Cambodia

DemocraticRepublicofCongo

Germany

Guatemala

Kenya

UnitedStatesofAmerica

Table 2: Composition of the PC Bureau as of June 30, 2011

FCPF Financial Contributors

Agence Française de Développement

Australia

BPTechnologyVentures

Canada

CDCClimat

Denmark

EuropeanCommission

Finland

Germany

Italy

Japan

Netherlands

Norway

Spain

Switzerland

TheNatureConservancy

UnitedKingdom

UnitedStatesofAmerica

Table 3: Financial Contributors to the FCPF (Donor Participants and Carbon Fund Participants) as of June 30, 2011

proposalsandachievingREDD+Readiness.TheFMTstaffparticipatedandprovidedfeedbackinnationalworkshopsorganizedbygovernmentsinREDDCountryParticipants.ThematicworkshopshavealsobeenorganizedbytheFMTincollaborationwiththeWorldBankInstitute(WBI),suchasseveralworkshopsonopportunitycostsofREDD,aSESAworkshopinLatinAmerica,knowledge-sharingses-sionsviawebinarsorganizedbyotherorganizations,andvideoconferencesessionswithREDD+teamsincountries.

1.2. Increased Ownership

1.2.1. A Country-Driven Partnership

TheFCPFwasamongthefirstglobalpartnershipstoadoptaninnovativegovernancestructureinwhichdevelopingcountrieshavethesamevoiceasfinancialcontributors,withadecision-makingprocessthatincludesawidespectrumofobservers,includingforest-dependentIndigenousPeoplesandotherforestdwellersandcivilsocietyandnon-governmentalorganizationsfromnorthandsouth.ThisopenplatformhasgeneratedtrustandacooperativespirittoadvancetheworkoftheFCPFandtheglobalREDD+agenda,moregenerally. AkeysignalofthiswillingnesstoworktogetherhasbeentheactiveparticipationbyREDD+CountryParticipantsandfinancialcontributorsinthePCmeetings.

Byco-chairingthePCmeetingsandformingcontactgroupstodiscussissuesingreaterdetail,REDD+CountryParticipantshavetakengreaterresponsibilityfortheprocess.Forexample,thePCformedcontactgroupstodiscussindividualR-PPsandworkinggroupstoprovideguidanceonimplementingrecommendationsoftheFCPFprogramevaluation. Similarly,tomakethePCBureaugeographicallybalanced,MexicointroducedaproposaltoincreasethenumberofREDDCountryParticipants.Afterdiscussion,thePCdecidedtohaveatotalofuptoeightmembers,fiverepresentativesfromREDDCountryParticipantsandthreefromfinancialcontributors(eitherDonorParticipantsorCarbonFundParticipants). TheentryofCDCClimatandBPTechnologyVenturesallowedtheCarbonFundtobecomefullyoperationalandreachacapitalizationlevelatthecloseofFY11ofapproximatelyUS$174million,withadditionalpledgesfromGermanyandSwitzerlandbringingthetotalcommittedandpledgedtotheCarbonFundasofJune30,2011toUS$212million.InlightofotherpledgestotheCarbonFundandtheaimofattractingfurtherprivatesectorfunding,thePCalsoapprovedtheFMT’sproposaltorequesttheWorldBankBoardofExecutiveDirectorsforanincreaseintheauthorizedcapitalizationofboththeReadinessFundandCarbonFund.

REDD Countries Donor and Carbon Fund Participants Observers to the PC

Argentina Agence Française de Développement Forest-DependentIndigenousPeoplesandForestDwellers

Cambodia Australia InternationalOrganizations

Colombia Canadaa Non-GovernmentalOrganizations

CostaRica EuropeanCommission PrivateSector

DemocraticRepublicofCongo Finland UNFCCCSecretariat

Ethiopia Germany UN-REDDProgramme

Gabon Japan

Nepal Netherlands

Guatemala Norway

Kenya Spain

Mexico Switzerland

Paraguay TheNatureConservancy

Thailand UnitedKingdom

Uganda UnitedStatesofAmerica

1.2.2. Engaging Observers and Indigenous Peoples

Somenon-governmentalactorsmaybeuniquelypositionedtocontributetotheReadinessprocess.TheycontinuetobringinviewsandinsightsthataddvaluetocountrypreparationeffortsandhelpshapethediscourseonhowtoachieveREDD+Readiness.ThoughobserversdonothaveformalvotingrightsintheFCPF’sgovernancestructure,thenormofreachingdecisionsthroughconsensushasempoweredthemtoplayaconstructiveroleintheFCPF.TheFCPFcontinuestorecognizetheimportantrolethatstakeholdersplayandsupportstheirparticipationbyfinancialandtechnicalmeans.Forest-dependentIndigenousPeoplesandotherforestdwellerrepresentativesconductedaself-selectionprocessinwhichAfricachosetworepresentatives(onefromFrancophoneAfricaandonefromAnglophoneAfrica);Asianominatedonerepresentativefortheregion;andLatinAmericanominatedtworepresentatives(onefromSouthAmericaandonefromCentralAmerica).TheresultswerepresentedtoPC9.TheapprovedbudgetforFY12thusincludesresourcestosupporttheparticipationoffiveregionalforest-dependentIndigenousPeoplesandotherforestdwellers’representatives. TheIndigenousPeoplesandForestDwellersCapacityBuildingProgramcontinuestostrengthenforest-dependentpeoples’participationinnationalReadinessprocesses.TheprogramenablesthedevelopmentofinclusiveandaccountablenationalstrategiesandprogramsbyenhancingunderstandingofREDD+andclimatechangeandenablingtheiractiveengagementinnationalandinternationaldialogues.InFY09,thePCallocatedatotalofUS$1million(US$200,000peryearforFY09–FY13)totheprogram.InFY11,theprogramprovidedsupporttoawiderangeofactivities,asoutlinedbelow.

High-level dialogues on REDD+ with Indigenous Peoples (Washington, DC)

TheWorldBankVicePresidentforSustainableDevelopmenthostedtwohigh-leveldialogueswithIndigenousPeoplesleaders.ThefirstsessiontookplaceinWashington,DC,onNovember15,2010.ThesecondonewasheldundertheauspicesoftheUNPermanentForumonIndigenousIssuesinNewYork,onMay20,2011.TheIndigenousPeoplesparticipantswhoattendedthe

Table 1: Composition of the FCPF Participants Committee as of June 30, 2011

a.DenmarkwaselectedtothePCinNovember2010butvolunteeredtoresignasamemberofthePCinJune2011inorderthatCanadacould replacethemasamember.

TheIPProgramenablesthedevelopmentofinclusiveandaccountablenationalstrategiesandprogramsbyenhancing

understandingofREDD+andclimatechangeandenablingactiveengagementinnationalandinternationaldialogues.

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meetingsrepresentedfoursocio-culturalregionsasidentifiedbytheUNsystem—Africa,Asia,CentralandSouthAmerica,andtheRussianFederation.ThedirectdialogueformatofthemeetingsallowedtheIndigenousPeoplesparticipantstoarticulatetheirneedsandaspirationsdirectlytoWorldBankseniormanagement.TheimpactsofclimatechangeonIndigenousPeoplesaswellastheIndigenousPeoples’activeparticipationinREDD+wasnotedalongwiththeneedtocontinuediscussionsonfree,prior,andinformedconsent(FPIC),particularlyastheWorldBankisupdatingandconsolidatingitsenvironmentalandsocialsafeguards.TherewasagreementontheneedtocontinuethisdialoguebyholdingtwosessionseachyearwithIndigenousPeoplesrepresentativesnominatedthroughaself-selectionprocess. TheIndigenousPeoplesrepresentativesalsocalledfortheWorldBanktoorganizeaGlobalConsultationofIndigenousPeoplesontheFCPF.WorldBankseniormanagementrecognizedtheimportanceofsocialinclusionandparticipationofIndigenousPeoplesandotherforestcommunitiesinREDD+andendorsedtheIndigenousPeoples’request,whichwassubsequentlypresentedattheFCPFPC9meetinginOslo,inJune2011.ThePCendorsedthisrequestandtheGlobalConsultationwastotakeplacefromSeptember27-29,2011inPanama.ThiseventwillbereportedonatPC10andintheFY12AnnualReport.

COICA Workshop on Climate Change and REDD+ (Bolivia)

InAugust2010,theFCPFfundedaworkshopoftheCOICA,thecoordinatingentityofIndigenousPeoplesorganizationsoftheAmazonbasin,designedtobuildthecapacityofCOICAanditsmemberorganizationstoengageininternationalnegotiationsonclimatechangeandREDD+andseektoachieveoutcomesthatrecognizetraditionalknowledgeandtherightsofIndigenousPeoples.The

workshoprevealedthediversepositionsofIndigenousPeoplesregardingREDD+andissuedconditionsforREDD+tosucceedfromthepointsofviewsofIndigenousPeoplesorganizationsfromtheAmazon.

International Technical Workshop of Indigenous Peoples towards COP16 (Mexico)

Forthefirsttime,governmentsandIndigenousPeoplesorganizationscametogetherforanhonestandopendialogueonclimatechange,thenegotiationsprocess,andtheroleofIndigenousPeoplesaswellastheirpositioningintheclimatenegotiations.IndigenousPeoplesrepresentativesputforwardaproposalontheinclusionofIndigenousPeoplesintheUNFCCCagreementandalsotabledaresolutiontogarnersupportfortheIndigenousPeoples’formalandeffectiveparticipationintheUNFCCCprocessandinREDD+,inpreparationforCOP16.TherewasfundamentalagreementontheindispensabilityofIndigenousPeoplesintheUNFCCCprocessandtheinclusionandparticipationofIndigenousPeoplesinREDD+designandimplementation,andtheparticipantswereabletofindentrypointswheretheroleofIndigenousPeoplescouldbestrengthened.ThismeetingwasviewedasahistoriconeandcertainlyhelpedtocreatespaceforasustaineddialogueonIndigenousPeoplesintheUNFCCCprocess.

FCPF information sharing at FIP IP Regional and Global Caucus Meetings (Ghana, Lao PDR, and Peru)

TheFMTtookadvantageofthreeregionalcaucusmeetingsorganizedbytheForestInvestmentProgram(FIP)inthecontextofthedesignofaDedicatedGrantMechanismforIndigenousPeoplesundertheFIPtosolicittheviewsofIndigenousPeoplesonarangeoftopicsrelatedtotheFCPF,inparticulartheMultipleDeliveryPartner

Activity Location

High-LevelSDNDirectDialoguewithIndigenousPeoples Washington,DC

COICAWorkshoponClimateChangeandREDD+ SantaCruz,Bolivia

InternationalTechnicalWorkshopofIndigenousPeoplestowardsCOP16 Xcaret,Mexico

FIPRegional/GlobalCaucusesAccra,Ghana;Vientiane,LaoPDR;Pachacamac,Peru

FIPACInternationalForumthroughREPALEAC RepublicofCongo

Table 4: Activities Supported through the Indigenous Peoples Capacity Building Program in FY112

For the first time, governments and IP organizations came together to have an honest and open dialogue on climate change, the negotiations process, and the role of IPs as well as their positioning in the climate negotiations.

2 ReportsfromtheactivitiesfundedbytheprogramareavailableontheFCPFwebsite athttp://www.forestcarbonpartnership.org/fcp/node/248.

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Box 1. Peru’s REDD+ Roundtable

TheREDD+Roundtableofapproximately70publicandprivatestakeholders,includingIPrepresentatives,constitutesthemainforumfordialogueandsharingofexperiencesbetweengovernmentandcivilsociety.TheRoundtablehasaccesstotheNationalClimateChangeCommission(CNCC),throughtheNationalREDDWorkingGroup.RegionalREDD+RoundtablesplayanadvisoryroleforRegionalREDDStrategiesandinfluencetheNationalREDD+StrategythroughtheregionalcommitteesthatarerepresentedintheCNCC.TheR-PPfurtherproposesanactiveroleforcommunitiesinMRV,andsuggestsjointactivitiesinthemonitoringofforestsandcarbonstocks,thuscombiningIPCCmethodologiesandtraditionalknowledgeintoaneffectiveMRVsystem.

arrangementandtheworkingsoftheCarbonFundasitgearedtowardsoperationalization.TheFCPFFMThasbeenworkingwiththeAdministrativeUnitoftheClimateInvestmentFunds,whichservesassecretariatfortheFIP,toensurecomplementaritiesbetweenthetwoprograms,ofwhichtheengagementwithIndigenousPeoplesisbutoneaspect.

International Forum of Indigenous Peoples of the Congo Basin (FIPAC)

TheIndigenousPeoplesprogramfunded,throughtheRéseau des Populations Autochtones et Locales pour la gestion durable de forêts denses et humides d’Afrique centrale(REPALEAC),thepreparationofIndigenousPeoplesgroupsfromsixCongoBasincountrieswithaviewtoengaginginameaningfuldebateduringtheSecondInternationalForumofIndigenousPeoplesoftheCongoBasin(FIPAC2),organizedbytheRepublicofCongo.Byfundingaseriesofregionalcaucuses,theFCPFfundinghasallowedthesegroupstoconvenebeforetheForumtotakestockofthesituationconcerningclimatechangeandREDD+.Asaresult,IndigenousPeoplesintheirhomecountriespreparedtheirpositionfortheForumandelaboratedtheirmainrequeststothegovernments.Thishasledtoamuch

betterinformedparticipationintheForumandempoweredtheIndigenousPeoplesofCentralAfrica.

Bringing Together National Level Stakeholders and Rightsholders

AsustainableREDD+strategywillrequireacarefulbalanc-ingoftheinterestsofdiversestakeholders.Bringingstake-holdersintotheREDD+processwillnotonlyallowcoun-triestotapintotheirwealthofknowledgeonthedriversofdeforestationandforestdegradation,andhowtoeffectivelyaddressthem,butwillalsoaddcredibilityandlegitimacytotheprocessasawhole.Mostcountrieshaveincorporatedforest-dependentIndigenousPeoplesandforestdwellersintotheprocessearly.Forexample,Cambodia,Liberia,andUgandahavepreparedconsultationplansasacommitmenttoengagingwithstakeholders.Perusetupanearlydia-logueprocessbyidentifyingkeystakeholdersandpreparedgroundformoreextensiveconsultationsasthepreparationtowardsREDD+movedforward.

1.3. leveraging Strengths of Partners

1.3.1. Expanding to Other Delivery Partners

AnimportantmilestonewasreachedtoenhancethedeliveryofREDD+services.Atitsninthmeeting,thePCadoptedtheCommonApproachtoEnvironmentalandSocialSafeguardsforMultipleDeliveryPartners(the“CommonApproach”).ThisinnovativeframeworkpavesthewayformultilateraldevelopmentbanksandUNagenciestoactasDeliveryPartners(DPs)thatwillprovideReadinesssupporttoREDD+countriesundertheFCPFReadinessFundbyachievingsubstantialequivalencewiththeWorldBank’sapplicablepoliciesandproceduresonenvironmentalandsocialsafeguards,disclosureofinformation,andgrievanceandaccountabilitymechanisms.TheCommonApproachdocumentwasdevelopedthroughintensive,seven-monthdiscussionsamongtheTaskForcethatcomprisedfivepilotcountries,3sixpotentialDPs,4fiveDonorandCarbonFundParticipants,IndigenousPeoplesrepresentatives,andCSOs.BasedontheTaskForcerecommendation,PC9alsoapprovedtheUnitedNationsDevelopmentProgramme(UNDP)andtheInter-AmericanDevelopmentBank(IDB)asthefirsttwoDPs,inlinewiththepreferencesofthefivepilotcountries.5

3Thefivepilotcountriesare:Cambodia,Guyana,Panama,Paraguay, andPeru.4TheAfricanDevelopmentBank,theAsianDevelopmentBank,the Inter-AmericanDevelopmentBank,theUnitedNationsDevelopment Programme,theUnitedNationsEnvironmentProgramme,andthe FoodandAgricultureOrganization.5 GuyanaandPeruselectedtheIDBandCambodia,Panama,and ParaguayselectedUNDPfromthecandidatelistofsixpotential deliverypartners.

1.3.2. Coordinating REDD+ Support with FIP and UN-REDD Programme

TheFCPF,FIP,andUN-REDDProgrammesharethecommonobjectiveofhelpingdevelopingcountriesreducedeforestationandforestdegradation.ThegoverningbodiesofallthreeprogramshavecalledforastreamlinedapproachandenhancedcoordinationwithbodiesliketheGEF,UNFCCC,andbilateralandnon-governmentalagencies.Together,theFCPF,FIPandUN-REDDProgrammeareworkingcloselytodevelopshort-termandlong-termoptionstoimprovecoherenceandcooperationacrossthedifferentphasesofREDD+,sinceeachoftheseprogramsbearsdistinctstrengthsfordifferentphases.DuringFY11,progresswasmadeonrespondingtothesecalls.MeetingsoftheFCPFParticipantsAssembly,FCPFParticipantsCommittee,andUN-REDDPolicyBoardwereheldjointlytocreateacommonplatformforsharingcountryexperiencesandlessonslearned.Otherachievementsalsoincluded:

Guidance on Stakeholder Engagement

TheFCPFandUN-REDDProgrammehavejointlypreparedguidelinesonstakeholderengagementwithaparticularfocusontheparticipationofIndigenousPeoplesandotherforest-dependentcommunities.Theguidelinesprovidearobustandcomprehensivesetofprinciplesaswellasstepsfortheactiveinclusionandparticipationofforest-dependentIndigenousPeoplesandotherforestdwellersinREDD+processes.TheguidelinesfurtherreflectthecommonunderstandingbetweentheFCPFandUN-REDDProgrammeonthefullandeffectiveparticipationofIndigenousPeoplesandforest-dependentcommunities,inaccordancewiththe1/CP.16DecisiononREDD+,andpresentaframeworkthatallowsconsistencyacrossREDD+activities.

Joint Papers

TheFCPFandUN-REDDProgrammejointlycommissionedthreepapersonmulti-stakeholderparticipation,benefitsharing,andsafeguardsinitiativesforREDD+,thedraftsofwhichwereoriginallypresentedattheREDD+PartnershipWorkshop“EnhancingCoordinatedDeliveryofREDD+:EmergingLessons,BestPracticesandChallenges,”heldonNovember26,2010inCancún,inconjunctionwithUNFCCCCOP16.6 Draft Framework for Sharing Approaches for Better Multi-Stakeholder Participation PracticesseekstosupporttheeffectivenessofREDD+decision-makingprocessesbyidentifyingemerginglessonsfromstakeholderparticipationpractices.Itprovidesinsightsonsharing

informationandexperiences,aframeworkforcategorizinganddescribingdifferenttypesofstakeholderengagementprocesses,andasetofcommontermsrelatingtostakeholderparticipation. REDD+ Benefit Sharing: A Comparative Assessment of Three National Policy Approaches outlinesnationalbenefit-sharingapproachesfromthreeareasofforestmanagementpolicywithrespecttoREDD+,including:paymentsforecosystemservices(PES),participatoryforestmanagement(PFM),andforestconcessionrevenue-sharingarrangements.Challenges,suggestions,andpossiblefuturedirectionsofbenefitsharingaredescribed. A Review of Three Safeguard Initiativesseekstocontributetothediscussiononpracticalexperiencesregardingsafeguardsbyoutliningcurrentapproachestotheapplicationofsocialandenvironmentalstandardsandprinciples,complementingtheAWG-LCACOP16decisiononsafeguards.

Country-level cooperation

TheFCPFalsocontinuedtocollaboratewiththeUN-REDDProgrammeaswellasnewDPs,toenhancethecommonR-PPtemplatethatcountriesusetodevelopREDD+Readinessproposals.Thishashelpedtoalignprocessesandensurethatpartnersareprovidingcomplementarysupporttoasinglesetofactivitiesproposedbythecountry. Inaddition,theFCPFiscollaboratingwiththeUN-REDDProgrammeandotherpartnersatthecountrylevel,toprovidecoherentsupporttothewiderangeofREDD+activitiesincountry.IntheDRC,theFCPFandUN-REDDProgrammeareworkingtogetherinvariousanalyticalandcapacity-buildingactivities.Oneofthoseisanassessmentofgovernance-relatedelementsoftheREDD+process,includingacomprehensiveanalysisofthepoliticaleconomyofREDD+inthecountryandaninvestigationofcorruptionrisksforanationalREDD+mechanism.Inaddition,theFCPFandUN-REDDaresupportingtheDRCinthepreparationfortheinvestmentphaseofREDD+.BothprogramshavecontributedtothepreparationofanInvestmentPlanfortheFIP,whichwillprovideDRCwithUS$60millionfortheimplementationofactivitiesaimedtoaddressthemaindriversofdeforestationandforestdegradationinthecountry.

1.3.3. Services to the REDD+ Partnership

DuringCOP15inCopenhageninDecember2009andsoonafter,donorcountriespledgedaninitialUS$4billionin“fast-startfinancing”tosupportdevelopingcountriesintheirREDD+effortsin2010-2012,whilealsoexpressingtheirwillingnesstoscaleupfuturefinancingforREDD+.IntheimmediateaftermathofCopenhagen,bothFranceandNorwaypledgedtohostfollow-upmeetingstomaintainthepoliticalmomentum,andattheOsloClimateandForest6Thepaperscanbeaccessedathttps://www.forestcarbonpartnership.

org/fcp/node/321.

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Conferencein2010,58countrieslaunchedanewInterimREDD+Partnership.7 ThePartnershipcurrentlyincludes72Parties—18donorcountriesand54forestcountries—andisavoluntarygroupingofcountries,demonstratingcountries’commitmentstomakingprogressandtakingactiononREDD+.ThePartiesaimtoenhancetheefficiency,effectiveness,transparency,andcoordinationoffast-startfinancingforREDD+.TheworkofthePartnershipdoesnotprejudgebutsupportstheUNFCCCprocess,andwouldbereplacedbyafutureUNFCCCmechanismincludingREDD+.Forthatpurpose,Partnersintendtohelpestablishsuchamechanism,enablethemobilizationoffinancialandtechnicalresourcesneededtoscaleupREDD+implementation,andunderlinetheimportanceoftheongoingUNFCCCnegotiations,aswellasexistingmultilateralandbilateralinitiatives. EverysixmonthsthePartnersselecttwoco-chairstoorganizeitswork.PapuaNewGuineaandJapan,andBrazilandFrancerespectivelyhaveservedduringthefirsttwoperiodsuptoJune2011.GuyanaandGermanytookoverasco-chairsinJuly2011.

InagreementwiththeFCPFPC,theWorldBank—throughtheFMToftheFCPF—andtheUnitedNations—throughtheProgrammeTeamoftheUN-REDDProgramme—providesecretariatservicestotheREDD+Partnershipandworkcloselywiththeco-chairs.ThejointprovisionofservicesbuildsontheextensivecooperationbetweentheFCPFandtheUN-REDDProgrammewithrespecttoREDD+.Thetwoorganizationssharetheworkloadbycomponent,withtheWorldBankfocusingon,forexample,analysisofgapsandoverlapsinfinancingandassessmentoftheeffectivenessofexistingmultilateralinitiativesonREDD+,whilsttheUNfocusesonthedesignandmaintenanceofavoluntarydatabaseofREDD+financialsupportandactions. ThePartnershipaimstotakeimmediateactiontofacilitate,amongotherthings,knowledgetransfer,capacityenhancement,mitigationactions,andtechnologydevelopmentandtransfer.Itoffersaplatformforopendiscussionofinnovativeideasandlessonslearnedfromon-the-groundexperience,andthePartnership’sworkprogramstressesnear-term,practicaldeliverables.The2010andthe2011-2012workprogramslaunchedanumberofactionswhoseresultsareavailableathttp://reddpluspartnership.org.

TheVoluntaryREDD+Databaseonfinancing,actions,andresultsiscontinuouslyupdatedbyPartnersandstakeholdersoftheREDD+Partnership.TheyreportonindividualagreementstoundertakeREDD+relatedactions,involvingfundersandrecipients.Datamaybeviewedforindividualcountriesorinstitutionsaswellasinanoverview.8AsofSeptember2011,atotalof498arrangementshadbeenreportedby36countries.Fundersreportedthatcountry-to-countryfundingamountedtoUS$3.51billion,country-to-institutionfundingreachedUS$3.41billion,andinstitution-to-countryfundingreachedUS$0.65billion. Theanalysisoffinancinggapsandoverlapsrevealedasignificantgapbetweenthereportedamountreceivedbyrecipientsandtheamountprovidedbyfunders.ThePartnershipistoidentifythetopfivetotenmostsignificantgapsinordertoclarifyinformationprovidedbetweenrecipientsandfunders.InfurtherdevelopmentofthedatabaseofREDD+finance,thisresultonfinancinggapsandoverlapswillbecomeanintegralpartofthekeyinformationsourceoftheREDD+Partnershiptocontinue

identifyinggapsandeventuallyfillthesegaps. InadditiontheresultsofthestudyontheeffectivenessofthemultilateralREDD+initiativeswillbeusedtodiscusshowtheapplicationandimplementationofprojects/financialsupportcouldbeimprovedanddisbursementsbeaccelerated. AnumberofworkshopswereheldinFY11toshareles-sonsfromREDD+initiativesandbestpracticestopromoteandfacilitatecooperationamongPartners,e.g.,inTianjin(REDD+Database,gapanalysis,andeffectiveness),Cancún(multi-stakeholderconsultations,applyingsafeguards,andbenefit-sharingmechanisms),Bangkok(demonstrationac-tivities),andCologne(scalingupREDD+finance).Presenta-tions,papers,andreportsofthesemeetingsareavailableontheREDD+Partnershipwebsite.9InordertohelpthePartnersprepareforthenegotiations,thePartnershipissharinglessonsinthemarginsandaheadoftheUNFCCCofficialmeetings.ThisapproachenablesthePartnershipdialoguetocontributetotheUNFCCCnegotiationsandallowscost-efficiency.Theopennessandeasyandstraight-forwardnatureofthediscussionsarerecognizedwhencomparedwiththeofficialnegotiations.

7Moreinformationmaybefoundathttp://www.oslocfc2010.no/ partnershipdocument.cfm.

9Thedocumentsmaybedownloadedfromhttp://reddplusdatabase.org/ entities/filter_by_type/countries.

ThoughobserversdonothaveformalvotingrightsintheFCPF’sgovernancestructure,thenormofreachingdecisionsthroughconsensushasempoweredthemtoplayaconstructiveroleintheFCPF.

8Thedataareavailableathttp://reddplusdatabase.org.

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2.1. Fast-start learning

2.1.1. FCPF Evaluation: Two Years in Review

AstheFCPFcompletedtwoyearsofoperations,thePCcommissionedanevaluationoftheFCPF,inaccordancewiththeprovisionsoftheCharter.TheevaluationassessedthecontributionofFCPFatbothcountryandgloballevels.Atthegloballevel,theevaluationreviewedthestructure,functions,processes,andimpactdriversoftheFCPFprogramasawhole,aswellasthegovernancearrangementsanddeliverymechanisms.Atthecountrylevel,theevaluationreviewedtheformulationofR-PPsandthecountrycontextoftheR-PPs(thoughnottheR-PPsthemselves),whichincludethestructure,functions,andprocessesofeachcountry’sforest-relevantsystem,theexistingcapacity,andresourcestoformulatetheR-PP.

StrengtheningREDD+,AcceleratingLearning

ThisevaluationprovidedanopportunitytoassesstheachievementsandchallengesoftheFCPFasaglobalpartnershipforpilotingREDD+intheearlyyearsoftheoperationoftheFacility.Theevaluationwascarriedoutbyanindependentconsultantfirm,onthebasisoftermsofreferenceendorsedbythePCfocusingontheOECD/DACcriteriaofrelevance,effectiveness,andefficiency.ResultsfromtheevaluationreportwerepresentedatPC8inVietnam.

The major achievements of the FCPF highlighted by the evaluation include the following:

• ThepioneeringandleadershiproleoftheFCPF inprovidingacommonframework,foundation,and platformforREDD+Readiness,whichhasserved asthebasisforevolvingthethinkingonREDD+in participantcountriesisrecognized,notablyby

o providingaforumforexchangeoflessons learnedandknowledgesharingamong participants;

o makingavailablepracticaltoolsand guidanceformovingforwardwithREDD+ planning;

o fosteringcross-sectoralandcross- institutionalengagement;and

o givingfreshimpetustoaddressingpervasive governancechallenges.

• TheFCPFhasestablishedprocesses,procedures, andstandardsofREDD+Readinessthatare increasinglybeingacceptedasthenormandhave servedtoinformtheREDD+negotiationsunderthe UNFCCC.

• ThegovernancestructureoftheFCPFisamodel thatisconsidereddemocratic,transparent,and inclusive.Thepartnershipmodelthatgivesequal representationtoREDDCountryParticipantsand DonorParticipants,andactiveengagementof observers,isseenashighlyeffectivebymembers andobserversalike.Thishasfosteredopenness andtransparencyinthedecision-makingprocesses andhasbeenwidelyappreciated.

• TheREDD+Readinessprocesshascreatedan enablingenvironmentforstakeholderengagement atthenationalandgloballevel.TheFCPFhas encourageddialogueamongdiversestakeholders atthenationallevelinamannerthatensures stakeholderswhohadnotbeeninvolvedinnational processeswereincluded,insomecountriesfor thefirsttimetothisextent.

2The partnership model that gives equal representation to REDD Country Participants and Donor Participants, and active engagement of observers is seen as highly effective by members and observers alike.

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Key gaps that have been identified for the FCPF to work on are:

• Ontheoperationalside,theneedtofinalizefinancial commitmentstoFCPFcountriesandprovideflexibility infundingsupporttoREDD+countrieshasbeen highlighted.Thereportrecognizesthatfinalization oftheapproachtosafeguardshasresultedindelay inthesigningofgrantagreementswithREDD+ countriesandurgesthatstepsbetakentoenhance this.

• Strengtheningcoordinationamongvariousactors atthenationalandinternationallevelforeffective REDD+implementation,includingthesafeguards approachtoREDD+.Thecross-sectoralnature ofREDD+andthefactthatFCPFfinancialsupportis insufficienttomeetthetotalbudgetaryrequirements forReadinesspointtotheneedforthenational governmenttohaveastrongcoordinatingrolein relationtoitsinternationalpartnersandtheBank’s projectportfolioinseveralFCPFcountries.Itwillbe importantforREDD+tobemainstreamedwithongoing developmentprogramsastheworkbeingundertaken ishighlyrelevanttoissuesidentifiedintheR-PPsof REDD+countries.

• LackofcapacitysupporttoREDD+participant countries,includingatthenationallevel.Several recommendationsrelatetowaysofenhancingthe supportprovidedbyFCPFandotherdevelopment partners.

• Lackofastrongcommunicationstrategytoconvey thekeyoutcomesofFCPF.Thereport recommendedtheFCPFdevelopacommunication andoutreachstrategytodisseminateFCPF outcomesmorewidelyforuseatcountrylevel, withintheWorldBank,andtoexternalaudiences.

TheWorldBankmanagementappreciatedtheusefulobservationsandlessonsprovidedbythereport,andconcurredwithitsmainfindingsandsuggestedremedialactions.10 Sincethefinalizationofthereport,thePCsetupaPCWorkingGrouptofacilitatediscussionsonthereport’srecommendationsatthePC9meetinginOslo,inJune2011.AdraftactionplanhasbeenpreparedbytheFMTproposingfollow-upactionontherecommendations.Actiononsomeoftherecommendationshasalreadybeentaken.SubsequentPCmeetings,beginningwithPC10inBerlin,willtakestock,discuss,andmakedecisionsonrecommendationspertainingtothestrategicdirectionoftheReadinessFund.

10Thefulltextofthemanagement’sresponseisavailableathttp://www. forestcarbonpartnership.org/fcp/sites/forestcarbonpartnership.org/ files/Documents/PDF/Jun2011/5.Management%20Response_June% 2016_0.pdf.TranslationsinFrenchandSpanisharealsoavailable.

PC Working group at the PC9 meeting in Oslo, in June 2011.

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CAMEROON

DEM. REP. OFCONGO

ETHIOPIA

GABON

GHANA

EQ. GUINEA

CENTRALAFR. REPUBLIC

KENYA

LIBERIA

MADAGASCAR

REP. OFCONGO

UGANDA

TANZANIA

MOZAMBIQUE

LAOP.D.R.

NEPAL

PAPUANEW GUINEA

VIETNAM

INDONESIA

THAILANDCAMBODIA

VANUATUBOLIVIA

COLOMBIA

COSTA RICA GUYANA

MEXICO

PANAMA

PARAGUAY

PERU

NICARAGUAHONDURAS

SURINAME

GUATEMALA

EL SALVADOR

ARGENTINA

CHILE

IBRD 36759R2SEPTEMBER 2011Th is map was produced by theMap Des ign Uni t o f The Wor ld Bank.The boundar ies , co lo rs , denominat ionsand any other in format ion shown onth is map do not imply, on the par t o fThe Wor ld Bank Group, any judgmenton the lega l s ta tus of any te r r i to ry , o rany endorsement or acceptance ofsuch boundar ies .

SELECTED INTO FACILITY [2]

PA SIGNED [8]

FORMULATION GRANT SIGNED [3]

R-PP INFORMAL PRESENTATION [5]

R-PP ASSESSED/FINAL R-PP SUBMITTED [16]

READINESS PREPARATION GRANT SIGNED [3]

REDD+ Country Participants.37 REDD+ Country Participants have been selected intothe FCPF. The map illustrates the progress within theFCPF of each of the 37 countries as of June 30, 2011.

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FCPFREDD+COUNTRYPARTICIPANTS

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2.1.2. FCPF Harvesting Knowledge on REDD+: Early Lessons from the FCPF Initiative and Beyond - Overall Lessons Learned

TheFMTpreparedandpresentedashortreportonearlylessonslearnedinNovember2010,atthePA3meetinginWashington,entitledFCPF Harvesting Knowledge on REDD-plus: Early Lessons from the FCPF Initiative and Beyond.Thereport’smajoroveralllessonsarereproducedbelow,togetherwiththesetoftenspecificlessonspresentedinthereportupdatedwithsomeexamplesofREDDCountryParticipantactivitiesinFY11: TheFCPF,throughtheREDDCountryParticipants,hasbeenbreakingnewgroundinconceptualizinghowtocreateincentivesandinstitutionstomakeREDD+work.AstheFCPFevolves,itisgeneratingexperiencethatisessentialtounderstandtheprogressmadethusfarandchallengesdowntheroad.

Overall lessons learned are:

• REDD+isaboutfinancialincentivesandgovernance.

Therearetwodeep-seatedfailuresbehindunplanned deforestation.Thefirstoneisthatotherformsofland usearemorevaluableinthenearandmedium termthanforests.Thesecondistheinabilityofexisting legislationsandregulationstohaltdeforestation.The FCPFoffersachancetoREDD+countriestoaddress thesetwofailuressimultaneously.

• Wehavemanysolidbuildingblocks,butweneedto startbuilding.

WhileREDD+maybeanewconcept,itssuccesswill dependonhowitcanintegrateexistinginstrumentsand lessonslearnedtoformnewpolicyapproachesthat alloweffectivemanagementofnaturalresourcesand sharingofbenefitsandburdens.

• Povertymatters.

Povertyisthedominanthumanconditionintropical countriesandthelackofalternativeformsofutilization hasperpetuatedthecycle.WhileREDD+creates incentivesthataddresspoverty-relateddriversatthe individualandinstitutionallevels,itcannotbeexpected tobetheprimarytoolforpovertyreduction.

• Nationalscopewithsub-nationalandlocal implementationworks.

REDD+offersmagnitudeandscopethatwerenot possibleunderproject-basedapproaches.Anational- levelaccountingframeworkwouldovercomeproblems associatedwithproject-levelimplementationlike leakageandadditionality,whilealsoallowingarange ofsub-nationalactivitiestotakeplace.

• Timingandsequencingareimportanttopiloting REDD+.

REDD+requiresfinancialresources,skilledstaff,and institutionalcapacitytocometogetherinatimely manner.Politicaltimingisalsokeytosustainprogress made.

Lesson 1: Partnership lessons from the FCPF

Apartnershipamongoftencontentiousstakeholdersintropicallandusecanfindwaystocommunicateandexplorehighlypolicy-sensitivetopics,ifitbuildstrustandwillingnesstosharenewideas.

Example from FY11: FCPF’s PC8 meeting in Vietnam considered new R-PPs from Peru and Cambodia in a process that brought together government officials who drafted the R-PPs and key civil society representatives and forest dwellers, who engaged in protracted negotiations over some critical points of contention in the R-PPs. The urgency of seeking a decision on the R-PP within the context of the forum of the PC meeting contributed substantially to the difficult task of reconciling conflicting viewpoints on fundamental issues in both countries, including in-country negotiations just prior to the PC meeting. For Peru, issues included debate about the rights of forest dwellers, land tenure, and on how participation in the R-PP development process can be operationalized via the evolving Mesa REDD stakeholder roundtables at the regional level.

Lesson 2: Lessons in sectoral coordination

Thecross-cuttingnatureofREDD+presentsnewchallengesinsectoralcoordinationthatmaybesolvedbyembeddingtheREDD+strategyinoverarchingpolicyframeworksandbymobilizingdecisivepoliticalwill.

Example from FY11: One of the key issues debated at PC8, as noted under Lesson 1 above, regarding Cambodia’s R-PP, was how the government can work to reconcile its continual granting of new economic concessions for mining, hydro development, etc., on lands that are both already being used by local communities, and under consideration for inclusion in another ministry’s REDD+ strategy options.

Lesson 3: Stakeholder participation

CountriesarenowgrapplingwithhowtooperationalizetheinclusionofstakeholdersinREDD+policyandimplementation,raisingnewissuesofcontroloverresourcemanagementandtherespectivedecisionmakingprocesses.

Example from FY11: The consultation and participation aspects are well developed in Colombia’s R-PP. This document has benefited from 37 ‘early dialogue’ events during which concepts related to climate change, REDD+, the FCPF and the R-PP itself were discussed with a wide range of representatives of civil society, indigenous peoples and farmer communities. Even so, the R-PP recognizes that information gathering and dissemination will have to continue into the R-PP implementation.

Lesson 4: Lessons from country R-PP formulation process

PoliticalwillisrequiredtocreatehighlyqualifiedteamscapableofresolvingcompetinginterestsintoacoherentnationalPlanforREDD+.

Example from FY11: The development of both the Liberia and the Uganda R-PPs evolved from the coalescence of a dedicated band of government, local and international NGO, and other experts to actively draft the complex documents. The model emerged since government resources and staff were stretched too thin to address the full range of issues required to be included in an R-PP.

Lesson 5: New techniques and tools

PromisingresultsareemergingwherecountriesarecombiningtraditionalevaluationofpotentialREDD+strategyoptionswithneweranalytictoolsthatfacilitatemakingchoicesamongcompetingoptions.

Example from FY11: Ethiopia tasked a technical institute to develop a cost curve of climate mitigation options in the forest and land use sector that was a central feature of its R-PP section on the REDD+ strategy.

Lesson 6: Implementation of REDD+

Ontheground:AREDD+bridgehasnotyetbeenbuiltbetweenthewealthofexperiencesatthelocallevelinmanagingforestresourcesandland-usechange,andideasonREDD+policyframeworksandincentiveprogramsatthenationallevel.

Example from FY11: Indonesia, with assistance from World Bank/FCPF FMT staff, has actively been reviewing its experiences with a wide range of fund types and financial mechanisms used to date to support natural resource management programs, in order to offer insights to the government as it considers how best to develop the institutional arrangements for its projected large-scale REDD+ program with Norwegian support.

Lesson 7: Governance aspects of REDD+

EarlycooperativedevelopmentofafirstsetofrulesofthegameforREDD+transactionsandbenefit-sharingisanessentialprerequisiteforthebroadlegitimacyandsupportforREDD+programs.

Example from FY11: DRC is designing a comprehensive accreditation system for REDD+, including a prototype REDD+ registry to track REDD+ financing and activities. Once operational, it could serve as a transparent platform to aide in the development of required national infrastructure to undertake REDD+ at a significant scale.

Box 2: Early lessons from the FCPF: Updated with examples from FY11

continued on page 26

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Lesson 8: REDD+ methodological issues

Addressingmethodologicalissuessuchasreferencelevelandmeasurement,reportingandverification(MRV)isakeyentryrequirementforREDD+programs.IntheabsenceofclearpolicyguidancefromtheinternationallevelandpricesignalsforREDD+,countriescouldembarkonano-regretsstepwiseapproachtobeginbuildingcapacity.

Example from FY11: Ethiopia and Cambodia both included detailed flow diagrams of the steps necessary for building a reference level and an MRV system, converting very early ideas about two technical topics into a draft workplan of ordered, implementable steps. Guyana tendered several contracts via competitive bidding to begin rapid development of its MRV system, beginning with system design and specification, training and data management for improved forest cover change detection, and establishment of carbon density plots.

Lesson 9: REDD+ financing

EarlyinitiativestofinanceREDD+haveilluminatedaparadox:InspiteofthehighlevelofinternationalcommitmentstoREDD+funding,themechanicsofmultilateralprogramstomoveresourcestoREDD+partnercountriesrequireduediligenceandsafeguardsthathaveslowedtheflowoffundstocountries.

Example from FY11: The Task Force on the Common Approach eventually led the PC to approve a unified approach founded on common standards for safeguards that opens up Readiness Preparation Grants to many countries for whom the World Bank could not be the Delivery Partner.

Lesson 10: REDD+ cannot be cast as a potential solution to every problem

IfREDD+istoevolveandachieveitspromisetomitigateglobalclimatechange,theselessonssuggestitneedssometime,somespace,andsomeflexibilitytobefairlyexperimentedwithoverthenextfewyears.

Example from FY11: This year marked the evolution within the FCPF from a focus on submission of country R-PP proposals and how to build capacity for REDD+, into an international initiative of countries that are now actively beginning to produce early studies, experiment with participatory approaches, and assess governance needs for undertaking REDD+ activities in specific land types and land ownership frameworks.

Box 2: Early lessons from the FCPF: Updated with examples from FY11 (continued) 2.2. Building on the International Framework for REDD+

2.2.1. Cancún: A Landmark Summit for REDD+

Cancún(COP16)wasahistoricsummitforREDD+.Forthefirsttime,theimportanceofstemmingthelossofforestsindevelopingcountriestomitigateglobalclimatechangewithfinancialsupportfromtheindustrializedworldwasen-shrinedinaninternationalagreement(theKyotoProtocolonlyallowsincentivepaymentstobemadeforafforestationandreforestationprojectsindevelopingcountries). PartiescarriedforwardthemomentumprovidedbytheCopenhagenclimatetalksin2009(COP15)andotherhigh-levelmeetingsonREDD+,suchastheOsloConferenceofMay2010,bydecidingonthegeneralprinciplesofREDD+,thescopeofactivities,aphasedapproach,andthecentralityofnationalstrategyplans.

Under REDD+, the following developing country activities are eligible for support:

• reducingemissionsfromdeforestation;

• reducingemissionsfromforestdegradation;

• conservationofforestcarbonstocks;

• sustainablemanagementofforests;and

• enhancementofforestcarbonstocks.

The COP16 decision encouraged developing countries, in accordance with national circumstances and respective capabilities, to develop the core elements of REDD+. These include:

• aREDD+strategyoractionplan;

• forestreferenceemissionlevel(theirbaselineof forestcoverandchangeovertime);

• aforestmonitoringsystemforrobustand transparentmonitoringandreportingofactivities; and

• asystemforprovidinginformationonhow safeguardswillbeaddressedandrespected throughouttheimplementationofREDD+activities. Safeguardsidentifiedincludeensuringfulland effectiveparticipationofrelevantstakeholders, notablyIndigenousPeoplesandlocalcommunities, whoseknowledgeandrightsmustberespected andwhomustbeabletoparticipatefullyand effectively.

Whilenoquantifiedglobaldeforestationtargetwasagreed,thestrikingaccomplishmentofCancúnwasthescalingupofmitigationvisionandactivitiestoanationalapproach(vs.theprojectapproachoftheCDM),whileallowingsub-nationalpilotingonaninterimbasisasa

vehicletocommenceearlyaction.AphasedapproachtoREDD+wasconfirmedintheCOPdecision,specifyingafirstphaseofnationalstrategiesandcapacitybuildingineachcountry,asecondphaseofimplementationofacarefullydevelopedREDD+strategy,andathirdphaseofresults-basedactivitiesthatarefullymeasured,reported,andverified.Bilateralandmultilateralassistancefundingisanticipatedforthefirsttwophases,whilefurtherdiscussioniscalledforbyCOP17inDurban,SouthAfrica,onhowthethirdphasewouldbefunded,withpotentialpublicand/orprivatefundingtobedetermined. PartiesinCancúnthusendorsedprinciplesforREDD+underafutureregulatoryemissionsregime,butleftmanyofthepracticaldetailsandrulestobefinalized.AtCOP17thePartieswillseektoagreeonthefollowing:

• Modalities.TheSubsidiaryBodyforScientificand TechnologicalAdvice(SBSTA)istaskedwith producing(binding)modalitiesonhowdeveloping countriesshould:(i)setReferenceEmissionLevels (REL);and(ii)designMeasurement,Reporting,and Verification(MRV)systems.

• Guidanceonsafeguards.SBSTAisalsotasked withdeveloping(non-binding)guidanceonthe establishmentofinformationsystemsbydeveloping countriesonhowtoimplementandrespectthe safeguardsforREDD+adoptedinCancún.

• Financialoptions.TheAdHocWorkingGroupon Long-termCooperationAction(AWG-LCA)isto produceoptionsforfinancing‘phase3’(results- based)activities.Theroleoftheprivatesectoris currentlyakeypolicyuncertainty.

Building in the REDD+ Space

ThepolicyspacepioneeredbytheinventionofREDD+haswidenedanddeepenedoverthepastyear.AtransitionhasoccurredfromREDD+asacreativeinternationalpolicyconceptfiveyearsago,totheearlystagesofcoalescingthenecessarycountry-drivennationalinstitutionalarchitectureandstakeholderparticipationtoeffectREDD+activitiesontheground.ThegoverningbodiesoftheFCPF,FIPandUN-REDDProgrammehavemandatedtheirsecretariatsto

Cancún(COP16)wasahistoricsummitforREDD+.Forthefirsttime,theimportanceofstemmingthelossofforestsindevelopingcountriestomitigateglobalclimatechange

withfinancialsupportfromtheindustrializedworldwasenshrinedin

aninternationalagreement.

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collaborativelydevelopoptionstoenhancecooperationandcoherenceamongREDD+institutionsinsupportofcountry-levelREDD+effortsandfinancing.TheFCPFFMTandUN-REDDProgrammeSecretariathavejointlydevelopedguidelinesforstakeholderengagement,andacommondrafttemplateforcountryR-PPs. TheexperiencegainedthroughtheReadinessprocessintheFCPFhashelpedPartiesfurtherdeveloptheREDD+processthroughtheUNFCCC.Forexample,theCancúndecisiononREDD+recognizedenvironmentalandsocialrisksandprovidedthatREDD+shouldpromoteandsupportsafeguards.WhilethereisanindicativelistofsafeguardsintheCancúndecision,aworkprogramisexpectedtodevelopthemfurther,togetherwithasystemthatprovidesinformationontheirapplicationandimplementation.TheCommonApproachdevelopedaspartoftheFCPF’sMultipleDeliveryPartnerarrangementrepresentsaconvergenceofviewsamongverydiverseinstitutionsontheapplicationofsafeguardsandcouldassistwiththefurtherdevelopmentofREDD+safeguards.

2.2.2. Safeguards for People and the Environment in REDD+

TheR-PPtemplatehascontinuedtoimprove,drivenbycountryexperience,thePC’sguidance,stakeholderviewsandrecommendations,andtheCancúndecisiononREDD+.TheFCPF’ssafeguardsapproach,consistingoftheStrategicEnvironmentalandSocialAssessment(SESA)andanassociatedEnvironmentalandSocialManagementFramework(ESMF),hasbeenwhollymainstreamedintothelatestversionofthetemplate.ThestrengthofaSESAforREDD+isthatitcombinesanalyticalworkandconsultationinaniterativefashiontoinformthepreparationofthecountry’sREDD+strategy.TheSESAhelpstoensurecompliancewiththeWorldBank’ssafeguardpolicies(andnowtheCommonApproach)byintegratingkeyenvironmentalandsocialconsiderations

relevanttoREDD+,includingallthosecoveredbythesafeguardpolicies,intotheReadinessPreparationprocessfromitsearlieststages,whilealsoextendingtopolicies,regulations,andinvestmentsthataresupportedaspartofREDD+strategyimplementation. TheSESA/ESMFapproachwasapprovedbytheBank’sBoardofExecutiveDirectorsfollowingathoroughdesignphaseandreviewsatseverallevelsofmanagement.Moreover,BankmanagementclarifiedtheBank’sOperationalPolicy(OP)4.01onEnvironmentalAssessment,whichnowincludesanexplicitrecognitionofSESAsandESMFsassafeguardsinstruments. TheguidelinesoftheR-PPtemplateweremodifiedinFY11toclarifytherequirementsforstakeholderconsultationsattheR-PPformulationstage.TheR-PPguidelinesnowdistinguishbetweenSection1bon“InformationSharingandEarlyDialoguewithKeyStakeholderGroups,”inwhichthesubmittingcountryprovidesinformationonexchangeswithIndigenousPeoplesandothergroupsuptothepointofsubmissionoftheR-PPtothePC,andSection1con“ConsultationandParticipationProcess,”inwhichthecountryproposeshowthefullrangeofstakeholdergroupswillbeengagedintheREDD+processgoingforward. EnhancedguidancehasbeenprovidedforchallengingcomponentsoftheR-PP,alongwithemerginggoodpracticesandstandardstobemetforeachcomponent.Similarly,effortsareunderwaytodevelopacommontemplatewiththeUN-REDDProgramme.ThelatestversionoftheR-PPtemplatereflectsthisattempt;thetemplateisbeingrevisedfurthertoincludeanyfinaladjustmentsneededinthisregard,aswellastoreflectimprovementsandclarificationsrequestedbyarangeofstakeholders.11

11DraftVersion5ofthetemplate(datedDecember22,2010)isavailable athttp://www.forestcarbonpartnership.org/fcp.

StrongcountryownershipandmobilizationofstakeholdersupporthaveprovidedthemomentumforR-PPdevelopment.ContinuedexchangeofinformationamongREDD+CountryParticipants,theTAP,andtheFMThasallowedthequalityofR-PPstogreatlyimprove.Afterall,R-PPsareacollaborativeexerciseamongdifferentgovernmentagenciesandstakeholders,andearlycross-sectoralcoordinationcangoalongwayinaddressingdeforestationandforestdegradation.RecentlysubmittedR-PPsdemonstratethatthebroadsharingofgoodpracticesamongcountrieswillbeessentialforachievingREDD+Readiness.CountrieshavealsostartedtoplaceR-PPsinbroaderdevelopmentcontextsthroughbetterinter-institutionalcoordination.Forexample,EthiopiahasmadetheR-PPatoolthroughwhichtoachieveitsoverarchingclimategoals. InastocktakingexerciseinNovember2010,TAPexpertsnotedthatIndigenousPeoplesrightswerebetteracknowledgedinrecentR-PPs,anumberofwhichreferredtotheneedforFPICofIndigenousPeoples,andthatproposalswereemergingforincludingcommunity-basedmonitoring,togetherwithrelatedcapacity-buildingactions,innationalREDD+monitoringproposals.Forexample,Madagascar’sR-PPinsistson“participatorymonitoring”asakeyaspectofanationalMRVsystem,buildingonexistingexperiencewithecologicalmonitoring,andexpandingintocarbonmonitoringthroughaprogramoftargetedcapacitybuildingforlocalcommunities.

2.3. Knowledge Sharing and Capacity Building

2.3.1. Defining What It Means to Be Ready

TheFCPFhasbeenabletogenerateandbuildcapacityofexpertsandpractitionersonReadinessplans,

nationalstrategies,andinstitutionalarrangementsforimplementingREDD+.Thishasresultedinmuchgreaterclarityonhowcountriesshoulddesigntheprocess. TAPsareassembledtoreviewandprovidetechnicalguidanceforcountryR-PPsubmissions.TheFCPFmaintainsarosterofexperts—nominatedbyFCPFParticipants,Observers,andtheFMT—tocreatemultidisciplinaryteamsofscientificandtechnicalexperts.TAPscontinuetoplayamajorroleinsupportingthedevelopmentofREDD+methodologies,providingexpertguidanceonR-PPformulation,andstrengtheningthetechnicalrigorofR-PPsingeneral. InFY11,eightREDD+countriessubmittedtheirfinalR-PPsforreviewbytheTAPandnineREDD+countriessubmitteddraftR-PPs.ThefinalR-PPswerealsoreviewedbyworkinggroupsofPCrepresentatives—apracticethatwasstartedinFY10.

2.3.2. Increasing South-South Knowledge Sharing

South-Southknowledgesharingisaneffectivemechanismtoensurecross-fertilizationacrossREDD+countriesandisencouragedbytheFCPF.AtPCmeetings,theFCPForganizesknowledge-sharingsessionswhereREDD+countriesareinvitedtopresentonsomerelevantREDD+topics.Asanexample,atPC9inOslo,Liberia,Mexico,andTheNatureConservancysharedtheirexperiencesonbenefit-sharingmechanismsrelevanttoREDD+(seeBox3below). IncooperationwiththeWorldBankregionaldepartmentsandcountryoffices,andwithfundingfromtheGEF,theFCPForganizedalargeSouth-Southknowledge-sharingeventbetween6countriesintheCongoBasin(plusMadagascar)andBrazilthroughaten-sitevisittoBrazil.Theactivityaimedtocontributetothedesignofthenational

Box 3: Country Experiences on Options for Benefit Sharing

Benefit-sharingmechanismsareanessentialpartofanationalREDD+structure,asitensuresthatincentivesaredeliveredtothosethathaveastakeintheforestsandcancontributetoitsgood(orbad)management,whichinturnbuildssupportandlegitimacyforREDD+.Thus,benefit-sharingmechanismswillplayapivotalroleinREDD+implementation.AtPC9,Liberia,Mexico,andTheNatureConservancypresentedearlylessonsforbenefit-sharingmechanismsfromexperiencewithdifferentforestmanagementoptions.Theexperiencesdemonstratelessonsinbuildingcapacityatthecommunitylevel,developingparticipatorydecision-makingprocesses,andimprovingthetargetingandeffectivenessofthedeliveryofbenefits.Theselessonswillhelptoguidethedesignofresults-basedpaymentapproachesaswellasmonitoringandevaluationsystems,andensureequityandfairnessintheprocess.Basedonthisdiscussion,theFMTwillcontinuethedialogueonbenefitsharinginFY12,throughworkshopsoractivitiesthatwilldiscusscountryexperiencesanddesignofpotentialmechanisms.

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REDD+strategy,bydemonstratingtotheparticipantstherolethatcommunitymanagementofforestscanplayasaneffectiveandefficienttoolforreducingdeforestation,alongwiththemainchallengestomakingthistypeofforestmanagementwork.Participantstotheactivityincludedkeydecision-makersintheAfricancountriesactivelyinvolvedintheR-PPpreparationorimplementationintheirhomecountries.InBrazil,participantsvisitedfederal-andstate-levelinitiatives,suchastheAmazonFund,aninnovativeperformance-basedfundthatiscurrentlyprovidingsupporttovariousactivitiesacrosstheBrazilianAmazon,andtheBolsa Florestaprogram,apaymentforenvironmentalservicesschemeintheAmazonasstateinBrazilthatseekstocompensatethosehouseholdsthatcontributetothesustainablemanagementofforests.ParticipantsalsovisitedtheTapajós stateforests,toseehowcommunitiesareaddingvaluetotimberandnon-timberforestproducts.Asaresultoftheactivity,participantsstarteddiscussionsatthecountrylevel,onhowREDD+couldfostercommunitymanagementofforestsintheirowncountries.

Readiness Package

AtPC9,CostaRica,theDRC,andNepaldiscussedprogressmadeonREDD+Readinessasaknowledge-sharingexercise.Thecross-cuttingthemeacrossthepresentationswastheneedtohaveasetoffundamentalReadinessactivitiesinplace,asoutlinedintheirR-PPs,tosetthestageforEmissionReductionPrograms(ERPrograms).Theyalsoreflectedonprinciples,indicators,andcriteriathatcouldbeusedtodefinekeymilestonesforfutureR-Packagesubmissions.HowtodefineReadiness,settingminimumstandards,andensuringthesestandardsareconsistentwithguidancefromtheUNFCCCareallthemesofanongoingdialogueamongtheParticipants,observers,andtheFMT.

Collaboration with the World Bank Institute

Toenhanceknowledgemanagement,informationdissemination,andtraining,ajointstaffpositionwascreatedwith75percentfinancedthroughtheCarbonFinanceAssistmulti-donortrustfund.Throughthispositionmanyactivitieswereboosted,culminatinginresultsliketheFCPFHarvestingKnowledgeonREDD+,thepublicationoftheManualonOpportunityCostsofREDD(EnglishandSpanish),theorganizationofthreeregionalworkshopsonOpportunityCostsandImplementationCostsofREDD,andtheparticipationintheknowledge-sharingplatformoftheAllianceforGlobalREDDCapacity.

2.3.3. The Costs of Getting Ready for REDD+

AkeyquestionthatREDD+countriesarefacingishowtoestimatethecostsofREDD+.Knowinghowmuchit“costs”toparticipateinwhichREDD+activitiesiscriticaltodefiningacountry’sstrategyonwhetherandhowto

tackleREDD+.IncollaborationwithWBI’sCarbonFinanceAssisttrustfund,theFCPFdevelopedamanualontheopportunitycostsofREDD+,withthegoalofhelpingcountriesgenerateeconomicinformationtoassesspotentialnationalREDD+strategies. Themanualprovidesahands-onapproachforawideaudienceonthemethodsandtoolstoestimatetheopportunitycostofdifferentlandusechangesinforestlandscapes.ItisavailableinEnglishandSpanishandcontainspresentations,acalculationtool,andinterviews.12ThemanualwaslaunchedataregionalworkshopinArusha,Tanzania,inNovember2010,withparticipantsattendingfromeightdifferentcountries,followedbyaworkshopinBangkok,Thailand,inApril2011,andinCali,Colombia,inMay2011.TheseworkshopswerecarriedoutinclosepartnershipwithotherorganizationssuchastheUN-REDDProgramme,theCenterforPeopleandForests(RECOFTC),theDeutsche Gesellschaft für Internationale Zusammenarbeit(GIZ),theIDBandtheInternationalCenterforTropicalAgriculture(CIAT),leveragingeachother’sresourcesandexperiencesinREDD+intheparticipatingcountries. TheFCPFhasstartedtoelaborateonthiswork,bygoingbeyondtheopportunitycostsanddevelopingguidanceontheimplementationandtransactioncostsofREDD+.AnalysisofalltheserelatedcostswillgivecountriesafullerpictureofjusthowmuchitcoststhemtotackleREDD+.

12Themanualmaybedownloadedfromhttp://wbi.worldbank.org/wbi/ learning-product/estimating-opportunity-costs-redd).

A transition has occurred from REDD+ as a creative international policy concept five years ago, to the early stages of coalescing the necessary country-driven national institutional architecture and stakeholder participation to effect REDD+ activities on the ground.

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33.1. From Readiness to Performance-Based Payments

TheoperationalizationoftheCarbonFundmarksanimportantstepinpilotingperformance-basedpaymentsforREDD+atscaleandinlinewithemergingpolicyguidanceundertheUNFCCC.TheCarbonFundwillprovideperformance-basedpaymentsforEmissionReductionsgeneratedfromREDD+activities,withaviewtoensuringequitablebenefitsharingandpromotingfuturelarge-scalepositiveincentivesforREDD+.TheCarbonFundwillalsoseektodisseminatebroadlytheknowledgegainedinthedevelopmentandimplementationofERPrograms.

UndertheCarbonFund,aboutfiveforestcountriesparticipatingintheFCPFwhoseReadinessPackagehasbeenendorsedbytheParticipantsCommittee,willenterintoanEmissionReductionsPaymentAgreement(ERPA)foranaverageamountofbetweenUS$30andUS$40millioneach.ItisanticipatedthatERPAswillcoveraperiodofaboutfiveyears,tobeconfirmeddependingonthevolumesonofferfromspecificERPrograms.TheprogramsselectedbytheCarbonFundParticipantsareexpectedtobeundertakenatasignificantscale,forexample,atthelevelofanadministrativejurisdictionwithinacountryoratthenationallevel,alignwiththeproposednationalREDD+strategyandmanagementframework,andbeconsistentwiththeemergingnationalREDD+MRVsystemandnationalREL.

The Carbon Fund will particularly target high-quality ERs generated by REDD+ programs that:

• Areconsistentwithemergingcompliancestandards undertheUNFCCCandotherregimes;

• Aresufficientlydiversetogeneratelearningvalue;

• Useclearandtransparentbenefit-sharing mechanismswithbroadcommunitysupportsothat REDD+incentivesareusedinaneffectiveand equitablemanner;

• Arebasedontransparentstakeholder consultations;and

• Produceadditionalenvironmentalandsocial benefits.

The following criteria will apply to the selection of ER Programs into the portfolio of the Carbon Fund. The ER Program will need to demonstrate the following characteristics:

• Besubmittedbythegovernmentsorgovernment- approvedentitiesofcountriesthatareFCPFREDD

CountryParticipants,thatis,countriesthatwere selectedintotheReadinessMechanismofthe FCPF;

• Bebasedonperformance,thatis,paymentsforERs relativetoanagreedREL.AlthoughtheCarbon Fundmightprovidesomeadvancepaymentsfor futureERs,itwillnotprovidefinancefor investments;

• Generatehigh-qualityandsustainableERs (includingenvironmentalandsocialbenefits,and minimizationoftheriskofnon-permanence);

• Beconsistentwithemergingcompliancestandards undertheUNFCCCandotherregimes,as applicable;

• Bebasedontransparentstakeholderconsultations;

• Useclearandtransparentbenefit-sharing mechanismswithbroadcommunitysupport,so thatREDD+incentivesareusedinaneffectiveand equitablemanner,withtheobjectivetofurther tackledeforestationandforestdegradation.Insome cases,thenationalgovernmentcanbethebest actortoenactandimplementthenecessarypolicy changesandregulations.Butmanychangeswill alsorequiretheinvolvementofIndigenousPeoples, localcommunities,andtheprivatesector,inwhich casethesestakeholdersorrights-holderswould expecttopartakeintheREDD+activitiesandthe correspondingcarbonrevenues(oralternative financingorsupport),inrecognitionoftheir contributions.Inothercases,IndigenousPeoples, localcommunities,andtheprivatesectorwould betheprimaryactorsimplementingtheER Programsandthusexpecttobetheprincipal beneficiariesofERPApayments.These arrangementswillhavetoreflecttheassessment

TheCarbonFundThe programs selected by the Carbon Fund are expected to be undertaken at a significant scale, for example, at the level of an administrative jurisdiction within a country or at the national level...

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FCPF Carbon Fund Participants

Tranche A (unrestricted use)

Australia

BPTechnologyVentures

CDCClimat

TheNatureConservancy

UnitedStatesofAmerica

Trance B (restricted use)

EuropeanCommission

Germany

Norway

UnitedKingdom

Table 5: Financial Contributors to the FCPF Carbon Fund as of June 30, 2011

ofthedriversofdeforestationandforest degradation.Adequategovernanceandfinancial managementarrangementsfortransparent benefitsharingwillneedtobeinplacepriortothe effectivenessoftheERPA;and

• Generatelearningvaluebytestingand demonstratingdifferentapproachesthatare proposedbyREDD+countries,andlearnfromthem inordertoinformtheinternationalcommunityon theirfeasibility.

For sub-national ER Programs, these should also:

• Beundertakenatasignificantscale,forexample, atthelevelofanadministrativejurisdictionwithin acountryoratthenationallevel,inlinewiththe proposednationalREDD+management framework;

• Beconsistentwiththe(emerging)nationalREDD+ strategyandrecognizedassuchbytheappropriate nationalauthority;

• Demonstratecapacitytomeasureandreport onERs.Thesystemshouldbeconsistentwiththe (emerging)nationalREDD+MRVsystem;

• BeconsistentwiththenationalREL,orwiththe nationalapproachestablishingtheREL;

• Beintegratedinanationalinstitutionalframework thatwillmanageandcoordinatesub-national programs;and

• Provideforanassessmentofandmeasures tominimizetheriskofdisplacementofemissions (leakage),reversals(non-permanence)andother relevantrisks.

3.2. Operationalizing the Carbon Fund

TheFCPFCarbonFundbecamefullyoperationalattheendofMay2011,whentheconditionthatatleasttwoprivateentitiesshouldhavebecomeFundParticipantswasfulfilled. TheCarbonFundbringstogetherkeygovernmentsandprivatesectorentitiesandwillhelptorefinemethodologicalframeworks,demonstratethefirsttransactionsatalargescale,andthuspavethewayforlargerfinancialflowsinthefuture. TheCarbonFundwelcomedAustralia(AusAid),BPTechnologyVentures,CDCClimat,theUnitedKingdomandtheUnitedStatesofAmericaasCarbonFundParticipantsduringFY11.SupplementalcontributionswerealsomadebyGermanyandNorway,bringingtotalcommittedandpledgedfundingtotheCarbonFundasof30June,2011toUS$212million.

Table5liststheParticipantsoftheCarbonFundasofJune30,2011,distinguishingbetweenthetwotranches(TrancheAforunrestricteduseoftheERsthatwillbegeneratedandTrancheBforrestricteduse,thatis,noresaleoruseforcompliance). WhiletheentryofnewParticipantssignalsgrowingconfidenceintheReadinessprocess,thebaseofparticipationneedstobefurtherbroadenedtomakeREDD+financingsustainable.Inparticular,thecurrentCarbonFundParticipantshaveexpressedstronginterestinexpandedparticipationfromtheprivatesector. TheOrganizationalMeetingheldinBarcelonafromMay31-June1,2011agreedonanactionplanconsistingofasequencedsetofgoalsfortheCarbonFund,whicharereproducedinBox4.

Box 4: Carbon Fund Action Plan

Six-month goals (by the October 2011 PC)• AgreeonER-PINtemplate• AgreeonRulesofProcedure• Initiateastrategicdiscussiononthefutureofthe CarbonFund• DiscussdraftpolicyguidanceonValuation/Pricing approach• FMTsharesdraftmethodologicalframeworkwith thePC• FMTproposesReadinessPackageoutlinetoPC

One-year goals• AdoptdraftReadinessPackageguidelinesand assessmentprocess• AgreepolicyguidanceonValuation/Pricing approach• AgreeMethodologicalapproach• AgreeERPAGeneralConditions• SignParticipationAgreementswithatleast2 additionalprivatesectorParticipants• SignLettersofIntentforbetweenoneandthree ERPrograms

Three-year goals• Signatleast3ERPAs,representingavalueof approximately60%oftheavailablecapitalfor ERpurchasesfromthecapitalizationtargetof US$200million• ReviewandreviseFCPFframeworkasnecessary• Captureanddisseminatethelessonslearnedin thefirstthreeyearsofFundoperations Tree spiking warning to deter illegal logging in Indonesia.

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4.1. The FCPF Budget Process

Sinceitsinception,theFCPFhasexperiencedconsiderablefinancialgrowthatthesametimethatitsinternalsystemsandprocesseswerejustbeingestablished.WiththeCarbonFundbecomingfullyoperationalandthefirstCarbonFundbudgetapprovedinJune2011,theopportunityformoresystematicfinancialplanningandbudgetingisnowinplaceforbothfunds.Itisexpectedthatfurtherchangeswillberequiredwiththeexpansiontomultipledeliverypartners. 4FY11FinancialReportoftheFacility

SuchchangeswilllikelyhaveimpactsontheinternalsystemsfortheFCPFwithintheWorldBank,asmaythestrategicdiscussionsrequestedbythePCearlyinFY12.Hence,thefinancialplanningfortheFacility’strustfundswillcontinuetoneedtoevolvetomatchtheevolvingcontextoftheFCPFandREDD+internationally. Thebasics,however,haveremainedthesame.ThebudgetsforbothmaintrustfundsoftheFCPF—theReadinessFundandtheCarbonFund—arebasedontheWorldBankfiscalyearandareapprovedannuallyinaccordancewiththeFCPFCharter.Sincebothfundsareestablishedthrough2020(withCarbonFundERPApaymentsexpectedtodominatethelatteryearsoffinancialoperations),thebudgetsneedtomakesensewithinalongtermframeworkforeachfund,consistentwithWorldBankpoliciesforthefinancialmanagementoftrustfunds.ThesepoliciesgenerallyrequirefundstobefullysetasideforcommitmentsmadebytheParticipantsaswellasmeetingthefiduciaryobligationsenteredintobytheWorldBankasTrustee. ThePCisresponsibleforapprovaloftheReadinessFundbudget,usuallyinJuneoftheprecedingfiscalyear.Todate,thePC(anditspredecessortheSteeringCommittee)hasapprovedbudgetsfortheReadinessFundforFY09-FY12,alongwithseveralamendmentsandrevisionstothosebudgetsthroughouttheyear. TheParticipantsoftheCarbonFundareresponsibleforapprovaloftheirannualbudgetsandallactivitiesarisingfromtheCarbonFundasaseparatetrustfund.ThefirstformalbudgetapprovalfortheCarbonFundhasbeenforFY12,withinformalguidancesoughtbytheFMTfordevelopmentalexpenditurespriortothattime(beforethefundbecamefullyoperational).Unlessotherwisenoted,themajorityofthisFinancialReportfocusesontheReadinessFund. However,aspartoftheapprovaloftheReadinessFundbudget,theFCPFCharterindicatesthatthePCmakesdecisionsonall‘SharedCosts’foractivitiesthatcutacrossandbenefitboththeReadinessandCarbon

Funds.Inpractice,theSharedCostshaveincludedFCPFSecretariatandREDD+MethodologySupportactivitiessuchastheworkofTAPs,theIPCapacityBuildingProgramanddevelopmentoftheR-PP.PursuanttotheCharter,theReadinessFundpays65percentandtheCarbonFundpays35percentofSharedCostsovertime,unlessthePCdecidesotherwise. ThePChasissuedresolutionswaivingsuchcostsharingthroughFY11,toreflectthefactthattheCarbonFundhadnotyetbeenmadefullyoperational,andinsteadpaid100percentoftheSharedCostsfromtheReadinessFundbudget.Itisexpectedthatcostsharingatthe65/35levelwillcommencefromFY12onward.However,thereisanimportantcaveatinResolutionPC/8/2011/8approvedinMarch2011,inthatthePChasplacedalifetime‘cap’orlimitofUS$12millionontheSharedCoststhatitwillchargetotheCarbonFund.ThisresolutionrespondedtotheconcernsofseveralexistingandpotentialCarbonFundParticipantsthatanupwardlimitbeplacedonsuchcosts,giventhatthePCotherwisemakesalldecisionsregardingtheircompositionandannualapprovals.DiscussionandconsensusagreementontheresolutionwasbutoneofthemanywaysthroughoutthepastyearthatthepartnersandstakeholdersoftheFCPFhavefoundwaystoconveytheirdifferentviewpointsandfindsolutionstomoveforward—inthiscasehelpingtobringinnewpartnerstotheCarbonFundalongtheway.

4.2. The Readiness Fund

4.2.1. Funding Sources

Asnoted,theFacilitycontinuestogrowinfinancialterms,andtheReadinessFundreceivedalargeinflowoffundingoverthepastyear.Table6presentsthecontributionsandpublicpledgesfortheReadinessFundbytheendofFY11.AlthoughtotalsignedDonorParticipationAgreementsamountedtoUS$207.9million,someoftheagreementsincludedaphasedcontributionintotheReadinessFundspreadoverafewyears.

Discussion and consensus agreement on the resolution was but one of the many ways throughout the past year that the partners and stakeholders of the FCPF have found ways to convey their different viewpoints and find solutions to move forward...

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Participant Name FY09 FY10 FY11 FY12-16 Total

Agence Française de Développement 4,612 592 5,800 11,004

Australia 9,565 7,997 17,562

Canada 41,360 41,360

Denmark 5,800 5,800

Finland 8,956 5,750 14,707

Germany 25,956 25,956

Italy 5,000 5,000

Japan 5,000 5,000 10,000

Netherlands 5,000 15,270 20,270

Norway 5,000 16,398 8,802 30,200

Spain 7,048 7,048

Switzerland 8,214 8,214

UnitedKingdom 5,766 5,766

UnitedStatesofAmerica 500 4,500 5,000

CommittedFunding 53,895 32,290 94,880 26,821 207,886

EuropeanCommission 5,800 5,800

Germany 14,500 14,500

Japan 4,000 4,000

Committed Funding plus Pledges 53,895 32,290 94,880 51,121 232,186

Table 6: Commitments and Pledges to the Readiness Fund as of June 30, 2011 (in US$ thousands)

InFY11,US$94.9millionwasreceivedintotheReadinessFundinadditiontotheUS$86.2millionincashreceivedintheprevioustwofiscalyears,bringingtotalcashcontributionstoUS$181.1million.ThisleavesoutstandingcommitmentsofaboutUS$26.8millionfromexistingsignedagreementstobepaidintotheReadinessFundinthecomingyears.

4.2.2. Funding Uses

AstheFCPFhasshiftedfromitsstartuptoimplementationphase,theannualbudgetsoftheReadinessFundhavealsoincreased.ThefirsttwoyearsofReadinessFundoperationswerecharacterizedbyrelativelyslowuptakeontheoperationalandadministrativebudget,whilethebroaddirectionsoftheFCPFwerebeingmappedoutbyParticipantsandthestaffingandexpertiseforREDD+wereputinplace.ThisincludedbothstaffingacrosskeystakeholdersoftheFCPF,aswellasstaffdevelopmentandformationofteamsattheWorldBank.However,inFY11,thePCapprovedasomewhatlargerbudgetforoperationalandadministrativesupporttoREDD+,toreflectthegrowingstaffingcapacity.InJuneof2011,thePChasfacilitatedabroaderworkprogramandsetofactivitiesthroughitsFY12budgetapproval,asindicatedinTable7.

Table8reflectsboththeevolutionoftheFY11budgetaswellasexpendituresbyactivityonacashbasis.ThePCauthorizedspecificnewactivitiesduringthefiscalyear,includingUS$235,000fortheTaskForceonaCommonApproach,whichcontributedtoraisingtheapprovedbudgetoftheReadinessFundmarginallyfromtheinitialFY11budget.TherevisedFY11budgetcametoUS$6.707million,comparedtototalexpendituresofUS$6.421million.Thefiscalyearclosedwithavariance(underrun)ofUS$286,000andspendingat96percentoftherevisedbudget,withashareofthisrelatedtothespecialbudgetaryrequestfortheTaskForceonaCommonApproach.ThesenumbersalsodonotincludesomecontractsthatwereissuedtosupportoperationsoftheFCPFandnotyetfullyexpensed(e.g.,someoftheIndigenousPeoplesProgramcontracts),andfundingcommitmentsthatweremadepreviouslytoWorldBankcountryteamssupportingReadinessinspecificcountriesbutnotyetexpensed. AsperTable8,CountryImplementationSupportcostswereUS$1.904million,or94percentoftheplannedbudget.Todate,thislineitemhasreflectedthedirectassistanceofWorldBankcountryteamstoREDDCountryParticipants,includingtechnicalassistance,grantsupervisionandassessmentsprovidedtothePC.

Activities Original Budget

Revised Budget

Actual Expense Variance

Expense Rate

ServicestoREDDCountries 4,473 4,473 4,369 104 98%

CountryImplementationSupport 2,025 2,025 1,904 121 94%

CountryAdvisoryServices 959 959 545 414 57%

REDDMethodologySupport 1,489 1,489 1,920 -431 129%

FCPFSecretariat* 1,735 1,762 1,685 77 96%

ReadinessTrustFundAdministration 472 472 366 106 78%

Total Readiness Fund 6,680 6,707 6,421 286 96%

Table 8. FY11 Readiness Program Expenditures by Activity (in US$ thousands)

Figure 2. FY11 Budget Performance (in US$ thousands)

n Revised FY11 Budget

2,0251,904

1,762 1,685

472

959

CountryImplementation

Support

FCPF Secretariat

REDD MethodologySupport

Readiness FundAdministration

2,500

2,000

1,500

1,000

500

0

366

545

Country Advisory Services

1,489

1,920

n FY11 Actuals

Activities

FY09 Revised Budget

FY09 Actual

FY10 Revised Budget

FY10 Actual

FY11 Revised Budget

FY11 Actual

FY12 Budget

ServicestoREDDCountries 3,732 2,037 4,226 3,719 4,473 4,369 5,660

CountryImplementationSupport 1,194 409 1,734 1,660 2,025 1,904 2,493

CountryAdvisoryServices 873 801 827 793 959 545 1,543

REDDMethodologySupport 1,665 827 1,665 1,266 1,489 1,920 1,624

of which est. Readiness Share 1,056

of which est. Carbon Fund Share 568

FCPFSecretariat 1,335 988 1,443 1,321 1,762 1,685 2,588

of which est. Readiness Share 1,682

of which est. Carbon Fund Share 906

ReadinessTrustFundAdministration

306 471 484 362 472 366 421

Total Readiness Fund 5,373 3,497 6,153 5,402 6,707 6,421 8,669

Table 7. FCPF Readiness Fund Annual Budgets FY10-12 (in US$ thousands)

*FY11RevisedBudgetincludedUS$235,000allocationforTaskForceonCommonApproach.

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Item Amount

Beginning Balance 77,695

DonorContributions 94,880

InvestmentIncome 732

TotalReceipts 95,612

CashDisbursements 6,421

GrantDisbursements 1,082

TotalDisbursements 7,503

Fund Balance 165,804

Table 9. FY11 Financial Statement for the Readiness Fund (in US$ thousands)

WhilespendingandactivitiesweregenerallyonthelevelsanticipatedatthestartofFY11,theunderrunthatdidoccurcamefromseveralREDDCountryParticipantsbeingunabletoaccessgrantfundinganddirectassistanceuntilarrangementsfortheCommonApproachandnewDeliveryPartnerscouldbeagreed.ThatworkprogressedinFY11,andcontinuesintoFY12.OnceagreementsareformalizedwiththenewDeliveryPartners,thecostsofCountryImplementationSupportwillalsoreflectaswellthecostsincurredbypartnerinstitutionsbeyondtheWorldBank. TherelatedlineitemofCountryAdvisoryServicescametoaboutUS$545,000oronly57percentoftheamountoriginallybudgetedinFY11.ThemajorityofthesecostsarisefromFMT,forestryandsocialdevelopmentstaffadviceandguidancetoREDDCountryParticipantsontheirprograms,includingdevelopmentoftheR-PP,SESAandconsultationprocesses.Thisrelativelylowlevelofspending(comparedtoaboutUS$793,000inFY10)reflectsingreatpartthefactthatFMTstaffworkedbeyondtheFCPFduringtheyear,tointegrateacrossvariousinitiativescloselyrelatedtotheFCPF,includingtheForestInvestmentProgram,theREDD+Partnership,andothers,withappropriateallocationsofcoststothoseinitiatives. Conversely,withthebudgetforREDDMethodologySupportactivitiessetatUS$1.489millioninFY11,andtotalexpendituresatUS$1.920million,thislineitemsawspendingof129percentagainstFY11plans.Costsreflectedtheexpenses(consultingcontracts,travelandmeetingcosts)oftheindependentTAPssupportingtheFCPF,considerableworkwithotherREDD+institutionstocoordinateanddevelopjointtools,suchastheR-PPtemplateandpreviouslyapprovedprogramssuchastheIPCapacityBuildingProgram. FCPFSecretariatexpenseswereUS$1.685millioncomparedtothefinalrevisedbudgetofUS$1.762million,or96percentoftherevisedbudget.Expendituresincludedthestandardcostsforprogrammanagement,organizationoftheannualParticipantsAssemblyandPCmeetings,andtravelcostsforREDDCountryParticipantstothosemeetings,inaccordancewiththeFCPFCharter.Increasingly,knowledgeandlearningeventsonREDD+aswellasotherkeypartnermeetings(e.g.,theUN-REDDProgrammeorREDD+Partnership)areorganizedtogetherwiththeFCPFSecretariat,tomaximizetheuseofParticipanttimeaswellastokeepcostsaslowaspossible.TypicalFCPFSecretariatcostsalsoincludesupportingtheparticipationoftheIPObserver,hostingandmaintainingtheFCPFwebsiteandgeneralcommunicationstoFCPFstakeholders. ReadinessFundAdministrationcostswereUS$366,000orabout78percentoftheUS$472,000budgetedinFY11.ThesecostsreflecttheworkofallWorldBankstaffinvolvedinfundmanagement,contributionsmanagement,

accounting,legalandotherservicesrequiredbytheReadinessFundTrustee.GiventhattheyhaveremainedrelativelysteadysincetheFund’sinceptioninFY09,thebudgetforthesecostswasreducedintheFY12budgetproposaloftheFMT.

4.2.3. End of Year Account Balance

Insummary,perTable9,atthecloseofFY11,thebalanceoftheReadinessFundstoodatUS$165.8million.TotalnewfundsintotheaccountwereaboutUS$95.6million,includingthedonorcontributionsofUS$94.9millionandUS$0.7millionofinvestmentincomeearnedontheaccountbalance.TotaldisbursementsonacashbasiswereUS$7.5million,withcashexpendituresofUS$6.4million,andexpendituresbyREDDCountryParticipantsagainsttheirown-managedgrantsofapproximatelyUS$1.1million.

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4.2.4. Accelerating Readiness Fund Disbursements

AnimportantaspectoftheReadinessFundfromitsinceptionhasbeenthatitmakesavailablegrantfundingtocountries—thegrantsofuptoUS$3.6millionperREDDCountryParticipant—insupportofcountry-ledReadinesswork.TheREDDCountryParticipantsmanageandutilizethegrantsforREDD+activitiesandexpenses,whichareultimatelyreflectedasdisbursementsinWorldBankfinancialstatementsonlyoncetheREDDCountryParticipantcompletesreimbursementfromthegrantresources.BytheendofFY11,17R-PPformulationgrantagreementshadbeensignedandelevenofthegrantswereactivelydisbursingin2011,withaboutUS$1.1millionfullyprocessedandexpensedbyREDDCountryParticipantsduringthefiscalyear(seeFigure1inSection1).However,associatedwiththesegrantdisbursementswasaconsiderablyhigherlevelofgrantcommitmentsmadebytheFCPFtoREDDCountryParticipants,alongwithassociatedcountryservicesandoperationalsupportthatcomeswithFCPFparticipation.Table10providesamorecompletepictureofthelevelofthesecommitmentstoREDDCountryParticipants. Atthesametime,itisstillevidentthatthedisbursementstoREDD+countriesneedtobedramaticallyaccelerated,inordertoensurethattheavailablefundingforReadinessistranslatedasquicklyaspossibletosupportfortheultimateFCPFgoalofReadinessforREDD+.DuringthediscussionofstrategicissuesscheduledfortheOctober2011PCmeeting,thePCisexpectedtoconsideranotewithoptionsforadditionalwaystoacceleratedisbursementsacrosstheReadinessFund.

4.2.5. Financial Commitments over the Longer Term

TheReadinessFundwasestablishedtooperateoverthelongterm,withaclosingdateintheFCPFCharterofDecember31,2020.Inordertoplanresourcesoverthislongertimehorizon,thePCissuesresolutionsfromtimetotimethatestablishfundingprioritiesandcommitmentsforthecomingyears.Thesecommitmentsareconsidered‘notional’whenthePChassetasideorallocatedfinancialresourcesoftheReadinessFundthatarenotyetsignedintoformalgrantagreementsorcontracts.Theyareconvertedto‘full’commitmentsoncethegrantagreements(orvendorcontracts)aresignedbyrecipientsand/orbytheWorldBankasTrusteeoftheReadinessFund. AtthecloseofFY10,thelongtermnotionalcommitments(useoffunds)madebythePCwerealignedwiththetotalcommittedfunding(sourcesoffunds).Importantly,thelongtermbusinessplanincludesreservesfortheoperationofthesecretariatbytheFMTandtheTrusteeroleoftheWorldBankoverthefulltermoftheFund—reflectingthefactthattheFacilityisexpectedtobefullyactivethroughthattime,whentheCarbonFundissupportingprogramsinselectREDDCountryParticipantsandmakingERPApayments. PC6agreedtoprovideaccesstoR-PPFormulationGrantsofUS$200,000andassociatedCountryImplementationSupporttoallREDDCountryParticipantsthatdonotyethaveaccesstosuchfundingthroughtheFCPForanotherdonor,providedthatthegrantagreementissignedbyDecember31,2011andanappropriatedeliverypartnercanbearranged(unlessotherwisedecidedbythePC,forexample,inthecaseofextenuatingcircumstances

Grants and Country ServicesAmount per Country(US$ millions)

Number Total (US$ millions)

Full Support through Readiness Package

PreparationGrants(uptoUS$3.6m) 3.6 36b 129.6

AssociatedCountryServicesa 36 31.8

Total Notional Commitments to Grants and Country Services 36 161.4

Table 10: Readiness Funds Notionally Committed to Grants and Services for REDD Country Participants (as of June 30, 2011)

a. CountryServicesarecomprisedofanaveragepercountryshareofREDDMethodologySupportandCountryAdvisoryServices,plusdirect CountryImplementationSupport.

b. 36REDDCountries,whichmayincludeallselectedREDDCountryParticipantsexceptforTanzania,whichisbilaterallyfunded.

Notional Commitments

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oradelaythatisnotthefaultoftheREDDCountryParticipant).ThePCalsoreiteratedthatallREDDCountryParticipantswereequallyeligibletoreceiveaReadinessPreparationGrantofuptoUS$3.6million.ThegrantsdependonthePC’sdecisionregardingtheR-PP,theavailabilityofsufficientcommittedfunding,andregionalbalanceamonggrantrecipients. TotalcommittedandpledgedfundingtotheReadinessFundasof30June,2011isapproximatelyUS$232million.Thisincreasedleveloffundingisadequatetocoverthelong-termfixedcostsoftheFacilityandfullReadinessPreparationGrantsofuptoUS$3.6milliontoall37selectedREDD+CountryParticipantsexceptforTanzania,whichisbilaterallyfunded,togetherwiththecostsoftheestimatedassociatedcountryservicesforthose36countries. AsshowninTable10,asoftheendofFY11,notionalcommitmentsoffullgrantsandtheestimatedassociatedcountryservicesto36countriesamounttoapproximatelyUS$161million. ForthediscussionofstrategicissuesscheduledfortheOctober2011PCmeeting,theFMTwillpresentfortheconsiderationofthePCanupdatedlongtermbusinessplanandoptionsthataimtoadjustthesecommitments,considertheuseofadditionalresourcesbeingpledgedfortheReadinessFund,and/orseeknewwaystoacceleratedisbursementsofexistingcommitments.

4.3. The Carbon Fund

4.3.1. Funding Sources

AsamajormilestoneoftheFacility,theCarbonFund’sminimumthresholdofUS$40million,establishedintheFCPFCharter,wassurpassedearlyinFY11,whenthesignedParticipationAgreementoftheUnitedStateswasreceivedinSeptember2011;sincethattimetheFundhasreceivedasteadyflowofnewfundingandpartners

addingtothecriticalearlymoversthathavehelpedtoshapetheFundfromitsinception.Table11presentsthecontributionsandpublicpledgesfortheCarbonFundbytheendofFY11,amountingtoUS$212millionoverall,withfullycommittedfunding(signedParticipationAgreements)ofaboutUS$174million.ThisleveloffundingisaconsiderableachievementgiventheoriginaltargetvolumeofUS$200millionforthecarbonfund’scapitalization.

4.3.2. Funding Uses

WithinthecontextoftheOrganizationalMeetingoftheCarbonFundinlateMay/earlyJune2011,thefirstbudgetapprovaloftheCarbonFundParticipantstookplace,alongwithinitialplanningforthefuturedirectionsoftheFund.Inpractice,theCarbonFundParticipantshavealreadybeenworkingcloselywiththemanystakeholdersoftheReadinessFundandtheFacilityoverall,toensurethattheFCPFworkseffectivelytoachieveitsdualobjectivesofpreparingforREDD+Readiness,aswellaspilotingandtestingperformance-basedpayments.HencetheCarbonFundFY12budgetprovidesasnapshotoftheworkunderwayacrossbothfunds,includingthesharedactivitiesoftheReadinessFundandtheCarbonFund,comprisingtheSharedCosts.Table12detailsthesecostsastheyaffecttheCarbonFundpre-FY12(beforefulloperations)aswellasthebudgetplangoingforward.

4.3.3. Financial Commitments over the Longer Term

TheCarbonFundonlybecamefullyoperationalinMay2011sotheFMTintendstopreparealong-termbusinessplanfortheCarbonFundmeetingtobeheldinOctober2011.

Participant Name FY09 FY10 FY11 FY12-16 Total

Australia 12,735 12,735

BPTechnologyVentures 5,000 5,000

CDCClimat 5,000 5,000

EuropeanCommission 6,347 362 6,709

Germany 4,009 3,819 21,125 17,400 46,353

Norway 10,000 55,000 65,000

TheNatureConservancy 5,000 5,000

UnitedKingdom 17,940 17,940

UnitedStatesofAmerica 10,000 10,000

CommittedFunding 25,356 4,181 71,800 72,400 173,737

Germany 29,000 29,000

Switzerland 9,600 9,600

Committed Funding plus Pledges 25,356 4,181 71,800 111,000 212,337

Table 11: Commitments and Pledges to the Carbon Fund as of June 30, 2011 (in US$ thousands)

FY09Actual

FY10Actual

FY11Actual

FY12Budget

SharedCosts(paidbytheReadinessFund)* 635 1,728 1,262

SharedCosts(paidbytheCarbonFund)** 1,474

CarbonFundAdministration 183 366 490

MarketingtoPrivateSector 45

MeetingLogistics 50

ProgramDevelopment 60

Total Carbon Fund Costs 183 366 2,119

Table 12: FCPF Carbon Fund Annual Budgets (in US$ thousands)

*PerPCResolutions:PC/3/2009/6,PC/6/2010/8,PC/9/2011/4andnotincludedinTotalCarbonFundCostsfigures.**PerPCResolutions:PC/9/2011/4.

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ConclusionsandtheRoadAhead

5FY2011wasacrucialyearforREDD+,culminatingintheadoptionbytheConferenceofthePartiesofDecision1/CP.16inCancún,whichincludedastrongchapteronREDD+.LookingatDurbanandbeyond,alotofworkremainstobedone,rangingfromtheregulatoryaspects,includingthenecessaryguidelinesonMRVandreferencelevels,theguidanceoninformationsystemsforsafeguards,anddeterminingsourcesoffinancefortheso-called“thirdphase”ofREDD+.

WithrespecttotheFCPF,FY11wasaveryrichyear,too.REDDCountryParticipantshavemademajorcontributionstotheinternationalthinkingonREDD+bylayingout,intheirR-PPs,howtheywouldgoaboutgettingreadyforREDD+. TheattentionnowshiftstodisbursingFCPFReadinessFundproceedstosupporttheimplementationoftheseR-PPs.Theworkwillbechallengingastherearenocookie-cutterapproachesandeachcountryhastoworkouttherightbalanceofactivitiesandfollowtherightprocesstobecomereadyforREDD+.Thereisamultiplicityofnationalandinternationalactorswithdifferent,sometimesconflicting,viewsonwhatneedstobedonefirst,howfast,andwithwhatleveloffinancialandhumanresources. InFY12theFCPFwillturnitsattentiontomeasuringprogresstowardsREDD+ReadinessthroughthedesignofaReadinessPackageandmonitoringreportsforReadinessgrantsunderimplementation.Thiswillprovechallenging,asReadinessisasmuchaprocessasitisastate.ThecrucialquestionforthePCthereforebecomeshowfarin

theprocessaREDDCountryParticipantshouldhavegonebeforeitcanbeconsideredready,andhowmuchprogressitshouldgiveevidenceofbeforeitcanbedeemedtohavemadesufficientprogresstoaccessfurtherfunding,includingperformance-basedpayments,e.g.,throughtheCarbonFundoftheFCPF. Inthenextfewyearstheglobalcommunitywillassertitsunderstandingofwhatisnecessarytosignificantlyexpandfromsmallbutingeniousforestprotectionprojectsofafewthousandhectarestothevisionaryinfrastructureanddeliverymechanismsatthecountrylevelthatareneededtoimpactglobalemissions.TheworkprogramonREDD+forthenearfuturefeaturesdauntingchallenges.Theseincludeestablishingnationalinstitutionscapableofassertinginfluenceoverlands,andorganizationsandeconomicincentivesthathavebeenstubbornlyintractableinmanydevelopingcountries;fashioningtechnicalmethodstomeasureandmonitorREDD+activitiesrelativetoreferencelevelswithoutREDD+policyinterventions;andadvancinggovernanceatthelocalandnationallevels.

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AcknowledgementsAll photos courtesy of the World Bank Photo Library/Rhett A. Butler unless otherwise noted.

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