ANNUAL REPORT for FISCAL YEAR 2011 76515 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.org Note: All dollar amounts are in U.S. dollars (US$) unless otherwise indicated. FY11 ANNUAL REPORT Acronyms AusAid Australian Agency for International Development AWG-LCA Ad Hoc Working Group on Long-term Cooperative Action (under UNFCCC) CAR Central African Republic CF Carbon Fund COP Conference of the Parties (to the UNFCCC) CSO Civil Society Organization DPs Delivery Partners DRC Democratic Republic of Congo ER Emission Reduction ER-PIN Emission Reductions Program Idea Note ERPA Emission Reductions Payment Agreement ESMF Environmental and Social Management Framework FCPF Forest Carbon Partnership Facility FIP Forest Investment Program FMT Facility Management Team FY Fiscal Year (World Bank fiscal year, July 1 through June 30) GEF Global Environment Facility IDB Inter-American Development Bank IPCC Intergovernmental Panel on Climate Change IP Program Indigenous Peoples and other Forest Dwellers Capacity Building Program Lao PDR Lao People’s Democratic Republic MRV Measurement, Reporting, and Verification NGO Non-Governmental Organization OECD/DAC Organisation for Economic Co-operation and Development’s Development Assistance Committee OP Operational Policy (of the World Bank) PA Participants Assembly PC Participants Committee REDD Reducing Emissions from Deforestation and Forest Degradation REDD+ REDD plus conservation of forest carbon stocks, sustainable management of forests, and enhancement of forest carbon stocks REL Reference Emission Level R-PP Readiness Preparation Proposal FOREST CARBON PARTNERSHIP FACILITY SBSTA Subsidiary Body for Scientific and Technological Advice (under UNFCCC) SESA Strategic Environmental and Social Assessment SFM Sustainable Forest Management TAP Technical Advisory Panel UNDP United Nations Development Programme UNFCCC United Nations Framework Convention on Climate Change UN-REDD United Nations Collaborative Programme on Reducing Emissions from Deforestation and Forest Degradation in Developing Countries WBI World Bank Institute 1 FY11 ANNUAL REPORT Contents 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 CONTENTS 2.1 Fast-start Learning 2.2 Building on the International Framework for REDD+ 19 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 FOREST CARBON PARTNERSHIP FACILITY FOREST CARBON PARTNERSHIP FACILITY 3 2 FY11 ANNUAL REPORT Executive Summary This report marks the third year of implementation of the FCPF. The first three years have seen the development of the FCPF and REDD+ at the global and national levels. Remarkable progress was achieved in the UNFCCC, an international REDD+ Partnership was established, and global initiatives such as the FCPF, the UN-REDD Programme, the Forest Investment Programme and the GEF’s new SFM/REDD+ window were set up to assist forest countries in tackling the REDD+ challenge. Under this new international framework, dozens of forest countries have started formulating broad strategies and investing in activities on the ground. The FCPF has become a central piece in the new The Facility’s main weaknesses have been the slow REDD+ institutional landscape. It has created a normative pace of financial commitments and disbursements from framework for REDD+ Readiness centered on the robust the FCPF Readiness Fund; the flat rate of FCPF grants assessment of country-owned proposals, fostered regardless of needs; the lack of in-country procurement domestic thinking about and action for REDD+, and capacity; the need for more World Bank staff to work on the incentivized greater cooperation among national and FCPF at the country level; insufficient communications and international entities. The past year saw the FCPF achieve outreach about the FCPF; and the creation of unrealistic some key milestones including the signing of the first expectations as to the scale and timing of REDD+ benefits. Readiness preparation grants for several forest countries, These weaknesses are already being addressed in the adoption of the Common Approach to safeguards a variety of ways by the Facility Management Team— among Multiple Delivery Partners under the Readiness through the acceleration of due diligence on Readiness Fund, the start of operations of the Carbon Fund, and the grants where feasible; the opening of the Readiness completion of the first evaluation of the Facility. Fund to Delivery Partners other than the World Bank The Carbon Fund has now entered its operational phase (to enhance Readiness service coverage) combined with and will provide performance-based payments to about the reinforcement of World Bank staff working on FCPF five programs from countries that have made significant operations; the possible varying of grant size in accordance progress towards REDD+ Readiness. Emission Reductions with needs; the support to in-country procurement experts; Payment Agreements will only be entered into under the and the recruitment of communications staff dedicated Carbon Fund for programs from REDD Country Participants to the FCPF. The past year saw the FCPF achieve some key whose Readiness Package has been assessed by the The above measures should address the weaknesses Participants Committee. The Carbon Fund will thus offer without compromising quality. In particular, the FOREST CARBON PARTNERSHIP FACILITY FOREST CARBON PARTNERSHIP FACILITY additional incentives for countries to get ready for REDD+ Common Approach to safeguards approved by the milestones including the signing of the first and undertake the necessary investments as well as policy and regulatory adjustments. Participants Committee in June 2011 creates a level playing field among Delivery Partners. Once they enter into Readiness preparation grants for several forest The first evaluation of the FCPF has now been complet- ed, which reveals the main strengths and weaknesses of Transfer Agreements with the World Bank—who acts as trustee of the FCPF Readiness Fund—they will be operating countries... the start of operations of the Carbon the FCPF. The strengths of the initiative include the capac- under a framework that ensures substantial equivalence ity that is being built for REDD+ in countries; the establish- with the World Bank’s social and environmental safeguards Fund, and the completion of the first evaluation ment of a common framework for Readiness; a transpar- policies and procedures applicable to the FCPF. ent and effective governance structure; the recognition of The next year will present new challenges and exciting country ownership, the lead role of country governments opportunities, among which the questions as to how to of the Facility. in the context of REDD+; the facilitation of greater donor coordination; and the creation of a space for Indigenous optimize resources allocation within the FCPF, whether to reopen the FCPF to more REDD Country Participants, Peoples, local communities and civil society to engage in and how to measure country progress towards REDD+ forest sector reforms and other reforms relevant to REDD+. Readiness will be paramount. 5 4 FY11 ANNUAL REPORT Turning Point The Forest Carbon Partnership Facility (FCPF) is a global partnership focused on reducing emissions from deforestation and forest degradation, forest carbon stock conservation, the sustainable management of forests, and the enhancement of forest carbon stocks in developing countries (commonly referred to as REDD+). The FCPF complements the UNFCCC negotiations on REDD+ by demonstrating how REDD+ can be applied at the country level and by drawing lessons from this early implementation phase. The FCPF consists of two separate mechanisms, each the proper environmental and social safeguards. The underpinned by a multi-donor fund—the Readiness Fund and FCPF Carbon Fund, in turn, will provide performance-based the Carbon Fund. Governments and private or public entities payments for verified Emission Reductions from REDD+ making the minimum financial contribution (US$5 million) programs in countries that have made considerable to the Readiness Fund are known as Donor Participants progress towards REDD+ Readiness. while governments and private or public entities making The FCPF completed its third full year of operation the minimum financial contribution (US$5 million) to the on June 30, 2011. This past year (FY11) was marked by Carbon Fund are known as Carbon Fund Participants. The some important developments on the path from REDD+ developing countries participating in the FCPF are known Readiness to carbon finance. as REDD+ Country Participants. Highlights from FY11 include the following: The Facility pursues four strategic objectives: > Three countries signed Readiness Preparation (a) To assist countries in their REDD+ efforts by grant agreements: the Democratic Republic of providing them with financial and technical Congo (DRC), Indonesia, and Nepal; assistance in building their capacity to benefit > Eight countries submitted R-PPs for formal from possible future systems of positive incentives assessment and were allocated grant funding for REDD+; by the Participants Committee (PC), with three (b) To pilot a performance-based payment system more countries presenting draft R-PPs. As of the for REDD+ activities, with a view to ensuring end of FY11, a total of 24 countries had either equitable benefit sharing and promoting future submitted R-PPs for formal assessment or large-scale positive incentives for REDD+; presented draft R-PPs, and almost US$65 million The FCPF also continues to serve (c) Within the approach to REDD+, to test ways to had been allocated in Readiness Preparation grants FOREST CARBON PARTNERSHIP FACILITY FOREST CARBON PARTNERSHIP FACILITY sustain or enhance livelihoods of local to 18 countries;1 as a forum for exchanging ideas, (d) communities and to conserve biodiversity; and To disseminate broadly the knowledge gained in the > A Common Approach to Environmental and Social Safeguards (the “Common Approach�) for information, and building capacity for development of the Facility and the implementation of Readiness Preparation Proposals (R-PPs) and Multiple Delivery Partners was approved, allowing the FCPF to leverage strengths of entities other the global REDD+ community. Emission Reductions (ER) Programs. than the World Bank, namely multilateral development banks and UN agencies, to enhance To achieve these objectives, the FCPF Readiness Fund the coverage of Readiness services to REDD+ supports participating countries in their preparation for countries; REDD+ as they develop the necessary policies and systems, in particular by adopting national strategies; develop reference emission levels (RELs); design Measurement, 1 Tanzania is among the 19 countries having submitted its R-PP for Reporting, and Verification (MRV) systems; and set up formal assessment but it did not request a grant allocation. REDD+ national management arrangements, including 7 6 FY11 ANNUAL REPORT > The FCPF completed its first program evaluation 1.1. Increased Momentum and Resources which yielded an assessment of progress made so for REDD+ far and guidance on how to strengthen the FCPF; and 1.1.1. Setting Sail: Eight New Allocations > The Carbon Fund became fully operational in May During FY11 the R-PP formulation grants continued to be 2011, bringing to bear the second mechanism of expended (see Figure 1) and the focus increased on the the Facility, which is essential in providing formulation and presentation of country R-PPs. These incentives for valuing standing forests. R-PPs symbolized significant achievements for each of the submitting REDD+ countries as they play a critical role These developments have brought the FCPF to a turning in creating a national dialogue on REDD+, bring together point. While the first three years were mostly dedicated national stakeholders, and provide a roadmap for going to establishing the right frameworks and processes to forward. Eight countries presented their R-PPs for formal ensure that REDD+ was being tackled in a comprehensive assessment (Cambodia, Ethiopia, Lao PDR, Liberia, fashion, the attention is now turning to the implementation Peru, Tanzania, Uganda, and Vietnam). Of these eight, all of national Readiness programs and the initiation of except Tanzania, which has alternative bilateral funding, performance-based incentive systems. were allocated Readiness grants. Three more countries In addition, the FCPF mobilized more funding for presented draft R-PPs (Central African Republic (CAR), REDD+, bringing total committed and pledged funding Colombia, and Nicaragua). for the two funds as of June 30, 2011 to US$444 million, representing a significant portion of total multilateral 1.1.2. Grants for Readiness REDD+ funding. As a major step forward in the Readiness process, dividing the grants into two installments, where the BP Technology Ventures joining the Carbon Fund, signal- Furthermore, the FCPF also continued to serve as a Readiness Preparation grant agreements were signed with latter installment was only released after submission of ing the growing confidence of the private sector in REDD+. forum for exchanging ideas, information, and building the DRC, Indonesia, and Nepal. This was made possible a progress report on utilization of the first US$2 million This development allowed the organizational meeting of capacity for the global REDD+ community. by the approval of World Bank management and Board disbursement. These developments are expected to the Carbon Fund to take place before the end of FY11. The As in previous years, the FCPF also supported a number of Executive Directors of the safeguards approach to be expedite the grant delivery process. meeting agreed on the goals of the Fund at the three-year, of capacity-building activities among Indigenous Peoples followed under the FCPF Readiness Fund, consisting of a The due diligence proceeded for countries whose R-PPs one-year and six-month horizons, approved the FY12 bud- and deepened the understanding of the social dimension of Strategic Environmental and Social Assessment (SESA) were assessed by the PC and steps were taken to address get, and discussed draft Rules of Procedure for the Fund. REDD+ through country R-PP submissions and exchanges and an Environmental and Social Management Framework the requirements included in the PC resolutions. This concluded a two-year long process of updating and held with representatives of forest-dependent Indigenous (ESMF). adjusting the contents of the FCPF Information Memoran- Peoples and local communities at the global, regional, and In addition, PC7 decided to smooth the disbursement 1.1.3. Additional Funding for Readiness dum chapter on the Carbon Fund. The resulting operational national levels. process of Readiness Preparation grants by no longer modalities of the Carbon Fund were consigned to an Issues FY11 also saw the increased capitalization of the Readiness Fund, with new commitments from Canada (US$41.4 Note, finalized in December 2010, and an amendment to million), Germany (US$26.0 million), and Italy (US$5 the FCPF Charter’s Article 12 on the Carbon Fund. million). These three countries thus became Donor The availability of Carbon Fund resources to be allocated Participants. In addition, Agence Française de Développement to future Emission Reductions Payment Agreements Figure 1: Formulation Grant Disbursement by REDD Country Participant (US$, thousands) and Finland increased their contributions to the Readiness (ERPAs) is expected to provide further incentives to Fund by US$5.8 million each. Germany and the European countries to progress significantly and speedily towards Uganda 40 140 180 n Actual Cash Commission also made public pledges during FY11, of REDD+ Readiness. Disbursement FOREST CARBON PARTNERSHIP FACILITY FOREST CARBON PARTNERSHIP FACILITY US$14.5 million and US$5.8 million respectively, bringing Republic of Congo 87 108 195 FY10 1.1.5. Country Implementation Support and Advisory the total amount committed and pledged to the Readiness Nepal 91 109 200 n Actual Cash Fund as of 30 June, 2011 to US$232 million. Services Disbursement Liberia 75 107 182 The Readiness Mechanism offers technical assistance to FY11 1.1.4. Moving towards Results-Based Payments 50 123 REDD+ countries in the form of two closely linked sets of Lao PDR 173 FY11 was a watershed year for the FCPF as the Carbon activities: (1) Country Implementation Support, consist- Kenya 169 169 Fund became fully operational. Two conditions had been ing of assistance with R-PP preparation, and fiduciary and Ghana 200 200 set for the operationalization of the Carbon Fund. First, safeguard support from World Bank country teams; and (2) 100 100 200 a minimum capitalization of US$40 million was required Country Advisory Services, comprised of the coordination Ethiopia under the FCPF Charter. Second, the early Carbon Fund by and feedback from the Facility Management Team (FMT) DRC 177 14 191 Participants chose to wait until at least two additional and World Bank staff on aspects of Readiness work. Visits Costa Rica 139 22 161 private entities had signed Participation Agreements to by World Bank and FMT staff, in some REDD Country Disbursed FY10 $959 ensure that the Fund started operations as a public-private Participants jointly with UN-REDD representatives, have Colombia 134 134 Disbursed FY11 $1,082 partnership. The first condition was met in September provided direct onsite technical input as countries ad- Cameroon 55 55 TOTAL Disbursed to end of FY11 $2,041 2010 and the second in May 2011, with CDC Climat and vance towards preparation of the Readiness Preparation 9 8 FY11 ANNUAL REPORT proposals and achieving REDD+ Readiness. The FMT staff By co-chairing the PC meetings and forming contact The IP Program enables the development of inclusive and participated and provided feedback in national workshops groups to discuss issues in greater detail, REDD+ Country organized by governments in REDD Country Participants. Participants have taken greater responsibility for the accountable national strategies and programs by enhancing Thematic workshops have also been organized by the FMT in collaboration with the World Bank Institute (WBI), such process. For example, the PC formed contact groups to discuss individual R-PPs and working groups to provide understanding of REDD+ and climate change and enabling as several workshops on opportunity costs of REDD, a guidance on implementing recommendations of the FCPF active engagement in national and international dialogues. SESA workshop in Latin America, knowledge-sharing ses- program evaluation. sions via webinars organized by other organizations, and Similarly, to make the PC Bureau geographically video conference sessions with REDD+ teams in countries. balanced, Mexico introduced a proposal to increase the number of REDD Country Participants. After discussion, 1.2.2. Engaging Observers and Indigenous Peoples 1.2. Increased Ownership the PC decided to have a total of up to eight members, five Some non-governmental actors may be uniquely positioned Table 2: Composition of the PC Bureau 1.2.1. A Country-Driven Partnership representatives from REDD Country Participants and three to contribute to the Readiness process. They continue as of June 30, 2011 from financial contributors (either Donor Participants or to bring in views and insights that add value to country The FCPF was among the first global partnerships to adopt Carbon Fund Participants). PC Bureau preparation efforts and help shape the discourse on an innovative governance structure in which developing The entry of CDC Climat and BP Technology Ventures how to achieve REDD+ Readiness. Though observers do Argentina countries have the same voice as financial contributors, allowed the Carbon Fund to become fully operational not have formal voting rights in the FCPF’s governance with a decision-making process that includes a wide and reach a capitalization level at the close of FY11 of Australia structure, the norm of reaching decisions through spectrum of observers, including forest-dependent approximately US$174 million, with additional pledges from consensus has empowered them to play a constructive Cambodia Indigenous Peoples and other forest dwellers and civil Germany and Switzerland bringing the total committed and role in the FCPF. The FCPF continues to recognize the Democratic Republic of Congo society and non-governmental organizations from north pledged to the Carbon Fund as of June 30, 2011 to US$212 important role that stakeholders play and supports their and south. This open platform has generated trust and a Germany million. In light of other pledges to the Carbon Fund and participation by financial and technical means. Forest- cooperative spirit to advance the work of the FCPF and the the aim of attracting further private sector funding, the Guatemala dependent Indigenous Peoples and other forest dweller global REDD+ agenda, more generally. PC also approved the FMT’s proposal to request the World Kenya representatives conducted a self-selection process A key signal of this willingness to work together Bank Board of Executive Directors for an increase in the in which Africa chose two representatives (one from United States of America has been the active participation by REDD+ Country authorized capitalization of both the Readiness Fund and Francophone Africa and one from Anglophone Africa); Asia Participants and financial contributors in the PC meetings. Carbon Fund. nominated one representative for the region; and Latin America nominated two representatives (one from South Table 3: Financial Contributors to the America and one from Central America). The results were FCPF (Donor Participants and Carbon Table 1: Composition of the FCPF Participants Committee as of June 30, 2011 Fund Participants) as of June 30, 2011 presented to PC9. The approved budget for FY12 thus includes resources to support the participation of five REDD Countries Donor and Carbon Fund Participants Observers to the PC FCPF Financial Contributors regional forest-dependent Indigenous Peoples and other Argentina Agence Française de Développement Forest-Dependent Indigenous forest dwellers’ representatives. Agence Française de Développement Peoples and Forest Dwellers The Indigenous Peoples and Forest Dwellers Capacity Australia Cambodia Australia International Organizations Building Program continues to strengthen forest- BP Technology Ventures dependent peoples’ participation in national Readiness Colombia Canadaa Non-Governmental Organizations processes. The program enables the development of Canada Costa Rica European Commission Private Sector inclusive and accountable national strategies and programs CDC Climat Democratic Republic of Congo Finland UNFCCC Secretariat by enhancing understanding of REDD+ and climate change Denmark and enabling their active engagement in national and FOREST CARBON PARTNERSHIP FACILITY FOREST CARBON PARTNERSHIP FACILITY Ethiopia Germany UN-REDD Programme European Commission international dialogues. In FY09, the PC allocated a total of Gabon Japan Finland US$1 million (US$200,000 per year for FY09–FY13) to the Nepal Netherlands program. In FY11, the program provided support to a wide Germany Guatemala Norway range of activities, as outlined below. Italy Kenya Spain Japan High-level dialogues on REDD+ with Indigenous Peoples (Washington, DC) Netherlands Mexico Switzerland Norway Paraguay The Nature Conservancy The World Bank Vice President for Sustainable Development hosted two high-level dialogues with Spain Thailand United Kingdom Indigenous Peoples leaders. The first session took place Switzerland Uganda United States of America in Washington, DC, on November 15, 2010. The second one The Nature Conservancy was held under the auspices of the UN Permanent Forum United Kingdom a. Denmark was elected to the PC in November 2010 but volunteered to resign as a member of the PC in June 2011 in order that Canada could on Indigenous Issues in New York, on May 20, 2011. United States of America replace them as a member. The Indigenous Peoples participants who attended the 11 10 FY11 ANNUAL REPORT meetings represented four socio-cultural regions as workshop revealed the diverse positions of Indigenous For the first time, governments and IP identified by the UN system—Africa, Asia, Central and South America, and the Russian Federation. The direct Peoples regarding REDD+ and issued conditions for REDD+ to succeed from the points of views of Indigenous Peoples organizations came together to have an honest dialogue format of the meetings allowed the Indigenous Peoples participants to articulate their needs and organizations from the Amazon. International Technical Workshop of Indigenous Peoples and open dialogue on climate change, the aspirations directly to World Bank senior management. The impacts of climate change on Indigenous Peoples as well towards COP16 (Mexico) as the Indigenous Peoples’ active participation in REDD+ negotiations process, and the role of IPs as well For the first time, governments and Indigenous Peoples was noted along with the need to continue discussions on organizations came together for an honest and open free, prior, and informed consent (FPIC), particularly as the dialogue on climate change, the negotiations process, as their positioning in the climate negotiations. World Bank is updating and consolidating its environmental and social safeguards. There was agreement on the need and the role of Indigenous Peoples as well as their positioning in the climate negotiations. Indigenous Peoples to continue this dialogue by holding two sessions each representatives put forward a proposal on the inclusion of year with Indigenous Peoples representatives nominated Indigenous Peoples in the UNFCCC agreement and also through a self-selection process. tabled a resolution to garner support for the Indigenous The Indigenous Peoples representatives also called Peoples’ formal and effective participation in the UNFCCC for the World Bank to organize a Global Consultation process and in REDD+, in preparation for COP16. There of Indigenous Peoples on the FCPF. World Bank senior was fundamental agreement on the indispensability of management recognized the importance of social inclusion Indigenous Peoples in the UNFCCC process and the and participation of Indigenous Peoples and other forest inclusion and participation of Indigenous Peoples in communities in REDD+ and endorsed the Indigenous REDD+ design and implementation, and the participants Peoples’ request, which was subsequently presented at the were able to find entry points where the role of Indigenous FCPF PC9 meeting in Oslo, in June 2011. The PC endorsed Peoples could be strengthened. This meeting was viewed this request and the Global Consultation was to take place as a historic one and certainly helped to create space for a from September 27-29, 2011 in Panama. This event will be sustained dialogue on Indigenous Peoples in the UNFCCC reported on at PC10 and in the FY12 Annual Report. process. COICA Workshop on Climate Change and REDD+ (Bolivia) FCPF information sharing at FIP IP Regional and Global In August 2010, the FCPF funded a workshop of the Caucus Meetings (Ghana, Lao PDR, and Peru) COICA, the coordinating entity of Indigenous Peoples The FMT took advantage of three regional caucus meetings organizations of the Amazon basin, designed to build the organized by the Forest Investment Program (FIP) in the capacity of COICA and its member organizations to engage context of the design of a Dedicated Grant Mechanism in international negotiations on climate change and REDD+ for Indigenous Peoples under the FIP to solicit the views and seek to achieve outcomes that recognize traditional of Indigenous Peoples on a range of topics related to knowledge and the rights of Indigenous Peoples. The the FCPF, in particular the Multiple Delivery Partner Table 4: Activities Supported through the Indigenous Peoples Capacity Building Program in FY112 FOREST CARBON PARTNERSHIP FACILITY FOREST CARBON PARTNERSHIP FACILITY Activity Location High-Level SDN Direct Dialogue with Indigenous Peoples Washington, DC COICA Workshop on Climate Change and REDD+ Santa Cruz, Bolivia International Technical Workshop of Indigenous Peoples towards COP16 Xcaret, Mexico Accra, Ghana; Vientiane, Lao PDR; FIP Regional/Global Caucuses Pachacamac, Peru FIPAC International Forum through REPALEAC Republic of Congo 2 Reports from the activities funded by the program are available on the FCPF website at http://www.forestcarbonpartnership.org/fcp/node/248. 13 12 FY11 ANNUAL REPORT better informed participation in the Forum and empowered 1.3.2. Coordinating REDD+ Support with FIP and information and experiences, a framework for categorizing the Indigenous Peoples of Central Africa. UN-REDD Programme and describing different types of stakeholder engagement Box 1. Peru’s REDD+ Roundtable processes, and a set of common terms relating to Bringing Together National Level Stakeholders The FCPF, FIP, and UN-REDD Programme share the The REDD+ Roundtable of approximately common objective of helping developing countries reduce stakeholder participation. and Rightsholders REDD+ Benefit Sharing: A Comparative Assessment of Three 70 public and private stakeholders, deforestation and forest degradation. The governing A sustainable REDD+ strategy will require a careful balanc- National Policy Approaches outlines national benefit-sharing including IP representatives, constitutes bodies of all three programs have called for a streamlined ing of the interests of diverse stakeholders. Bringing stake- approaches from three areas of forest management policy the main forum for dialogue and sharing approach and enhanced coordination with bodies like holders into the REDD+ process will not only allow coun- with respect to REDD+, including: payments for ecosystem the GEF, UNFCCC, and bilateral and non-governmental of experiences between government tries to tap into their wealth of knowledge on the drivers of services (PES), participatory forest management (PFM), agencies. Together, the FCPF, FIP and UN-REDD and civil society. The Roundtable has deforestation and forest degradation, and how to effectively Programme are working closely to develop short-term and and forest concession revenue-sharing arrangements. access to the National Climate Change address them, but will also add credibility and legitimacy to Challenges, suggestions, and possible future directions of long-term options to improve coherence and cooperation the process as a whole. Most countries have incorporated benefit sharing are described. Commission (CNCC), through the National across the different phases of REDD+, since each of these forest-dependent Indigenous Peoples and forest dwellers A Review of Three Safeguard Initiatives seeks to contribute REDD Working Group. Regional REDD+ programs bears distinct strengths for different phases. into the process early. For example, Cambodia, Liberia, and to the discussion on practical experiences regarding During FY11, progress was made on responding to these Roundtables play an advisory role for Uganda have prepared consultation plans as a commitment safeguards by outlining current approaches to the calls. Meetings of the FCPF Participants Assembly, Regional REDD Strategies and influence to engaging with stakeholders. Peru set up an early dia- FCPF Participants Committee, and UN-REDD Policy application of social and environmental standards and the National REDD+ Strategy through the logue process by identifying key stakeholders and prepared principles, complementing the AWG-LCA COP 16 decision Board were held jointly to create a common platform for ground for more extensive consultations as the preparation on safeguards. regional committees that are represented sharing country experiences and lessons learned. Other towards REDD+ moved forward. achievements also included: in the CNCC. The R-PP further proposes Country-level cooperation an active role for communities in MRV, and 1.3. Leveraging Strengths of Partners Guidance on Stakeholder Engagement The FCPF also continued to collaborate with the UN-REDD suggests joint activities in the monitoring of The FCPF and UN-REDD Programme have jointly prepared Programme as well as new DPs, to enhance the common 1.3.1. Expanding to Other Delivery Partners forests and carbon stocks, thus combining R-PP template that countries use to develop REDD+ guidelines on stakeholder engagement with a particular An important milestone was reached to enhance the Readiness proposals. This has helped to align processes IPCC methodologies and traditional delivery of REDD+ services. At its ninth meeting, the PC focus on the participation of Indigenous Peoples and other and ensure that partners are providing complementary knowledge into an effective forest-dependent communities. The guidelines provide adopted the Common Approach to Environmental and support to a single set of activities proposed by the country. a robust and comprehensive set of principles as well as MRV system. Social Safeguards for Multiple Delivery Partners (the In addition, the FCPF is collaborating with the UN- steps for the active inclusion and participation of forest- “Common Approach�). This innovative framework paves REDD Programme and other partners at the country level, dependent Indigenous Peoples and other forest dwellers the way for multilateral development banks and UN to provide coherent support to the wide range of REDD+ in REDD+ processes. The guidelines further reflect the agencies to act as Delivery Partners (DPs) that will provide activities in country. In the DRC, the FCPF and UN-REDD arrangement and the workings of the Carbon Fund as it common understanding between the FCPF and UN-REDD Readiness support to REDD+ countries under the FCPF Programme are working together in various analytical and geared towards operationalization. The FCPF FMT has Programme on the full and effective participation of Readiness Fund by achieving substantial equivalence capacity-building activities. One of those is an assessment been working with the Administrative Unit of the Climate Indigenous Peoples and forest-dependent communities, with the World Bank’s applicable policies and procedures of governance-related elements of the REDD+ process, Investment Funds, which serves as secretariat for the FIP, in accordance with the 1/CP.16 Decision on REDD+, and on environmental and social safeguards, disclosure of including a comprehensive analysis of the political to ensure complementarities between the two programs, of present a framework that allows consistency across information, and grievance and accountability mechanisms. economy of REDD+ in the country and an investigation which the engagement with Indigenous Peoples is but one REDD+ activities. The Common Approach document was developed through of corruption risks for a national REDD+ mechanism. In aspect. intensive, seven-month discussions among the Task Force Joint Papers addition, the FCPF and UN-REDD are supporting the DRC International Forum of Indigenous Peoples of the that comprised five pilot countries,3 six potential DPs,4 five in the preparation for the investment phase of REDD+. Donor and Carbon Fund Participants, Indigenous Peoples The FCPF and UN-REDD Programme jointly commissioned Congo Basin (FIPAC) Both programs have contributed to the preparation of an representatives, and CSOs. Based on the Task Force three papers on multi-stakeholder participation, benefit Investment Plan for the FIP, which will provide DRC with FOREST CARBON PARTNERSHIP FACILITY FOREST CARBON PARTNERSHIP FACILITY The Indigenous Peoples program funded, through sharing, and safeguards initiatives for REDD+, the drafts of recommendation, PC9 also approved the United Nations US$60 million for the implementation of activities aimed the Réseau des Populations Autochtones et Locales pour la which were originally presented at the REDD+ Partnership Development Programme (UNDP) and the Inter-American to address the main drivers of deforestation and forest gestion durable de forêts denses et humides d’Afrique centrale Workshop “Enhancing Coordinated Delivery of REDD+: Development Bank (IDB) as the first two DPs, in line with degradation in the country. (REPALEAC), the preparation of Indigenous Peoples groups Emerging Lessons, Best Practices and Challenges,� held the preferences of the five pilot countries.5 from six Congo Basin countries with a view to engaging on November 26, 2010 in Cancún, in conjunction with 1.3.3. Services to the REDD+ Partnership in a meaningful debate during the Second International UNFCCC COP16.6 Forum of Indigenous Peoples of the Congo Basin (FIPAC During COP15 in Copenhagen in December 2009 and soon Draft Framework for Sharing Approaches for Better Multi- 2), organized by the Republic of Congo. By funding a after, donor countries pledged an initial US$4 billion in 3 The five pilot countries are: Cambodia, Guyana, Panama, Paraguay, Stakeholder Participation Practices seeks to support the series of regional caucuses, the FCPF funding has allowed and Peru. “fast-start financing� to support developing countries in effectiveness of REDD+ decision-making processes these groups to convene before the Forum to take stock 4 The African Development Bank, the Asian Development Bank, the their REDD+ efforts in 2010-2012, while also expressing Inter-American Development Bank, the United Nations Development by identifying emerging lessons from stakeholder of the situation concerning climate change and REDD+. their willingness to scale up future financing for REDD+. In Programme, the United Nations Environment Programme, and the participation practices. It provides insights on sharing As a result, Indigenous Peoples in their home countries Food and Agriculture Organization. the immediate aftermath of Copenhagen, both France and prepared their position for the Forum and elaborated their 5 Guyana and Peru selected the IDB and Cambodia, Panama, and Norway pledged to host follow-up meetings to maintain the Paraguay selected UNDP from the candidate list of six potential 6 political momentum, and at the Oslo Climate and Forest main requests to the governments. This has led to a much delivery partners. The papers can be accessed at https://www.forestcarbonpartnership. org/fcp/node/321. 15 14 FY11 ANNUAL REPORT Though observers do not have formal voting rights in the FCPF’s governance structure, the norm of reaching decisions through consensus has empowered them to play a constructive role in the FCPF. Conference in 2010, 58 countries launched a new Interim In agreement with the FCPF PC, the World Bank— The Voluntary REDD+ Database on financing, actions, identifying gaps and eventually fill these gaps. REDD+ Partnership.7 through the FMT of the FCPF—and the United Nations— and results is continuously updated by Partners and In addition the results of the study on the effectiveness The Partnership currently includes 72 Parties—18 through the Programme Team of the UN-REDD stakeholders of the REDD+ Partnership. They report of the multilateral REDD+ initiatives will be used to discuss donor countries and 54 forest countries—and is a Programme—provide secretariat services to the REDD+ on individual agreements to undertake REDD+ related how the application and implementation of projects/ voluntary grouping of countries, demonstrating countries’ Partnership and work closely with the co-chairs. The joint actions, involving funders and recipients. Data may be financial support could be improved and disbursements be commitments to making progress and taking action provision of services builds on the extensive cooperation viewed for individual countries or institutions as well accelerated. on REDD+. The Parties aim to enhance the efficiency, between the FCPF and the UN-REDD Programme with as in an overview.8 As of September 2011, a total of 498 A number of workshops were held in FY11 to share les- effectiveness, transparency, and coordination of fast- respect to REDD+. The two organizations share the arrangements had been reported by 36 countries. Funders sons from REDD+ initiatives and best practices to promote start financing for REDD+. The work of the Partnership workload by component, with the World Bank focusing on, reported that country-to-country funding amounted to and facilitate cooperation among Partners, e.g., in Tianjin does not prejudge but supports the UNFCCC process, for example, analysis of gaps and overlaps in financing and US$3.51 billion, country-to-institution funding reached (REDD+ Database, gap analysis, and effectiveness), Cancún and would be replaced by a future UNFCCC mechanism assessment of the effectiveness of existing multilateral US$3.41 billion, and institution-to-country funding reached (multi-stakeholder consultations, applying safeguards, and FOREST CARBON PARTNERSHIP FACILITY FOREST CARBON PARTNERSHIP FACILITY including REDD+. For that purpose, Partners intend to initiatives on REDD+, whilst the UN focuses on the design US$0.65 billion. benefit-sharing mechanisms), Bangkok (demonstration ac- help establish such a mechanism, enable the mobilization and maintenance of a voluntary database of REDD+ The analysis of financing gaps and overlaps revealed tivities), and Cologne (scaling up REDD+ finance). Presenta- of financial and technical resources needed to scale up financial support and actions. a significant gap between the reported amount received tions, papers, and reports of these meetings are available REDD+ implementation, and underline the importance The Partnership aims to take immediate action to by recipients and the amount provided by funders. The on the REDD+ Partnership website.9 In order to help the of the ongoing UNFCCC negotiations, as well as existing facilitate, among other things, knowledge transfer, Partnership is to identify the top five to ten most significant Partners prepare for the negotiations, the Partnership is multilateral and bilateral initiatives. capacity enhancement, mitigation actions, and technology gaps in order to clarify information provided between sharing lessons in the margins and ahead of the UNFCCC Every six months the Partners select two co-chairs to development and transfer. It offers a platform for open recipients and funders. In further development of the official meetings. This approach enables the Partnership organize its work. Papua New Guinea and Japan, and Brazil discussion of innovative ideas and lessons learned from database of REDD+ finance, this result on financing gaps dialogue to contribute to the UNFCCC negotiations and and France respectively have served during the first two on-the-ground experience, and the Partnership’s work and overlaps will become an integral part of the key allows cost-efficiency. The openness and easy and straight- periods up to June 2011. Guyana and Germany took over as program stresses near-term, practical deliverables. information source of the REDD+ Partnership to continue forward nature of the discussions are recognized when co-chairs in July 2011. The 2010 and the 2011-2012 work programs launched a compared with the official negotiations. number of actions whose results are available at http:// reddpluspartnership.org. 8 9 7 More information may be found at http://www.oslocfc2010.no/ The data are available at http://reddplusdatabase.org. The documents may be downloaded from http://reddplusdatabase.org/ 17 16 partnershipdocument.cfm. entities/filter_by_type/countries. FY11 ANNUAL REPORT Strengthening REDD+, Accelerating Learning 2 2.1. Fast-start Learning 2.1.1. FCPF Evaluation: Two Years in Review As the FCPF completed two years of operations, the PC commissioned an evaluation The partnership model that gives equal of the FCPF, in accordance with the provisions of the Charter. The evaluation assessed the contribution of FCPF at both country and global levels. At the global representation to REDD Country Participants level, the evaluation reviewed the structure, functions, processes, and impact drivers and Donor Participants, and active engagement of the FCPF program as a whole, as well as the governance arrangements and delivery mechanisms. At the country level, the evaluation reviewed the formulation of observers is seen as highly effective by of R-PPs and the country context of the R-PPs (though not the R-PPs themselves), members and observers alike. which include the structure, functions, and processes of each country’s forest- relevant system, the existing capacity, and resources to formulate the R-PP. This evaluation provided an opportunity to assess the o giving fresh impetus to addressing pervasive achievements and challenges of the FCPF as a global governance challenges. partnership for piloting REDD+ in the early years of the • The FCPF has established processes, procedures, operation of the Facility. The evaluation was carried out and standards of REDD+ Readiness that are by an independent consultant firm, on the basis of terms increasingly being accepted as the norm and have of reference endorsed by the PC focusing on the OECD/ served to inform the REDD+ negotiations under the DAC criteria of relevance, effectiveness, and efficiency. UNFCCC. Results from the evaluation report were presented at PC8 • The governance structure of the FCPF is a model in Vietnam. that is considered democratic, transparent, and The major achievements of the FCPF highlighted by the inclusive. The partnership model that gives equal evaluation include the following: representation to REDD Country Participants and • The pioneering and leadership role of the FCPF Donor Participants, and active engagement of in providing a common framework, foundation, and observers, is seen as highly effective by members and observers alike. This has fostered openness FOREST CARBON PARTNERSHIP FACILITY FOREST CARBON PARTNERSHIP FACILITY platform for REDD+ Readiness, which has served as the basis for evolving the thinking on REDD+ in and transparency in the decision-making processes participant countries is recognized, notably by and has been widely appreciated. o providing a forum for exchange of lessons • The REDD+ Readiness process has created an learned and knowledge sharing among enabling environment for stakeholder engagement participants; at the national and global level. The FCPF has encouraged dialogue among diverse stakeholders o making available practical tools and at the national level in a manner that ensures guidance for moving forward with REDD+ stakeholders who had not been involved in national planning; processes were included, in some countries for o fostering cross-sectoral and cross- the first time to this extent. institutional engagement; and 19 18 FY11 ANNUAL REPORT Key gaps that have been identified for the FCPF to work on are: • On the operational side, the need to finalize financial commitments to FCPF countries and provide flexibility in funding support to REDD+ countries has been highlighted. The report recognizes that finalization of the approach to safeguards has resulted in delay in the signing of grant agreements with REDD+ countries and urges that steps be taken to enhance this. • Strengthening coordination among various actors at the national and international level for effective REDD+ implementation, including the safeguards approach to REDD+. The cross-sectoral nature of REDD+ and the fact that FCPF financial support is insufficient to meet the total budgetary requirements for Readiness point to the need for the national government to have a strong coordinating role in relation to its international partners and the Bank’s project portfolio in several FCPF countries. It will be important for REDD+ to be mainstreamed with ongoing development programs as the work being undertaken is highly relevant to issues identified in the R-PPs of REDD+ countries. • Lack of capacity support to REDD+ participant countries, including at the national level. Several recommendations relate to ways of enhancing the support provided by FCPF and other development partners. • Lack of a strong communication strategy to convey the key outcomes of FCPF. The report recommended the FCPF develop a communication and outreach strategy to disseminate FCPF outcomes more widely for use at country level, within the World Bank, and to external audiences. The World Bank management appreciated the useful observations and lessons provided by the report, and concurred with its main findings and suggested remedial actions.10 FOREST CARBON PARTNERSHIP FACILITY FOREST CARBON PARTNERSHIP FACILITY Since the finalization of the report, the PC set up a PC Working Group to facilitate discussions on the report’s recommendations at the PC9 meeting in Oslo, in June 2011. A draft action plan has been prepared by the FMT proposing follow-up action on the recommendations. Action on some of the recommendations has already been taken. Subsequent PC meetings, beginning with PC10 in Berlin, will take stock, discuss, and make decisions on recommendations pertaining to the strategic direction of the Readiness Fund. 10 The full text of the management’s response is available at http://www. forestcarbonpartnership.org/fcp/sites/forestcarbonpartnership.org/ files/Documents/PDF/Jun2011/5.Management%20Response_June% 2016_0.pdf. Translations in French and Spanish are also available. 21 20 FY11 ANNUAL REPORT crop crop FCPF REDD+ COUNTRY PARTICIPANTS REDD+ Country Participants. 37 REDD+ Country Participants have been selected into the FCPF. The map illustrates the progress within the FCPF of each of the 37 countries as of June 30, 2011. NEPAL MEXICO LAO P.D.R. SELECTED INTO FACILITY [2] HONDURAS GUATEMALA THAILAND VIETNAM PA SIGNED [8] NICARAGUA CAMBODIA EL SALVADOR PANAMA FORMULATION GRANT SIGNED [3] COSTA RICA GUYANA GHANA CENTRAL ETHIOPIA R-PP INFORMAL PRESENTATION [5] COLOMBIA SURINAME LIBERIA CAMEROON AFR. REPUBLIC EQ. GUINEA REP. OF UGANDA R-PP ASSESSED/FINAL R-PP SUBMITTED [16] KENYA GABON CONGO READINESS PREPARATION GRANT SIGNED [3] DEM. REP. OF CONGO INDONESIA PAPUA TANZANIA NEW GUINEA PERU VANUATU BOLIVIA MOZAMBIQUE MADAGASCAR PARAGUAY CHILE ARGENTINA IBRD 36759R2 SEPTEMBER 2011 This map was produced by the Map Design Unit of The World Bank. FOREST CARBON PARTNERSHIP FACILITY FOREST CARBON PARTNERSHIP FACILITY The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries. 23 22 FY11 ANNUAL REPORT Box 2: Early lessons from the FCPF: Updated with examples from FY11 Lesson 1: Partnership lessons from the FCPF A partnership among often contentious stakeholders in tropical land use can find ways to communicate and explore highly policy-sensitive topics, if it builds trust and willingness to share new ideas. 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 The cross-cutting nature of REDD+ presents new challenges in sectoral coordination that may be solved by embedding the REDD+ strategy in overarching policy frameworks and by mobilizing decisive political will. 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 Countries are now grappling with how to operationalize the inclusion of stakeholders in REDD+ policy and implementation, raising new issues of control over resource management and the respective decision making processes. Example from FY11: The consultation and participation aspects are well developed in Colombia’s R-PP. This document has benefited 2.1.2. FCPF Harvesting Knowledge on REDD+: Early While REDD+ may be a new concept, its success will 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 Lessons from the FCPF Initiative and Beyond - Overall depend on how it can integrate existing instruments and information gathering and dissemination will have to continue into the R-PP implementation. Lessons Learned lessons learned to form new policy approaches that allow effective management of natural resources and Lesson 4: Lessons from country R-PP formulation process The FMT prepared and presented a short report on early sharing of benefits and burdens. Political will is required to create highly qualified teams capable of resolving competing interests into a coherent national lessons learned in November 2010, at the PA3 meeting in Washington, entitled FCPF Harvesting Knowledge on REDD- • Poverty matters. Plan for REDD+. plus: Early Lessons from the FCPF Initiative and Beyond. The Poverty is the dominant human condition in tropical Example from FY11: The development of both the Liberia and the Uganda R-PPs evolved from the coalescence of a dedicated band report’s major overall lessons are reproduced below, of government, local and international NGO, and other experts to actively draft the complex documents. The model emerged since countries and the lack of alternative forms of utilization government resources and staff were stretched too thin to address the full range of issues required to be included in an R-PP. together with the set of ten specific lessons presented in has perpetuated the cycle. While REDD+ creates the report updated with some examples of REDD Country incentives that address poverty-related drivers at the Lesson 5: New techniques and tools Participant activities in FY11: individual and institutional levels, it cannot be expected Promising results are emerging where countries are combining traditional evaluation of potential REDD+ strategy options The FCPF, through the REDD Country Participants, has to be the primary tool for poverty reduction. with newer analytic tools that facilitate making choices among competing options. been breaking new ground in conceptualizing how to create incentives and institutions to make REDD+ work. As the • National scope with sub-national and local Example from FY11: Ethiopia tasked a technical institute to develop a cost curve of climate mitigation options in the forest and land use implementation works. sector that was a central feature of its R-PP section on the REDD+ strategy. FCPF evolves, it is generating experience that is essential FOREST CARBON PARTNERSHIP FACILITY FOREST CARBON PARTNERSHIP FACILITY to understand the progress made thus far and challenges REDD+ offers magnitude and scope that were not Lesson 6: Implementation of REDD+ down the road. possible under project-based approaches. A national- On the ground: A REDD+ bridge has not yet been built between the wealth of experiences at the local level in managing Overall lessons learned are: level accounting framework would overcome problems forest resources and land-use change, and ideas on REDD+ policy frameworks and incentive programs at the national associated with project-level implementation like level. • REDD+ is about financial incentives and governance. leakage and additionality, while also allowing a range Example from FY11: Indonesia, with assistance from World Bank/FCPF FMT staff, has actively been reviewing its experiences with a wide There are two deep-seated failures behind unplanned of sub-national activities to take place. range of fund types and financial mechanisms used to date to support natural resource management programs, in order to offer insights deforestation. The first one is that other forms of land to the government as it considers how best to develop the institutional arrangements for its projected large-scale REDD+ program with • Timing and sequencing are important to piloting Norwegian support. use are more valuable in the near and medium REDD+. term than forests. The second is the inability of existing Lesson 7: Governance aspects of REDD+ legislations and regulations to halt deforestation. The REDD+ requires financial resources, skilled staff, and institutional capacity to come together in a timely Early cooperative development of a first set of rules of the game for REDD+ transactions and benefit-sharing is an FCPF offers a chance to REDD+ countries to address manner. Political timing is also key to sustain progress essential prerequisite for the broad legitimacy and support for REDD+ programs. these two failures simultaneously. made. Example from FY11: DRC is designing a comprehensive accreditation system for REDD+, including a prototype REDD+ registry to track • We have many solid building blocks, but we need to REDD+ financing and activities. Once operational, it could serve as a transparent platform to aide in the development of required start building. national infrastructure to undertake REDD+ at a significant scale. continued on page 26 25 24 FY11 ANNUAL REPORT Box 2: Early lessons from the FCPF: Updated with examples from FY11 (continued) 2.2. Building on the International Framework Cancún (COP16) was a historic summit for REDD+ for REDD+. For the first time, the Lesson 8: REDD+ methodological issues Addressing methodological issues such as reference level and measurement, reporting and verification (MRV) is a key 2.2.1. Cancún: A Landmark Summit for REDD+ importance of stemming the loss entry requirement for REDD+ programs. In the absence of clear policy guidance from the international level and price Cancún (COP16) was a historic summit for REDD+. For the of forests in developing countries signals for REDD+, countries could embark on a no-regrets stepwise approach to begin building capacity. first time, the importance of stemming the loss of forests in to mitigate global climate change Example from FY11: Ethiopia and Cambodia both included detailed flow diagrams of the steps necessary for building a reference level and developing countries to mitigate global climate change with an MRV system, converting very early ideas about two technical topics into a draft workplan of ordered, implementable steps. Guyana financial support from the industrialized world was en- with financial support from the 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. shrined in an international agreement (the Kyoto Protocol industrialized world was enshrined in only allows incentive payments to be made for afforestation an international agreement. Lesson 9: REDD+ financing and reforestation projects in developing countries). Parties carried forward the momentum provided by the Early initiatives to finance REDD+ have illuminated a paradox: In spite of the high level of international commitments vehicle to commence early action. A phased approach to REDD+ funding, the mechanics of multilateral programs to move resources to REDD+ partner countries require due Copenhagen climate talks in 2009 (COP15) and other high- to REDD+ was confirmed in the COP decision, specifying diligence and safeguards that have slowed the flow of funds to countries. level meetings on REDD+, such as the Oslo Conference a first phase of national strategies and capacity building of May 2010, by deciding on the general principles of Example from FY11: The Task Force on the Common Approach eventually led the PC to approve a unified approach founded on common in each country, a second phase of implementation of a standards for safeguards that opens up Readiness Preparation Grants to many countries for whom the World Bank could not be the REDD+, the scope of activities, a phased approach, and the carefully developed REDD+ strategy, and a third phase of Delivery Partner. centrality of national strategy plans. results-based activities that are fully measured, reported, Lesson 10: REDD+ cannot be cast as a potential solution to every problem Under REDD+, the following developing country activities and verified. Bilateral and multilateral assistance funding are eligible for support: is anticipated for the first two phases, while further If REDD+ is to evolve and achieve its promise to mitigate global climate change, these lessons suggest it needs some time, discussion is called for by COP17 in Durban, South Africa, some space, and some flexibility to be fairly experimented with over the next few years. • reducing emissions from deforestation; on how the third phase would be funded, with potential Example from FY11: This year marked the evolution within the FCPF from a focus on submission of country R-PP proposals and how to • reducing emissions from forest degradation; public and/or private funding to be determined. build capacity for REDD+, into an international initiative of countries that are now actively beginning to produce early studies, experiment Parties in Cancún thus endorsed principles for REDD+ with participatory approaches, and assess governance needs for undertaking REDD+ activities in specific land types and land ownership • conservation of forest carbon stocks; frameworks. under a future regulatory emissions regime, but left many • sustainable management of forests; and of the practical details and rules to be finalized. At COP17 • enhancement of forest carbon stocks. the Parties will seek to agree on the following: • Modalities. The Subsidiary Body for Scientific and The COP16 decision encouraged developing countries, in Technological Advice (SBSTA) is tasked with accordance with national circumstances and respective producing (binding) modalities on how developing capabilities, to develop the core elements of REDD+. countries should: (i) set Reference Emission Levels These include: (REL); and (ii) design Measurement, Reporting, and • a REDD+ strategy or action plan; Verification (MRV) systems. • forest reference emission level (their baseline of • Guidance on safeguards. SBSTA is also tasked forest cover and change over time); with developing (non-binding) guidance on the • a forest monitoring system for robust and establishment of information systems by developing transparent monitoring and reporting of activities; countries on how to implement and respect the and safeguards for REDD+ adopted in Cancún. FOREST CARBON PARTNERSHIP FACILITY FOREST CARBON PARTNERSHIP FACILITY • a system for providing information on how • Financial options. The Ad Hoc Working Group on safeguards will be addressed and respected Long-term Cooperation Action (AWG-LCA) is to throughout the implementation of REDD+ activities. produce options for financing ‘phase 3’ (results- Safeguards identified include ensuring full and based) activities. The role of the private sector is effective participation of relevant stakeholders, currently a key policy uncertainty. notably Indigenous Peoples and local communities, Building in the REDD+ Space whose knowledge and rights must be respected The policy space pioneered by the invention of REDD+ has and who must be able to participate fully and widened and deepened over the past year. A transition has effectively. occurred from REDD+ as a creative international policy While no quantified global deforestation target was concept five years ago, to the early stages of coalescing the agreed, the striking accomplishment of Cancún was the necessary country-driven national institutional architecture scaling up of mitigation vision and activities to a national and stakeholder participation to effect REDD+ activities approach (vs. the project approach of the CDM), while on the ground. The governing bodies of the FCPF, FIP and allowing sub-national piloting on an interim basis as a UN-REDD Programme have mandated their secretariats to 27 26 FY11 ANNUAL REPORT Strong country ownership and mobilization of national strategies, and institutional arrangements for stakeholder support have provided the momentum for implementing REDD+. This has resulted in much greater R-PP development. Continued exchange of information clarity on how countries should design the process. among REDD+ Country Participants, the TAP, and the FMT TAPs are assembled to review and provide technical has allowed the quality of R-PPs to greatly improve. After guidance for country R-PP submissions. The FCPF all, R-PPs are a collaborative exercise among different maintains a roster of experts—nominated by FCPF government agencies and stakeholders, and early cross- Participants, Observers, and the FMT—to create sectoral coordination can go a long way in addressing multidisciplinary teams of scientific and technical experts. deforestation and forest degradation. Recently submitted TAPs continue to play a major role in supporting the R-PPs demonstrate that the broad sharing of good development of REDD+ methodologies, providing expert practices among countries will be essential for achieving guidance on R-PP formulation, and strengthening the REDD+ Readiness. Countries have also started to place technical rigor of R-PPs in general. R-PPs in broader development contexts through better In FY11, eight REDD+ countries submitted their final inter-institutional coordination. For example, Ethiopia R-PPs for review by the TAP and nine REDD+ countries has made the R-PP a tool through which to achieve its submitted draft R-PPs. The final R-PPs were also reviewed overarching climate goals. by working groups of PC representatives—a practice that In a stocktaking exercise in November 2010, TAP was started in FY10. collaboratively develop options to enhance cooperation and relevant to REDD+, including all those covered by the experts noted that Indigenous Peoples rights were better coherence among REDD+ institutions in support of country- safeguard policies, into the Readiness Preparation process 2.3.2. Increasing South-South Knowledge Sharing acknowledged in recent R-PPs, a number of which referred level REDD+ efforts and financing. The FCPF FMT and from its earliest stages, while also extending to policies, to the need for FPIC of Indigenous Peoples, and that South-South knowledge sharing is an effective mechanism UN-REDD Programme Secretariat have jointly developed regulations, and investments that are supported as part of proposals were emerging for including community-based to ensure cross-fertilization across REDD+ countries and guidelines for stakeholder engagement, and a common REDD+ strategy implementation. monitoring, together with related capacity-building actions, is encouraged by the FCPF. At PC meetings, the FCPF draft template for country R-PPs. The SESA/ESMF approach was approved by the Bank’s in national REDD+ monitoring proposals. For example, organizes knowledge-sharing sessions where REDD+ The experience gained through the Readiness process Board of Executive Directors following a thorough design Madagascar’s R-PP insists on “participatory monitoring� as countries are invited to present on some relevant REDD+ in the FCPF has helped Parties further develop the REDD+ phase and reviews at several levels of management. a key aspect of a national MRV system, building on existing topics. As an example, at PC9 in Oslo, Liberia, Mexico, process through the UNFCCC. For example, the Cancún Moreover, Bank management clarified the Bank’s experience with ecological monitoring, and expanding into and The Nature Conservancy shared their experiences on decision on REDD+ recognized environmental and social Operational Policy (OP) 4.01 on Environmental Assessment, carbon monitoring through a program of targeted capacity benefit-sharing mechanisms relevant to REDD+ (see Box 3 risks and provided that REDD+ should promote and support which now includes an explicit recognition of SESAs and building for local communities. below). safeguards. While there is an indicative list of safeguards ESMFs as safeguards instruments. In cooperation with the World Bank regional in the Cancún decision, a work program is expected to The guidelines of the R-PP template were modified 2.3. Knowledge Sharing and Capacity Building departments and country offices, and with funding from the develop them further, together with a system that provides in FY11 to clarify the requirements for stakeholder GEF, the FCPF organized a large South-South knowledge- information on their application and implementation. consultations at the R-PP formulation stage. The 2.3.1. Defining What It Means to Be Ready sharing event between 6 countries in the Congo Basin (plus The Common Approach developed as part of the FCPF’s R-PP guidelines now distinguish between Section 1b The FCPF has been able to generate and build capacity Madagascar) and Brazil through a ten-site visit to Brazil. Multiple Delivery Partner arrangement represents a on “Information Sharing and Early Dialogue with Key of experts and practitioners on Readiness plans, The activity aimed to contribute to the design of the national convergence of views among very diverse institutions on Stakeholder Groups,� in which the submitting country the application of safeguards and could assist with the provides information on exchanges with Indigenous further development of REDD+ safeguards. Peoples and other groups up to the point of submission of the R-PP to the PC, and Section 1c on “Consultation and 2.2.2. Safeguards for People and the Environment Box 3: Country Experiences on Options for Benefit Sharing Participation Process,� in which the country proposes how in REDD+ the full range of stakeholder groups will be engaged in the Benefit-sharing mechanisms are an essential part of a national REDD+ structure, as it ensures FOREST CARBON PARTNERSHIP FACILITY FOREST CARBON PARTNERSHIP FACILITY The R-PP template has continued to improve, driven REDD+ process going forward. that incentives are delivered to those that have a stake in the forests and can contribute to by country experience, the PC’s guidance, stakeholder Enhanced guidance has been provided for challenging its good (or bad) management, which in turn builds support and legitimacy for REDD+. Thus, views and recommendations, and the Cancún decision components of the R-PP, along with emerging good practices and standards to be met for each component. benefit-sharing mechanisms will play a pivotal role in REDD+ implementation. At PC9, Liberia, on REDD+. The FCPF’s safeguards approach, consisting of the Strategic Environmental and Social Assessment Similarly, efforts are under way to develop a common Mexico, and The Nature Conservancy presented early lessons for benefit-sharing mechanisms (SESA) and an associated Environmental and Social template with the UN-REDD Programme. The latest from experience with different forest management options. The experiences demonstrate Management Framework (ESMF), has been wholly version of the R-PP template reflects this attempt; the lessons in building capacity at the community level, developing participatory decision-making mainstreamed into the latest version of the template. The template is being revised further to include any final processes, and improving the targeting and effectiveness of the delivery of benefits. These strength of a SESA for REDD+ is that it combines analytical adjustments needed in this regard, as well as to reflect lessons will help to guide the design of results-based payment approaches as well as monitoring work and consultation in an iterative fashion to inform improvements and clarifications requested by a range of stakeholders.11 and evaluation systems, and ensure equity and fairness in the process. Based on this discussion, the preparation of the country’s REDD+ strategy. The SESA helps to ensure compliance with the World Bank’s the FMT will continue the dialogue on benefit sharing in FY12, through workshops or activities safeguard policies (and now the Common Approach) by 11 that will discuss country experiences and design of potential mechanisms. Draft Version 5 of the template (dated December 22, 2010) is available integrating key environmental and social considerations at http://www.forestcarbonpartnership.org/fcp. 29 28 FY11 ANNUAL REPORT REDD+ strategy, by demonstrating to the participants the role that community management of forests can play as an effective and efficient tool for reducing deforestation, along with the main challenges to making this type of forest A transition has occurred from REDD+ as management work. Participants to the activity included key decision-makers in the African countries actively involved a creative international policy concept five in the R-PP preparation or implementation in their home countries. In Brazil, participants visited federal- and state- years ago, to the early stages of coalescing the level initiatives, such as the Amazon Fund, an innovative performance-based fund that is currently providing support to various activities across the Brazilian Amazon, and necessary country-driven national institutional the Bolsa Floresta program, a payment for environmental services scheme in the Amazonas state in Brazil that architecture and stakeholder participation to seeks to compensate those households that contribute to the sustainable management of forests. Participants also effect REDD+ activities on the ground. visited the Tapajós state forests, to see how communities are adding value to timber and non-timber forest products. As a result of the activity, participants started discussions at the country level, on how REDD+ could foster community management of forests in their own countries. tackle REDD+. In collaboration with WBI’s Carbon Finance Readiness Package Assist trust fund, the FCPF developed a manual on the At PC9, Costa Rica, the DRC, and Nepal discussed progress opportunity costs of REDD+, with the goal of helping made on REDD+ Readiness as a knowledge-sharing countries generate economic information to assess exercise. The cross-cutting theme across the presentations potential national REDD+ strategies. was the need to have a set of fundamental Readiness The manual provides a hands-on approach for a activities in place, as outlined in their R-PPs, to set the wide audience on the methods and tools to estimate the stage for Emission Reduction Programs (ER Programs). opportunity cost of different land use changes in forest They also reflected on principles, indicators, and criteria landscapes. It is available in English and Spanish and that could be used to define key milestones for future contains presentations, a calculation tool, and interviews.12 R-Package submissions. How to define Readiness, setting The manual was launched at a regional workshop in minimum standards, and ensuring these standards are Arusha, Tanzania, in November 2010, with participants consistent with guidance from the UNFCCC are all themes attending from eight different countries, followed by a of an ongoing dialogue among the Participants, observers, workshop in Bangkok, Thailand, in April 2011, and in Cali, and the FMT. Colombia, in May 2011. These workshops were carried out in close partnership with other organizations such as the Collaboration with the World Bank Institute UN-REDD Programme, the Center for People and Forests (RECOFTC), the Deutsche Gesellschaft für Internationale To enhance knowledge management, information Zusammenarbeit (GIZ), the IDB and the International Center dissemination, and training, a joint staff position was for Tropical Agriculture (CIAT), leveraging each other’s created with 75 percent financed through the Carbon FOREST CARBON PARTNERSHIP FACILITY FOREST CARBON PARTNERSHIP FACILITY resources and experiences in REDD+ in the participating Finance Assist multi-donor trust fund. Through this countries. position many activities were boosted, culminating in The FCPF has started to elaborate on this work, results like the FCPF Harvesting Knowledge on REDD+, the by going beyond the opportunity costs and developing publication of the Manual on Opportunity Costs of REDD guidance on the implementation and transaction costs (English and Spanish), the organization of three regional of REDD+. Analysis of all these related costs will give workshops on Opportunity Costs and Implementation Costs countries a fuller picture of just how much it costs them to of REDD, and the participation in the knowledge-sharing tackle REDD+. platform of the Alliance for Global REDD Capacity. 2.3.3. The Costs of Getting Ready for REDD+ A key question that REDD+ countries are facing is how to estimate the costs of REDD+. Knowing how much it “costs� to participate in which REDD+ activities is critical 12 The manual may be downloaded from http://wbi.worldbank.org/wbi/ to defining a country’s strategy on whether and how to learning-product/estimating-opportunity-costs-redd). 31 30 FY11 ANNUAL REPORT 3 The Carbon Fund The programs selected by the Carbon 3.1. From Readiness to Performance-Based Payments Fund are expected to be undertaken at a The operationalization of the Carbon Fund marks an important step in piloting performance-based payments for REDD+ at scale and in line with emerging policy significant scale, for example, at the level guidance under the UNFCCC. The Carbon Fund will provide performance-based of an administrative jurisdiction within a payments for Emission Reductions generated from REDD+ activities, with a view to ensuring equitable benefit sharing and promoting future large-scale positive country or at the national level... incentives for REDD+. The Carbon Fund will also seek to disseminate broadly the knowledge gained in the development and implementation of ER Programs. Under the Carbon Fund, about five forest countries Country Participants, that is, countries that were participating in the FCPF whose Readiness Package has selected into the Readiness Mechanism of the been endorsed by the Participants Committee, will enter FCPF; into an Emission Reductions Payment Agreement (ERPA) • Be based on performance, that is, payments for ERs for an average amount of between US$30 and US$40 relative to an agreed REL. Although the Carbon million each. It is anticipated that ERPAs will cover a period Fund might provide some advance payments for of about five years, to be confirmed depending on the future ERs, it will not provide finance for volumes on offer from specific ER Programs. The programs investments; selected by the Carbon Fund Participants are expected to be undertaken at a significant scale, for example, at the • Generate high-quality and sustainable ERs level of an administrative jurisdiction within a country or at (including environmental and social benefits, and the national level, align with the proposed national REDD+ minimization of the risk of non-permanence); strategy and management framework, and be consistent • Be consistent with emerging compliance standards with the emerging national REDD+ MRV system and under the UNFCCC and other regimes, as national REL. applicable; The Carbon Fund will particularly target high-quality ERs • Be based on transparent stakeholder consultations; generated by REDD+ programs that: • Use clear and transparent benefit-sharing mechanisms with broad community support, so • Are consistent with emerging compliance standards that REDD+ incentives are used in an effective and under the UNFCCC and other regimes; equitable manner, with the objective to further • Are sufficiently diverse to generate learning value; tackle deforestation and forest degradation. In some • Use clear and transparent benefit-sharing cases, the national government can be the best FOREST CARBON PARTNERSHIP FACILITY FOREST CARBON PARTNERSHIP FACILITY mechanisms with broad community support so that actor to enact and implement the necessary policy REDD+ incentives are used in an effective and changes and regulations. But many changes will equitable manner; also require the involvement of Indigenous Peoples, local communities, and the private sector, in which • Are based on transparent stakeholder case these stakeholders or rights-holders would consultations; and expect to partake in the REDD+ activities and the • Produce additional environmental and social corresponding carbon revenues (or alternative benefits. financing or support), in recognition of their The following criteria will apply to the selection of ER contributions. In other cases, Indigenous Peoples, Programs into the portfolio of the Carbon Fund. The local communities, and the private sector would ER Program will need to demonstrate the following be the primary actors implementing the ER characteristics: Programs and thus expect to be the principal beneficiaries of ERPA payments. These • Be submitted by the governments or government- arrangements will have to reflect the assessment 33 approved entities of countries that are FCPF REDD 32 FY11 ANNUAL REPORT of the drivers of deforestation and forest Table 5 lists the Participants of the Carbon Fund as of Table 5: Financial Contributors to the FCPF Carbon Fund June 30, 2011, distinguishing between the two tranches as of June 30, 2011 degradation. Adequate governance and financial management arrangements for transparent (Tranche A for unrestricted use of the ERs that will be generated and Tranche B for restricted use, that is, no FCPF Carbon Fund Participants benefit sharing will need to be in place prior to the effectiveness of the ERPA; and resale or use for compliance). Tranche A (unrestricted use) While the entry of new Participants signals growing • Generate learning value by testing and confidence in the Readiness process, the base of Australia demonstrating different approaches that are participation needs to be further broadened to make BP Technology Ventures proposed by REDD+ countries, and learn from them REDD+ financing sustainable. In particular, the current CDC Climat in order to inform the international community on Carbon Fund Participants have expressed strong interest their feasibility. The Nature Conservancy in expanded participation from the private sector. United States of America For sub-national ER Programs, these should also: The Organizational Meeting held in Barcelona from May 31-June 1, 2011 agreed on an action plan consisting Trance B (restricted use) • Be undertaken at a significant scale, for example, of a sequenced set of goals for the Carbon Fund, which European Commission at the level of an administrative jurisdiction within are reproduced in Box 4. Germany a country or at the national level, in line with the proposed national REDD+ management Norway framework; Box 4: Carbon Fund Action Plan United Kingdom • Be consistent with the (emerging) national REDD+ strategy and recognized as such by the appropriate Six-month goals (by the October 2011 PC) national authority; • Agree on ER-PIN template • Agree on Rules of Procedure • Demonstrate capacity to measure and report on ERs. The system should be consistent with the • Initiate a strategic discussion on the future of the (emerging) national REDD+ MRV system; Carbon Fund • Discuss draft policy guidance on Valuation/Pricing • Be consistent with the national REL, or with the approach national approach establishing the REL; • FMT shares draft methodological framework with • Be integrated in a national institutional framework the PC that will manage and coordinate sub-national • FMT proposes Readiness Package outline to PC programs; and • Provide for an assessment of and measures One-year goals to minimize the risk of displacement of emissions • Adopt draft Readiness Package guidelines and (leakage), reversals (non-permanence) and other assessment process relevant risks. • Agree policy guidance on Valuation/Pricing approach 3.2. Operationalizing the Carbon Fund • Agree Methodological approach The FCPF Carbon Fund became fully operational at the • Agree ERPA General Conditions end of May 2011, when the condition that at least two • Sign Participation Agreements with at least 2 private entities should have become Fund Participants was additional private sector Participants fulfilled. FOREST CARBON PARTNERSHIP FACILITY FOREST CARBON PARTNERSHIP FACILITY • Sign Letters of Intent for between one and three The Carbon Fund brings together key governments ER Programs and private sector entities and will help to refine methodological frameworks, demonstrate the first Three-year goals transactions at a large scale, and thus pave the way for • Sign at least 3 ERPAs, representing a value of larger financial flows in the future. approximately 60% of the available capital for The Carbon Fund welcomed Australia (AusAid), BP ER purchases from the capitalization target of Technology Ventures, CDC Climat, the United Kingdom and US$200 million the United States of America as Carbon Fund Participants during FY11. Supplemental contributions were also made • Review and revise FCPF framework as necessary by Germany and Norway, bringing total committed and • Capture and disseminate the lessons learned in the first three years of Fund operations Tree spiking warning to deter illegal logging in Indonesia. pledged funding to the Carbon Fund as of 30 June, 2011 to US$212 million. 35 34 FY11 ANNUAL REPORT 4 Discussion and consensus agreement on the FY11 Financial Report of the Facility resolution was but one of the many ways 4.1. The FCPF Budget Process throughout the past year that the partners and Since its inception, the FCPF has experienced considerable financial growth at the same time that its internal systems and processes were just being established. stakeholders of the FCPF have found ways With the Carbon Fund becoming fully operational and the first Carbon Fund budget to convey their different viewpoints and find approved in June 2011, the opportunity for more systematic financial planning and budgeting is now in place for both funds. It is expected that further changes will be solutions to move forward... required with the expansion to multiple delivery partners. Such changes will likely have impacts on the internal Funds. In practice, the Shared Costs have included FCPF systems for the FCPF within the World Bank, as may the Secretariat and REDD+ Methodology Support activities strategic discussions requested by the PC early in FY12. such as the work of TAPs, the IP Capacity Building Program Hence, the financial planning for the Facility’s trust funds and development of the R-PP. Pursuant to the Charter, will continue to need to evolve to match the evolving context the Readiness Fund pays 65 percent and the Carbon Fund of the FCPF and REDD+ internationally. pays 35 percent of Shared Costs over time, unless the PC The basics, however, have remained the same. The decides otherwise. budgets for both main trust funds of the FCPF—the The PC has issued resolutions waiving such cost Readiness Fund and the Carbon Fund—are based on sharing through FY11, to reflect the fact that the Carbon the World Bank fiscal year and are approved annually Fund had not yet been made fully operational, and instead in accordance with the FCPF Charter. Since both funds paid 100 percent of the Shared Costs from the Readiness are established through 2020 (with Carbon Fund ERPA Fund budget. It is expected that cost sharing at the 65/35 payments expected to dominate the latter years of financial level will commence from FY12 onward. However, there is operations), the budgets need to make sense within a an important caveat in Resolution PC/8/2011/8 approved long term framework for each fund, consistent with World in March 2011, in that the PC has placed a lifetime ‘cap’ Bank policies for the financial management of trust funds. or limit of US$12 million on the Shared Costs that it will These policies generally require funds to be fully set aside charge to the Carbon Fund. This resolution responded to for commitments made by the Participants as well as the concerns of several existing and potential Carbon Fund meeting the fiduciary obligations entered into by the World Participants that an upward limit be placed on such costs, Bank as Trustee. given that the PC otherwise makes all decisions regarding The PC is responsible for approval of the Readiness their composition and annual approvals. Discussion and Fund budget, usually in June of the preceding fiscal consensus agreement on the resolution was but one of the year. To date, the PC (and its predecessor the Steering many ways throughout the past year that the partners and Committee) has approved budgets for the Readiness stakeholders of the FCPF have found ways to convey their FOREST CARBON PARTNERSHIP FACILITY FOREST CARBON PARTNERSHIP FACILITY Fund for FY09-FY12, along with several amendments and different viewpoints and find solutions to move forward—in revisions to those budgets throughout the year. this case helping to bring in new partners to the Carbon The Participants of the Carbon Fund are responsible Fund along the way. for approval of their annual budgets and all activities arising from the Carbon Fund as a separate trust fund. 4.2. The Readiness Fund The first formal budget approval for the Carbon Fund has been for FY12, with informal guidance sought by the FMT 4.2.1. Funding Sources for developmental expenditures prior to that time (before As noted, the Facility continues to grow in financial terms, the fund became fully operational). Unless otherwise and the Readiness Fund received a large inflow of funding noted, the majority of this Financial Report focuses on the over the past year. Table 6 presents the contributions and Readiness Fund. public pledges for the Readiness Fund by the end of FY11. However, as part of the approval of the Readiness Although total signed Donor Participation Agreements Fund budget, the FCPF Charter indicates that the PC amounted to US$207.9 million, some of the agreements makes decisions on all ‘Shared Costs’ for activities that included a phased contribution into the Readiness Fund cut across and benefit both the Readiness and Carbon spread over a few years. 37 36 FY11 ANNUAL REPORT In FY11, US$94.9 million was received into the Table 8 reflects both the evolution of the FY11 budget Table 7. FCPF Readiness Fund Annual Budgets FY10-12 (in US$ thousands) Readiness Fund in addition to the US$86.2 million in cash as well as expenditures by activity on a cash basis. The PC received in the previous two fiscal years, bringing total cash authorized specific new activities during the fiscal year, FY09 FY10 FY11 Revised FY09 Revised FY10 Revised FY11 FY12 contributions to US$181.1 million. This leaves outstanding including US$235,000 for the Task Force on a Common Activities Budget Actual Budget Actual Budget Actual Budget commitments of about US$26.8 million from existing Approach, which contributed to raising the approved signed agreements to be paid into the Readiness Fund in budget of the Readiness Fund marginally from the initial Services to REDD Countries 3,732 2,037 4,226 3,719 4,473 4,369 5,660 the coming years. FY11 budget. The revised FY11 budget came to US$6.707 Country Implementation Support 1,194 409 1,734 1,660 2,025 1,904 2,493 million, compared to total expenditures of US$6.421 4.2.2. Funding Uses million. The fiscal year closed with a variance (under run) Country Advisory Services 873 801 827 793 959 545 1,543 As the FCPF has shifted from its startup to implementation of US$286,000 and spending at 96 percent of the revised REDD Methodology Support 1,665 827 1,665 1,266 1,489 1,920 1,624 phase, the annual budgets of the Readiness Fund have budget, with a share of this related to the special budgetary of which est. Readiness Share 1,056 also increased. The first two years of Readiness Fund request for the Task Force on a Common Approach. of which est. Carbon Fund Share 568 operations were characterized by relatively slow uptake These numbers also do not include some contracts that on the operational and administrative budget, while the were issued to support operations of the FCPF and not FCPF Secretariat 1,335 988 1,443 1,321 1,762 1,685 2,588 broad directions of the FCPF were being mapped out by yet fully expensed (e.g., some of the Indigenous Peoples of which est. Readiness Share 1,682 Participants and the staffing and expertise for REDD+ Program contracts), and funding commitments that were of which est. Carbon Fund Share 906 were put in place. This included both staffing across key made previously to World Bank country teams supporting Readiness Trust Fund 306 471 484 362 472 366 421 stakeholders of the FCPF, as well as staff development Readiness in specific countries but not yet expensed. Administration and formation of teams at the World Bank. However, As per Table 8, Country Implementation Support costs Total Readiness Fund 5,373 3,497 6,153 5,402 6,707 6,421 8,669 in FY11, the PC approved a somewhat larger budget for were US$1.904 million, or 94 percent of the planned operational and administrative support to REDD+, to reflect budget. To date, this line item has reflected the direct the growing staffing capacity. In June of 2011, the PC has assistance of World Bank country teams to REDD Country facilitated a broader work program and set of activities Participants, including technical assistance, grant Table 8. FY11 Readiness Program Expenditures by Activity (in US$ thousands) through its FY12 budget approval, as indicated in Table 7. supervision and assessments provided to the PC. Activities Original Revised Actual Expense Budget Budget Expense Variance Rate Table 6: Commitments and Pledges to the Readiness Fund as of June 30, 2011 (in US$ thousands) Services to REDD Countries 4,473 4,473 4,369 104 98% Country Implementation Support 2,025 2,025 1,904 121 94% Participant Name FY09 FY10 FY11 FY12-16 Total Country Advisory Services 959 959 545 414 57% Agence Française de Développement 4,612 592 5,800 11,004 REDD Methodology Support 1,489 1,489 1,920 -431 129% Australia 9,565 7,997 17,562 FCPF Secretariat* 1,735 1,762 1,685 77 96% Canada 41,360 41,360 Readiness Trust Fund Administration 472 472 366 106 78% Denmark 5,800 5,800 Total Readiness Fund 6,680 6,707 6,421 286 96% Finland 8,956 5,750 14,707 * FY11 Revised Budget included US$235,000 allocation for Task Force on Common Approach. Germany 25,956 25,956 Italy 5,000 5,000 Japan 5,000 5,000 10,000 Figure 2. FY11 Budget Performance (in US$ thousands) FOREST CARBON PARTNERSHIP FACILITY FOREST CARBON PARTNERSHIP FACILITY Netherlands 5,000 15,270 20,270 n Revised FY11 Budget n FY11 Actuals Norway 5,000 16,398 8,802 30,200 2,500 2,025 Spain 7,048 7,048 1,904 1,920 2,000 Switzerland 8,214 8,214 1,762 1,685 1,489 United Kingdom 5,766 5,766 1,500 United States of America 500 4,500 5,000 959 1,000 Committed Funding 53,895 32,290 94,880 26,821 207,886 545 European Commission 5,800 5,800 472 500 366 Germany 14,500 14,500 Japan 4,000 4,000 0 Committed Funding plus Pledges 53,895 32,290 94,880 51,121 232,186 Country FCPF Readiness Fund Country REDD Methodology Implementation Secretariat Administration Advisory Services Support 39 38 Support FY11 ANNUAL REPORT While spending and activities were generally on the levels anticipated at the start of FY11, the under run that did occur came from several REDD Country Participants being unable to access grant funding and direct assistance until arrangements for the Common Approach and new Delivery Partners could be agreed. That work progressed in FY11, and continues into FY12. Once agreements are formalized with the new Delivery Partners, the costs of Country Implementation Support will also reflect as well the costs incurred by partner institutions beyond the World Bank. The related line item of Country Advisory Services came to about US$545,000 or only 57 percent of the amount originally budgeted in FY11. The majority of these costs arise from FMT, forestry and social development staff advice and guidance to REDD Country Participants on their programs, including development of the R-PP, SESA and consultation processes. This relatively low level of spending (compared to about US$793,000 in FY10) reflects in great part the fact that FMT staff worked beyond the FCPF during the year, to integrate across various initiatives closely related to the FCPF, including the Forest accounting, legal and other services required by the Investment Program, the REDD+ Partnership, and others, Readiness Fund Trustee. Given that they have remained with appropriate allocations of costs to those initiatives. relatively steady since the Fund’s inception in FY09, the Conversely, with the budget for REDD Methodology budget for these costs was reduced in the FY12 budget Support activities set at US$1.489 million in FY11, and proposal of the FMT. total expenditures at US$1.920 million, this line item saw spending of 129 percent against FY11 plans. Costs 4.2.3. End of Year Account Balance reflected the expenses (consulting contracts, travel and meeting costs) of the independent TAPs supporting the In summary, per Table 9, at the close of FY11, the balance FCPF, considerable work with other REDD+ institutions of the Readiness Fund stood at US$165.8 million. Total to coordinate and develop joint tools, such as the R-PP new funds into the account were about US$95.6 million, template and previously approved programs such as the including the donor contributions of US$94.9 million and IP Capacity Building Program. US$0.7 million of investment income earned on the account FCPF Secretariat expenses were US$1.685 million balance. Total disbursements on a cash basis were US$7.5 compared to the final revised budget of US$1.762 million, million, with cash expenditures of US$6.4 million, and or 96 percent of the revised budget. Expenditures expenditures by REDD Country Participants against their included the standard costs for program management, own-managed grants of approximately US$1.1 million. organization of the annual Participants Assembly and PC meetings, and travel costs for REDD Country Participants FOREST CARBON PARTNERSHIP FACILITY FOREST CARBON PARTNERSHIP FACILITY Table 9. FY11 Financial Statement for the Readiness to those meetings, in accordance with the FCPF Charter. Fund (in US$ thousands) Increasingly, knowledge and learning events on REDD+ as well as other key partner meetings (e.g., the UN- Item Amount REDD Programme or REDD+ Partnership) are organized together with the FCPF Secretariat, to maximize the Beginning Balance 77,695 use of Participant time as well as to keep costs as Donor Contributions 94,880 low as possible. Typical FCPF Secretariat costs also Investment Income 732 include supporting the participation of the IP Observer, Total Receipts 95,612 hosting and maintaining the FCPF website and general communications to FCPF stakeholders. Cash Disbursements 6,421 Readiness Fund Administration costs were US$366,000 Grant Disbursements 1,082 or about 78 percent of the US$472,000 budgeted in FY11. Total Disbursements 7,503 These costs reflect the work of all World Bank staff Fund Balance 165,804 involved in fund management, contributions management, 41 40 FY11 ANNUAL REPORT 4.2.4. Accelerating Readiness Fund Disbursements 4.2.5. Financial Commitments over the Longer Term An important aspect of the Readiness Fund from its The Readiness Fund was established to operate over the inception has been that it makes available grant funding long term, with a closing date in the FCPF Charter of to countries—the grants of up to US$3.6 million per December 31, 2020. In order to plan resources over this REDD Country Participant—in support of country-led longer time horizon, the PC issues resolutions from time Readiness work. The REDD Country Participants manage to time that establish funding priorities and commitments and utilize the grants for REDD+ activities and expenses, for the coming years. These commitments are considered which are ultimately reflected as disbursements in World ‘notional’ when the PC has set aside or allocated financial Bank financial statements only once the REDD Country resources of the Readiness Fund that are not yet signed Participant completes reimbursement from the grant into formal grant agreements or contracts. They are resources. By the end of FY11, 17 R-PP formulation grant converted to ‘full’ commitments once the grant agreements agreements had been signed and eleven of the grants (or vendor contracts) are signed by recipients and/or by the were actively disbursing in 2011, with about US$1.1 World Bank as Trustee of the Readiness Fund. million fully processed and expensed by REDD Country At the close of FY10, the long term notional Participants during the fiscal year (see Figure 1 in Section commitments (use of funds) made by the PC were aligned 1). However, associated with these grant disbursements with the total committed funding (sources of funds). was a considerably higher level of grant commitments Importantly, the long term business plan includes reserves made by the FCPF to REDD Country Participants, along for the operation of the secretariat by the FMT and the with associated country services and operational support Trustee role of the World Bank over the full term of the that comes with FCPF participation. Table 10 provides a Fund—reflecting the fact that the Facility is expected to more complete picture of the level of these commitments be fully active through that time, when the Carbon Fund is to REDD Country Participants. supporting programs in select REDD Country Participants At the same time, it is still evident that the and making ERPA payments. disbursements to REDD+ countries need to be dramatically PC6 agreed to provide access to R-PP Formulation accelerated, in order to ensure that the available funding Grants of US$200,000 and associated Country for Readiness is translated as quickly as possible to Implementation Support to all REDD Country Participants support for the ultimate FCPF goal of Readiness for that do not yet have access to such funding through the REDD+. During the discussion of strategic issues FCPF or another donor, provided that the grant agreement scheduled for the October 2011 PC meeting, the PC is is signed by December 31, 2011 and an appropriate delivery expected to consider a note with options for additional ways partner can be arranged (unless otherwise decided by the to accelerate disbursements across the Readiness Fund. PC, for example, in the case of extenuating circumstances Table 10: Readiness Funds Notionally Committed to Grants and Services for REDD Country Participants (as of June 30, 2011) Notional Commitments Amount per Country Number Total Grants and Country Services (US$ millions) (US$ millions) FOREST CARBON PARTNERSHIP FACILITY FOREST CARBON PARTNERSHIP FACILITY Full Support through Readiness Package Preparation Grants (up to US$3.6m) 3.6 36b 129.6 Associated Country Services a 36 31.8 Total Notional Commitments to Grants and Country Services 36 161.4 a. Country Services are comprised of an average per country share of REDD Methodology Support and Country Advisory Services, plus direct Country Implementation Support. b. 36 REDD Countries, which may include all selected REDD Country Participants except for Tanzania, which is bilaterally funded. 43 42 FY11 ANNUAL REPORT Table 11: Commitments and Pledges to the Carbon Fund as of June 30, 2011 (in US$ thousands) or a delay that is not the fault of the REDD Country adding to the critical early movers that have helped to Participant). The PC also reiterated that all REDD Country shape the Fund from its inception. Table 11 presents the Participant Name FY09 FY10 FY11 FY12-16 Total Participants were equally eligible to receive a Readiness contributions and public pledges for the Carbon Fund by Preparation Grant of up to US$3.6 million. The grants the end of FY11, amounting to US$212 million overall, with Australia 12,735 12,735 depend on the PC’s decision regarding the R-PP, the fully committed funding (signed Participation Agreements) BP Technology Ventures 5,000 5,000 availability of sufficient committed funding, and regional of about US$174 million. This level of funding is a CDC Climat 5,000 5,000 balance among grant recipients. considerable achievement given the original target volume European Commission 6,347 362 6,709 Total committed and pledged funding to the Readiness of US$200 million for the carbon fund’s capitalization. Fund as of 30 June, 2011 is approximately US$232 million. Germany 4,009 3,819 21,125 17,400 46,353 4.3.2. Funding Uses This increased level of funding is adequate to cover the Norway 10,000 55,000 65,000 long-term fixed costs of the Facility and full Readiness Within the context of the Organizational Meeting of the The Nature Conservancy 5,000 5,000 Preparation Grants of up to US$3.6 million to all 37 Carbon Fund in late May/early June 2011, the first budget United Kingdom 17,940 17,940 selected REDD+ Country Participants except for Tanzania, approval of the Carbon Fund Participants took place, along which is bilaterally funded, together with the costs of with initial planning for the future directions of the Fund. United States of America 10,000 10,000 the estimated associated country services for those 36 In practice, the Carbon Fund Participants have already Committed Funding 25,356 4,181 71,800 72,400 173,737 countries. been working closely with the many stakeholders of the Germany 29,000 29,000 As shown in Table 10, as of the end of FY11, notional Readiness Fund and the Facility overall, to ensure that Switzerland 9,600 9,600 commitments of full grants and the estimated associated the FCPF works effectively to achieve its dual objectives country services to 36 countries amount to approximately of preparing for REDD+ Readiness, as well as piloting Committed Funding plus Pledges 25,356 4,181 71,800 111,000 212,337 US$161 million. and testing performance-based payments. Hence the For the discussion of strategic issues scheduled for Carbon Fund FY12 budget provides a snapshot of the work the October 2011 PC meeting, the FMT will present for the underway across both funds, including the shared activities consideration of the PC an updated long term business of the Readiness Fund and the Carbon Fund, comprising Table 12: FCPF Carbon Fund Annual Budgets (in US$ thousands) plan and options that aim to adjust these commitments, the Shared Costs. Table 12 details these costs as they consider the use of additional resources being pledged for affect the Carbon Fund pre-FY12 (before full operations) as FY09 FY10 FY11 FY12 the Readiness Fund, and/or seek new ways to accelerate well as the budget plan going forward. Actual Actual Actual Budget disbursements of existing commitments. 4.3.3. Financial Commitments over the Longer Term Shared Costs (paid by the Readiness Fund)* 635 1,728 1,262 4.3. The Carbon Fund The Carbon Fund only became fully operational in May 2011 Shared Costs (paid by the Carbon Fund)** 1,474 so the FMT intends to prepare a long-term business plan Carbon Fund Administration 183 366 490 4.3.1. Funding Sources for the Carbon Fund meeting to be held in October 2011. Marketing to Private Sector 45 As a major milestone of the Facility, the Carbon Fund’s Meeting Logistics 50 minimum threshold of US$40 million, established in the FCPF Charter, was surpassed early in FY11, when the Program Development 60 signed Participation Agreement of the United States was Total Carbon Fund Costs 183 366 2,119 received in September 2011; since that time the Fund has received a steady flow of new funding and partners * Per PC Resolutions: PC/3/2009/6, PC/6/2010/8, PC/9/2011/4 and not included in Total Carbon Fund Costs figures. ** Per PC Resolutions: PC/9/2011/4. FOREST CARBON PARTNERSHIP FACILITY FOREST CARBON PARTNERSHIP FACILITY 45 44 FY11 ANNUAL REPORT 5 Conclusions and the Road Ahead FY2011 was a crucial year for REDD+, culminating in the adoption by the Conference of the Parties of Decision 1/CP.16 in Cancún, which included a strong chapter on REDD+. Looking at Durban and beyond, a lot of work remains to be done, ranging from the regulatory aspects, including the necessary guidelines on MRV and reference levels, the guidance on information systems for safeguards, and determining sources of finance for the so-called “third phase� of REDD+. With respect to the FCPF, FY11 was a very rich year, too. the process a REDD Country Participant should have gone REDD Country Participants have made major contributions before it can be considered ready, and how much progress to the international thinking on REDD+ by laying out, in it should give evidence of before it can be deemed to their R-PPs, how they would go about getting ready for have made sufficient progress to access further funding, REDD+. including performance-based payments, e.g., through the The attention now shifts to disbursing FCPF Readiness Carbon Fund of the FCPF. Fund proceeds to support the implementation of these In the next few years the global community will assert R-PPs. The work will be challenging as there are no its understanding of what is necessary to significantly cookie-cutter approaches and each country has to work out expand from small but ingenious forest protection projects the right balance of activities and follow the right process of a few thousand hectares to the visionary infrastructure to become ready for REDD+. There is a multiplicity of and delivery mechanisms at the country level that are national and international actors with different, sometimes needed to impact global emissions. The work program on conflicting, views on what needs to be done first, how fast, REDD+ for the near future features daunting challenges. and with what level of financial and human resources. These include establishing national institutions capable In FY12 the FCPF will turn its attention to measuring of asserting influence over lands, and organizations and progress towards REDD+ Readiness through the design of economic incentives that have been stubbornly intractable a Readiness Package and monitoring reports for Readiness in many developing countries; fashioning technical grants under implementation. This will prove challenging, methods to measure and monitor REDD+ activities relative as Readiness is as much a process as it is a state. The to reference levels without REDD+ policy interventions; and crucial question for the PC therefore becomes how far in advancing governance at the local and national levels. FOREST CARBON PARTNERSHIP FACILITY FOREST CARBON PARTNERSHIP FACILITY 47 46 48 FOREST CARBON PARTNERSHIP FACILITY Acknowledgements All photos courtesy of the World Bank Photo Library/Rhett A. Butler unless otherwise noted. Design by Corporate Visions, Inc. 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