Critical theme - Moving forward with REDD+ (part two)

©2014 GLOBAL CANOPY PROGRAMME 1
Moving forward with REDD+
between 2015-2020…

©2014 GLOBAL CANOPY PROGRAMME 2©2014 GLOBAL CANOPY PROGRAMME
• To meet 2 degrees limit – global deforestation levels need to be significantly
reduced.
• There is a lack of demand for REDD+ emission reductions in the ‘interim
period’ between 2015 and 2020.
• EC target: 50% reduction in deforestation levels by 2020 = equal to a max of
9,900 MtCO2e from forests and land use between 2015 and 2020
• Can be achieved through a combination of measures taken by forest
countries and the private sector:
1. Domestic policy and regulatory reform in forest countries
2. Overseas development assistance between governments (including performance
based payments)
3. Payments in exchange for fungible REDD+ emission reductions
THE PROBLEM

• To meet 2 degrees limit – global deforestation levels need to be significantly
reduced.
• There is a lack of demand for REDD+ emission reductions in the ‘interim
period’ between 2015 and 2020.
• EC target: 50% reduction in deforestation levels by 2020 = equal to a max of
9,900 MtCO2e from forests and land use between 2015 and 2020
• Can be achieved through a combination of measures taken by forest
countries and the private sector:
1. Domestic policy and regulatory reform in forest countries
2. Overseas development assistance between governments (including performance
based payments)
3. Payments in exchange for fungible REDD+ emission reductions
THE PROBLEM

• Who will buy these REDD+ emission reductions?
• Current counterparties between 2015 and 2020:
1. California ETS
2. BioCarbon Fund
3. FCPF Carbon Fund
4. KfW REDD+ Early Movers Programme
5. Voluntary pre-compliance market
• Total existing potential demand = 253 MtCO2e
• This is less than 3% of the total 9,900 MtCO2e REDD+ emission reductions
needed to meet the EC target
THE PROBLEM

• BUT lets assume that some of the 9,900 MtCO2e needed may be
achieved through (1) policy and regulatory reform; (2) ODA between
governments (including performance based payments).
• Let’s call it 75% to be generous (or 7425 MtCO2e)
• If we estimate the remaining 25% (2475 MtCO2e) of the 9,900 MtCO2e
reductions needed is paid for by exchanging fungible REDD+ credits in an
international trading mechanism.
• This means that supply is still 3-10 times larger than the current demand
of 253 MtCO2e
THE PROBLEM

Demand vs. Supply

Without interim demand:
1. Little incentive for tropical forest countries to generate long term
emissions reductions
2. Little incentive for the private sector to invest in REDD+ without
demand.
3. This will delay action towards a post 2020 compliance regime.
And ultimately increase the future cost of tackling climate change.
Why is lack of interim demand a
problem?

A strategic intervention is needed by donor country and
tropical forest country governments, and public financial institutions, to
unlock public/private investment in REDD+ activities by scaling up interim
demand.
Objective is to:
1. Increase demand for REDD+ emission reductions before 2020.
2. Catalyse private sector investment in activities generating REDD+
emission reductions before 2020
The Solution

The strategic intervention should stimulate demand by:
1. Creating performance-based financial incentives to enable forest
countries to enter long term contracts to reduce emissions by
offering greater certainty over the price/volume of REDD+ credits.
2. This will catalyse private sector investment in activities that
generate REDD+ emission reductions by creating investable
conditions and a track record for REDD+.
3. Mimicking other successful interventions, such as the GAVI
and its Advanced Market Commitment (AMC).
4. Utilising existing funds and mechanisms for delivery, such as the
FCPF, Green Climate Fund, etc.
The Solution: What?

1. Raise minimal public sector capital for interim period (including
already committed capital, e.g. Indonesia LoI with Norway),
leveraging maximum possible from private sector
2. Offer greater certainty over price and volume of REDD+ emission
reductions, using price floors, ERPAs, options contracts, to
stimulate private sector investment
3. Offer upfront concessional finance, insurance, technical assistance,
etc, to support the ‘supply side’
4. Channel funding from the public sector through existing
structures, such as the FCPF, GCF, national funds (e.g. FREDDI)
or others
The Solution: How?

1. It can attract private finance
2. It saves public sector money in the long term
3. It supports the development of a post-2020 framework
4. It helps meet existing climate agreements
5. It builds on money already spent on REDD+ Readiness
6. It can pilot the GCF or other funds/mechanisms in development
The Solution: Why?

• Aim:
– address the lack of finance and demand for REDD+ emission reductions
between 2015 and 2020 (when a global climate change agreement is
anticipated).
• Method:
– facilitate, by the UNFCCC COP20 in Lima in December 2014, an agreement
among REDD+ donor country governments to set up an intergovernmental
interim forest finance working group, to:
1. Examine ways to spend the funding that has already been committed by donor country
governments
2. Investigate the need for additional public funding
3. Examine the capital-raising options, deployment instruments and the institutional
frameworks
– support the delivery of recommendations, by the working group, by COP21 in
Paris in December 2015
The Interim Forest Finance Project

Critical theme - Moving forward with REDD+ (part two)

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Critical theme - Moving forward with REDD+ (part two)

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