Assessing Options for Effective Mechanisms to Share Benefits

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INSIGHTS FOR REDD+ INITIATIVES

ASSESSiNG OPTiONS FOR EFFECTivE

MECHANiSMS TO SHARE BENEFiTS

FEBRUARY 2012

Author: PricewaterhouseCoopers (PwC)


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Acknowledgment

This paper was prepared by members o the Sustainability and Climate Change team at

PricewaterhouseCoopers LLP. The team was led by Richard Gledhill, Global Leader o Climate

Change and Carbon Market Services. The team included Chris Knight, Assistant Director

Sustainability & Climate Change, Forestry & Ecosystems team; Jim Stephenson (currently

with RECOFTC), Helen Baker, and Jack Steege.

The Program on Forests (PROFOR) and the Trust Fund or Environmentally and Socially

Sustainable Development (TFESSD) provided fnancial support or this work. A multi-

donor partnership housed at the World Bank, PROFOR fnances orest-related analysis and

processes that support the ollowing goals: improving peoples livelihoods through better

management o orests and trees; enhancing orest law enorcement and governance;

fnancing sustainable orest management; and coordinating orest policy across sectors.

In 2012, PROFORs donors included the European Union, Finland, Germany, Italy, Japan,

the Netherlands, Switzerland, the United Kingdom, and the World Bank. Learn more at

www.proor.ino

About the authors: PricewaterhouseCoopers LLP provides advisory support to conservation

organizations, multilateral institutions and government agencies in the development o

conservation fnance and biodiversity and ecosystem service markets. Learn more at www.

pwc.com/sustainability

Disclaimer

The views expressed do not necessarily represent those o the institutions involved, nor do

they necessarily represent ofcial policies o PROFOR or the World Bank.

To the extent permitted by law, PricewaterhouseCoopers LLP, its members, partners,

employees and agents specifcally disclaim any duty or responsibility to any third party which

may view or otherwise access the report, whether in contract or in tort (including without

limitation, negligence and breach o statutory duty), and shall not be liable in respect o any

loss, damage, or expense o whatsoever nature which is caused by or as a consequence osuch viewing o or access to the Report by any such third party.

Suggested citation: PwC. 2012. Assessing Options or Eective Mechanisms to Share

Benefts: Insights or REDD+ Initiatives. Washington, DC: Program on Forests (PROFOR).

Published in February 2012

For a ull list o publications please contact:

Program on Forests (PROFOR)

1818 H Street, NW

Washington, DC 20433, [email protected]

www.proor.ino/proor/knowledge


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A/R Aorestation/reorestation

BMCT Bwindi Mgahinga Conservation Trust, Uganda

BSM beneft sharing mechanism

CDM Clean development mechanism

FCPF Forest Carbon Partnership Facility

FIA Forest Investment Account, Canada

FPIC Free, prior, and inormed consent

GHG Greenhouse gases

GIS Global inormation system

ICMS-E Impostos Sobre Circulao de Mercadorias e Prestao de Servios Ecolgico, Brazil

(Approximately equivalent to value-added tax)

IUCN International Union or the Conservation o Nature

LCSC Local community steering committee

MRV Monitoring, reporting, and verifcation

NGO Nongovernmental organization

NIB National input-based (beneft sharing mechanism)

NPB National perormance-based (beneft sharing mechanism)PES Payments or Ecosystem Services

PSAH Program or Hydrological Services, Mexico

REDD+ Reduced Emissions rom Deorestation and Forest Degradation, plus conservation,

sustainable management o orests, and enhancement o orest carbon stocks

RFA Redevance Forestire Annuelle or Annual Forestry Fee, Cameroon

RUPES Rewarding Upland Poor or Environmental Services, Philippines

SFM Sustainable orest management

SNIB Subnational input-based (beneft sharing mechanism)

SNPB Subnational perormance-based (beneft sharing mechanism)

TAU Trust Administrative Unit

TMB Trust Management Board

UNFCCC United Nations Framework Convention on Climate Change

VCS Verifed carbon standard

ACRONYMS

ii iACRONYMS


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Carbon credit A certicate or instrument that represents the reduction o emissions o greenhouse gases

by the equivalent o one tonne o carbon dioxide relative to an agreed baseline.

Carbon rights The rights to carbon as property, and the associated rights to transer and trade carbon

(Peskett 2011a).

Forest rent The dierence between the market price or orest products and the costs o bringing them

to market (Karsenty 2000).

Input-based beneft sharing

mechanisms

Input-based mechanisms distribute benets up ront to partners (e.g., community groups)

on the basis that these provide enabling conditions or adoption o targeted practices

(e.g., those associated with avoided deorestation). The uture perormance o the

recipients o these benets is not monitored. No link is provided between the distribution

o benets and measurable perormance in orest management.

Monitoring, reporting, and

verifcation

In relation to REDD+, monitoring and reporting o carbon stock changes and the social

and environmental impact o REDD+ at a project, subnational, or national level, and

verication o reports by a designated third party.

National approach A national carbon-accounting ramework and MRV system, with nations being rewarded

or emissions reductions relative to an established national reerence level, rather than at

a subnational or project level. Reductions may be rewarded through allocation o tradable

carbon credits, by nancial transers rom a global und, or by other mechanisms.1

Nested approach A national climate-change policy, carbon accounting ramework, and MRV system, whereby

emissions reductions at both the national and subnational or policy level are rewarded

through allocation o tradable carbon credits.

Under a nested approach the national government sets up a national accounting

ramework and establishes a nationwide monitoring system. The government is rewarded

with incentives rom an international system (or through a bilateral arrangement) or

implementing policy reorms that would lead to veriable emission reductions. Meanwhile,

implementation o REDD+ activities also occurs at the subnational level led by local or

regional governments, communities, NGOs, or private developers. These activities account

or emission reductions at the subnational level and earn incentives directly rom the

international (or bilateral) system based on those reductions. This subnational accountingneeds to be aligned to the national level (i.e., aggregate credits issued in any given

year must be based on the perormance o the nation as a whole relative to its reerence

emission level) (Cortez et al. 2010).

Perormance-based beneft

sharing mechanisms

Perormance-based mechanisms distribute benets on the condition that the partners

receiving the benets (e.g., community groups) have achieved a predened, measurable,

and veriable standard o perormance against a baseline (e.g., have restored or protected

X number o orest hectares).

1 Adapted rom Angelsen et al. 2008.

GLOSSARY

vGLOSSARY


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Readiness To be REDD+ ready, a country, state, or province might aim to have in place the

ollowing:

A avorable policy environment that allows or the implementation o REDD+ programs in

an ecient, eective, and equitable manner (the Three Es) (CIFOR 2009)

An institutional structure that allows or eective decision making regarding REDD+

development at a government level

Adequate physical and human capacity within the government, nongovernmental,

academic, and private sectors to eectively assess orest carbon stocks and measure

carbon changes and leakage

Clear and transparent revenue and incentive-sharing mechanisms

A nancial management system established or unds to fow to beneciaries and

stakeholders in an ecient, eective, and equitable manner

REDD Reducing Emissions rom Deorestation and Forest Degradation (REDD) is an eort to

create a nancial value or the carbon stored in orests, oering incentives or national

and subnational actors to reduce emissions rom orested lands and invest in low-carbon

paths to sustainable development.

REDD+ Policy approaches and positive incentives on issues relating to reducing emissions romdeorestation and orest degradation in developing countries; and the role o conservation,

sustainable management o orests and enhancement o orest carbon stocks in

developing countries.2

Subnational approach A national climate-change policy, carbon accounting ramework, and MRV system, whereby

emissions reductions are rewarded only at the subnational or project level.

Using this approach, both REDD+ accounting and implementation would be ocused on a

dened geographic area or project site. Project development activities could be undertaken

by individuals, communities, NGOs, private companies, and dierent levels o government.

Forest CO2

emission baselines; subsequent monitoring, reporting, veriying (MRV), and

rewarding would only be or the sites in question. Projects would have to account or any

leakage or displacement o destructive activities rom the project site to other orest

areas outside the project area (RECOFTC 2009).

Land rights Land rights reer to both: ownership or other legally enorceable rights o an individual or a

community over land (de jure rights), and occupancy and use rights (de acto rights).

2 UNFCCC/CP/2007/6/Add.1,14 March2008; Decision 1/CP.13 [BAP], paragraph 1(b)(iii).

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TABLE OF CONTENTS

1. INTRODUCING FOREST SECTOR BENEFIT SHARING MECHANISMS_________________ 1.1 Objectives _______________________________________________________ 11.2 Approach Used ___________________________________________________ 21.3 Structure o This Paper ____________________________________________ 21.4 Beneft Sharing in the Forest Sector __________________________________ 3

1.5 Beneft Sharing Mechanisms and REDD+ ______________________________ 92. FOREST SECTOR BENEFIT SHARING MECHANISM TYPES AND THEIR

RELEVANCE TO REDD+ _________________________________________________2.1 Defning Types o Beneft Sharing Mechanism __________________________112.2 Forest Sector Beneft Sharing Mechanism Types and Their Relevance

to REDD+ _______________________________________________________112.3 What Is the Time Line or Setting Up a Forest Sector Beneft Sharing

Mechanism?____________________________________________________ 152.4 How Does Each Forest Sector Beneft Sharing Mechanism Type Work? ______ 152.5 The Costs o Managing Forest Sector Beneft Sharing Mechanisms ________ 34

2.6 Lessons or Establishing Forest Sector Beneft Sharing Mechanisms _______ 35

3. OPTIONS ASSESSMENT FRAMEWORKS FOR IDENTIFYING A SUITABLE BENEFIT

SHARING MECHANISM ________________________________________________ 3.1 Using the Options Assessment Framework ____________________________ 39

4. OPTIONS ASSESSMENT FRAMEWORKS____________________________________ 4.1 Option Assessment Framework or National Beneft Sharing Mechanisms ___ 454.2 Suggested Enabling Actions or National Beneft Sharing Mechanisms _____ 604.3 Options Assessment Framework or Subnational Beneft Sharing

Mechanisms ____________________________________________________ 69

4.4 Suggested Enabling Actions or Subnational Beneft Sharing Mechanisms __ 83

5. FURTHER INFORMATION SOURCES _______________________________________

REFERENCES __________________________________________________________

ANNEX I: IN-DEPTH CASE STUDY ASSESSMENTS _______________________________

ANNEX II: HIGH-LEVEL CASE STUDY ASSESSMENTS____________________________

FIGURES

Figure 1.1 Participants in a Forest Sector Beneft Sharing Mechanism ___________ 4

Figure 2.1 Four Types o Forest Sector Beneft Sharing Mechanisms ___________ 12Figure 2.2 National Input-Based Beneft Sharing Mechanism ________________ 16Figure 2.3 National Perormance-Based Beneft Sharing Mechanism ___________17

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Figure 2.4 Subnational Input-Based Mechanism __________________________ 25Figure 2.5 Subnational Perormance-Based Beneft Sharing Mechanism _______ 27Figure . Establishing a Forest Sector Beneft Sharing Mechanism ___________ Figure II.1 Targeting PEHS in Mexico ___________________________________ 158

TABLES

Table 1.1 Types o Forest Sector Benefts Distributed Through Beneft SharingMechanisms _________________________________________________ 6

Table 1.2 Beneft Sharing Mechanism Participants __________________________ 7Table 2.1 Characteristics or Classiying Beneft Sharing Mechanism ___________ 12Table 2.2 Suitability o Forest Beneft Sharing Mechanism Types to Dierent

Phases o REDD+ ____________________________________________ 13Table 3.1 Key Component Scoring _______________________________________ 42Table 3.2 Interpreting Percentage Scores rom the Assessment _______________ 43Table 3.3 Color Coding Used in the Options Assessment Framework ___________ 44

BOXES

Box 1.1 Examples o Beneft Sharing Mechanism ParticipantsSocio Bosque,Ecuador ______________________________________________________ 8

Box 2.1 Similarities Between National Input and Perormance-Based BeneftSharing Mechanisms __________________________________________ 19

Box 2.2 Example o a National Input-Based Beneft Sharing MechanismThe Redevance Forestire Annuelle (RFA), Cameroon ________________ 19

Box 2.3 Example o a National Perormance-Based Beneft SharingSocioBosque, Ecuador ______________________________________________ 22

Box 2.4 Similarities Between Subnational Input- and Perormance-BasedBeneft Sharing Mechanisms ____________________________________

Box . Example o a Subnational Input-Based Beneft Sharing Mechanism:Bwindi Mgahinga Conservation Trust (BMCT), Uganda ________________

Box . Example o a Subnational Perormance-Based Beneft SharingMechanismICMS Ecolgico (ICMS-E), Brazil ______________________

Box . Simultaneous Implementation o Input- and Perormance-BasedBeneft Sharing Mechanisms ____________________________________

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Since the UNFCCC conerence o the parties in Bali (COP13), discussions around the role o tropical

orests in reducing emissions rom deorestation and orest degradation (REDD+) have revolved

around the need or nancial incentives and compensation to involve countries in critical climate

change mitigation measures. Most recently, during the COP 16 discussions in Cancun, parties

committed to a Green Climate Fund, which is meant to be capitalized at US $100 billion by 2020,

and used to help developing countries nance emission reduction and adaptation. There were also

commitments to provide new and additional resources o approximately US $30 billion or 201012

or investments through international institutions (including in the area o orestry). While thesenumbers look signicant and generate considerable optimism, dierent experts have estimated that

approximately US $20 billion per year will be necessary to prevent 90 percent o deorestation and,

thereore, reduce emissions.

Numerous challenges are associated with using these resources eectively. One o these is

identiying the mechanism or the markets and development partners to make available nancial

resources or developing countries implementing REDD+. The second, and more critical, challenge

is ensuring the nancial resources are solely used to eectively deliver the specied goals o REDD+.

The latter depends on ensuring nancial resources associated with such initiatives translate into

incentives or those who use and manage orest resources.

Recent work in this area has conrmed that achieving REDD+ objectives will require eective

distribution o benets rom the national or subnational level to the local level. Experts have identied

various models that oer insights into eectively transerring benets (see, or example, Costenbader,

2011). These various models provide interesting ndings or development partners and national

REDD working groups regarding the challenges and lessons or designing benet sharing schemes.

1.1 OBJECTIVES

One objective o this paper is to provide inormation and tools or policy makers and developmentpartners engaged in developing arrangements or transerring REDD+ benets. This paper is also

intended to help key stakeholders design a mechanism that is appropriate or a countrys context by

taking into account these actors:

The countrys approach to REDD+

Whether the national REDD+ program is donor unded, based on payment or perormance,3 or

linked to the international compliance carbon market

The range and type o recipients that the arrangement has to involve

3 Donor unds released according to stages depending on the partner country meeting carbon abatement (possibly also

ecosystem service conservation and poverty alleviation targets) e.g., the Norway and Indonesia REDD+ unding program.

1 INTRODUCING FOREST SECTOR BENEFITSHARING MECHANISMS

1Cp 1: IntroduCIng Forest seCtor BeneFIt sharIng MeChanIsMs


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Another objective is to provide inormation and tools or assessing and structuring benet sharing

mechanisms at national and subnational levels (e.g., at the local government or project level) and at

local community levels. This paper, however, does not address benet sharing within communities,

because this would depend on local circumstances.

This paper includes an Options Assessment Framework that would help REDD+ stakeholders identiy

nationally appropriate REDD+ benet sharing mechanisms, and oers guidance on measuresneeded to successully design and implement a selected mechanism.

This paper is based on a quick review o 12 existing orest benet sharing mechanisms representing

a spectrum o approaches. From the 12, ve were selected and examined in detail using inormation

rom key inormants and available materials.

1.2 APPROACH USEDA three-step research process was used or the case studies and or developing the ramework. The

three steps involved these actions:

1. Consolidating a list o more than 30 dierent benet sharing arrangements and classiying them

according to categories such as their scope, scale, country, and data availability. This list was then

narrowed to 12 mechanisms that spanned a range o approaches and were known to be eective.

2. A desk-based research o the long list o 12 orest sector benet sharing mechanisms that were

selected to provide an appropriate range o geographies and mechanism types. A template

was created to compile inormation on the mechanisms, including inormation on objective,

how the benet was administered, the number o beneciaries, total value, strengths, type o

benet delivered, requirement with regard to clarity o rights, how benets were transerred,

engagement o local partners, institutional requirements, and country context. This research wasused to derive lessons learned or the establishment and success o REDD+ benet sharing

mechanisms and to select a short list o benet sharing mechanisms or urther in-depth review.

3. Short listing ve mechanisms or an in-depth review that includes an appropriate range o

mechanism types and scales. Data collection on the ve mechanisms involved interviewing

stakeholders rom government, NGOs, academia, and private and legal sectors to obtain primary

data on the mechanism. These interviews provided direct insight into the critical establishment

and success actors or these mechanisms, as well as their areas or potential improvement. The

critical success actors identied during this analysis orm the basis or the ramework.

1.3 STRUCTURE OF THIS PAPERThis paper is divided into three sections to provide the reader with an introduction to orest sector

benet sharing mechanisms and their relevance or REDD+; guidance on establishing benet sharing

mechanisms; and Options Assessment Frameworks or our REDD+ benet sharing mechanism

categories.

Section 1: Introducing Forest Sector Beneit Sharing Mechanisms

This section begins with an overview o orest benet sharing and the mechanisms or transerring

these benets, benet sharing mechanism participants, and the type o orest benets the

mechanisms distribute.

It also highlights key lessons rom existing orest sector benet sharing mechanisms and describes

their relevance to REDD+.

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Finally it provides a typology or orest sector benet sharing mechanisms, with a description

o each typology along with case study examples to illustrate how these dierent benet sharing

mechanisms may be applied in REDD+.

Section 2: Forest Sector Beneit Sharing Mechanisms and Their Relevance to REDD+

This section provides a summary o the key lessons learned during the establishment o other

orest sector benet sharing mechanisms. The lessons are broken down among benet sharing

mechanism types, and may be worth policy makers consideration when establishing REDD+

benet sharing mechanisms in other countries.

Section 3: Options Assessment Framework or Identiying a Suitable Beneit SharingMechanism

This section provides a high-level, step-by-step approach to establishing benet sharing

mechanisms. This approach includes methods to gain wider buy-in, the pre-establishment work

needed, and the post-benet sharing mechanism launch; ongoing management and review,

including a short list o inormation sources or the urther reerence on orest sector; and REDD+

benet sharing mechanisms.

This section contains the Options Assessment Frameworks both or national and subnational

benet sharing mechanism types, together with guidance on their use.

These Options Assessment Frameworks are designed to help decision makers and development

partners make an initial assessment o one or more appropriate mechanisms or distributing

REDD+ benets in their countries, taking the ollowing our building blocks into account:

z Government, civil society, community, and private-sector institutional capacity

z The national or subnational legal ramework relevant to REDD+

z

Fund management capacity and experiencez Monitoring capacity and experience.

Linking the results rom the options assessment to enabling actions or implementation, this

section helps identiy the next steps needed to establish an appropriate REDD+ benet sharing

mechanism in a country.

1.4 BENEFIT SHARING IN THE FOREST SECTORForest benet sharing mechanisms transer monetary or nonmonetary benets to individuals or

organizations that have a stake in, or eect on, a orest asset. Figure 1.1 illustrates typical parties

involved in these mechanisms.

1.4.1 What Do We Mean by Beneft Sharing in the Forest Sector?There are dierent ways in which benets in the orest sector may be distributed. These can be

grouped into two benet sharing categories: orest rent and incentives.

1.4.1.1 Forest Rent4

Forest rent includes the distribution o money among stakeholders, rom revenue or rent derived

rom the management o a orest resource. Forest rent benets may be linked with an action on

behal o the recipient, or may not require an action at all:

4 The dierence between the market price or a natural product (e.g., a orest product) and the costs o bringing it to market

represents economic rent (Karsenty 2000).



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Gove rn m e nt fo re s t r y de pa r t m e nt , p r i va t e se c t o r

o r NGO

Globa l or

n a t i o n a l

pu b l ic fund s

E n v i r o n m e n t a l

m a r k e t sPr iva te sec tor

Bene f it sha r ing

m e c h a n i s m

a d m i n i s t r a t o r

Benef ic ia r ies

F u n d e r

F o r e s t r e n t

s h a r i n g

C o m m u n i t i e s

& ind ividu a lsLoca l

g o v e r n m e n t

Incen t i ve s

Be ne f i t sha r i ng m e c ha n i sm spe c i fi c fundF u n d m a n a g er

Gove rn m e nt t r a i n i ng , NGOs , p r i va t e s e c t o r ,

c o m m u n i ty g r o u p s , l a w ye r sI m p l e m e n t a t i o n

agency

$Benef i t s

( M o n e t a r y o r

n o n m o n e t a r y )

I n d e p e n d e n t

ver i f ica t ion

Fores t

conse rva t ion

& pr o tec t ion

Convent iona l

fores t sec torac t ivi t ies

SF M

R e d u c e d i m p a c t

o n f o r e s t r e s o u r c e s/

Sus t a inab l e f o r e s t

m a n a g e m e n t (S FM )

FIGURE 1.1. PARTICIPANTS IN A FOREST SECTOR BENEFIT SHARING MECHANISM



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Forest Rent Beneits Provided or Speciic ActionsRent is shared with subnational or local level orest rights holders according to the level o resource

input provided by these rights holders. For example, i a community group owns the rights to a

30 percent share o a orest asset, and provides the labor required to manage and harvest this asset,

they may be entitled to approximately 30 percent o the orest rent in return.

Forest Rent Beneits Provided Without Requiring Speciic ActionsRent is distributed to aected stakeholders who are disadvantaged in some way by the orest

management activities. These stakeholders hold orest rights but do not participate in the

management o the orest asset. The amount o orest rent transerred may be negotiated according

to the perceived economic value o the damage or loss to the aected stakeholder or according to

a preset benet sharing model (see Case Study 1: RFA, Cameroon [Appendix I] or an example o

this model). Rent may also be earmarked or distribution to subnational government agencies (at

province or state level) as the orests are national resources.

1.4.1.2 IncentivesIncentives are not directly linked to orest rent, but are monetary or nonmonetary benets transerred

to a stakeholder to enable or motivate a particular behavior. Forest-based incentives may also be

linked to an action or provided or oreiting use o land in a certain way.

Incentives Provided or Speciic ActionsIn cases in which orestry activities have specic objectives, incentives to motivate activities are oten

described as benets.

Support or sustainable land use and livelihoods: Many orest activities are ocused on orest

conservation and restoration as a goal in its own right. To achieve this, unds rom public or donor

sources can be used to provide incentives and support or sustainable land use and livelihoods.

For example, individual landowners may be oered incentive payments to restore or protect a

orest on their land or oered support to establish ruit tree agro-orestry systems, with a goal o

relieving pressure on natural orest resources.

Support or orest governance and institutional development: Forest unding programs can

support improved orest governance and institutional development or communities, civil society,

and government. The immediate objective o this support may be to ensure the smooth and

eective unction o the program, but the resulting increase in institutional capacity and improved

orest governance systems can create an important longterm benet or orest stakeholders in

the uture.

Compensation or opportunity costs: Forest rights holders may have to provide a monetary or

nonmonetary transer to other orest stakeholders (e.g., local communities) to rerain rom an

activity or to cover a loss. For example, a orest rights holder may need to provide a payment to

a local community to give them incentive to rerain rom their preerred economic activity, which,

i carried out, would confict with the rights owners orest-management plan.

Theoretically, compensation covers opportunity costs, but in reality is usually a negotiated amount,

ormalized through an agreement between the orest rights holder and the stakeholder group

receiving the compensation.

These compensation benets are oten transerred rom the rights owner to stakeholders inaccordance with the terms o a contractual agreement. For example, a orest conservation project

owner may give a local community incentive to rerain rom converting natural orest to cropland,

using compensation payments equal to the opportunity cost.



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1.4.2 Types o BeneftsThe benets distributed through benet sharing mechanisms may not always involve a direct

monetary payment, and the total benet delivered may be a combination o many dierent orms o

benets. Table 1.1 provides a categorization o orest benets between monetary and nonmonetary

benet types, with illustrative examples o each.

TAB LE 1.1. TYPE S OF FOREST SECTOR BE NEFITS DI STRI BU TED THROUGH BE NEFIT SH ARIN G ME CHANIS MS

BENEFIT TYPEaMONETARY/

NONMONETARY FORM OF DISTRIBUTION

Rent

Forest rent

(i.e., direct proft rom the sale otimber or nontimber orest products)

Monetary Cash payments

Nonmonetary n.a.

Incentives

Compensation o opportunity costs

(e.g., orest landowners protectorest rather than convert tocrop production and in returnreceive monetary or nonmonetarycompensation value equal to theper hectare commercial value othe crop)

Monetary Cash payments Tax relie

Nonmonetary Goods and materials (e.g., seedlings and ertilizers) Capacity building and training (e.g., orestmanagement)

Social inrastructure and inrastructures (e.g., schools,rural irrigation)

Access to loans on preerential terms Access to microfnance on preerential terms

Incentives and support or

sustainable land use and

livelihoods

(e.g., unding and capacity buildingor the establishment o ruittree agro-orestry or smallholderarmers)

Monetary Salaries Cash payments Tax relie

Nonmonetary Formal land titles Formal access or concession rights Goods and materials (e.g., seedlings and ertilizers) Capacity building and training (e.g., orestmanagement)

Increased market access or premium products (e.g.,orestry or agricultural commodity certifcation)

Price guarantees Cost-sharing arrangements Access to loans on preerential terms Access to microfnance on preerential terms

Support or orest governance and

institutional development

(e.g., provision o training to districtorestry ofcers in how to improvesupport services or communitiesand the enorcement o communityorestry law)

Monetary Improved salaries or government sta, NGOs, andcommunity groups to increase retention and reducerelative appeal o bribes

Nonmonetary Capacity building and training (e.g., organizationaldevelopment, fnancial management, anticorruptionmeasures, community support)

Provision o capital inputs needed or more eectiveorest law enorcement (e.g., vehicles)

Formalization o orest governance working groups atnational or subnational level

Organization o regular orest governance andcommunity orestry workshops and consultations

Additional employment benefts or orest department sta

aPeskett 2011b.



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1.4.3 Who Participates in Forest Sector Beneft Sharing Mechanisms?Benet sharing mechanism participants may be divided into the ollowing categories:

Funders

Benet sharing mechanism beneciaries

Managers or administrators

Implementing agencies5

Independent veriers.

Table 1.2 provides a summary o these participant categories, the role they play within a benet-

sharing mechanism, and the stakeholder groups that may all within each category.

TAB LE 1. 2. BE NEFIT SHARIN G ME CHANIS M PARTI CIPAN TS

CATEGORY ROLE STAKEHOLDER TYPE

1. Funders Provide unding to cover Beneft sharing mechanism establishment costs Administrative costs Monitoring costs Beneft payments Funding expansion and replication

Bilateral or multilateraldevelopment partners or donors

International NGOs Private oundations Private sector (through donation,investment, purchase oecosystem service rights, or taxcontribution)

State-owned enterprises (in somecountries)

2. Benefciaries Provide resource inputs, services, or access rights to orests

in exchange or either Forest rent Compensation or opportunity costs Incentives and support or sustainable land use andlivelihoods

Support or orest governance and institutionaldevelopment

Community groups

Individual households Private landowners Private sector business

3. Managers or

administrators

Provide und management services Administer contractual arrangements with benefciaries Monitor, report, and possibly veriy beneft sharingmechanism perormance (verifcation may be carried outby independent party)

Continually improve beneft sharing mechanismgovernance and operations based on monitoring fndings Assess long-term eects o beneft sharing mechanism Contract out parts o the beneft sharing mechanismmanagement process to external providers whereappropriate

National governments andministries

Local and regional governments Autonomous trust bodies Private sector actors

NGOs

5 The key dierence between implementing agencies and managers or administrators is that implementing agencies do not

manage benet sharing mechanism unds but do provide benet transer services such as capacity building, land tenure

clarication, and construction o public inrastructure. For example, an implementation agency may be a national NGO that

trains communities in small business management.

(Continued)



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CATEGORY ROLE STAKEHOLDER TYPE

4. Implementing

agencies

Provide training and capacity-building services Operate monitoring systems Assist with mapping and demonstrating community landrights (e.g., through collaborative GIS mapping)

Capacity building and training Develop public inrastructure or the good o beneftsharing mechanism benefciaries

Government training andcapacity building services

Municipal authorities Lawyers GIS specialists Private sector NGOs Community groups

5. Independent

verifers

Veriy monitoring and reporting o fndings rom undmanager or administrator

Potential training and capacity building role or undmanager or administrator, i required

Verifcation consultants orconsultancies with a specialtyin REDD+ or orest sectorverifcation

NGOs with specialty in REDD+ ororest sector verifcation

Figure 1.1 provides an overview o the unction o a generic orest beneft sharing mechanism and the role o each beneft

sharing mechanism participant within the mechanism. This is ollowed by a case study o the Socio Bosque programin Ecuador (box 1.1), which provides an example o each o the orest sector beneft sharing mechanism participantsdescribed in table 1.2.

TAB LE 1.2. BENEFI T SHAR IN G MECHAN ISM PAR TICI PAN TS (CONTINUED)

BOX 1.1. EXAMPLES OF BENEFIT SHARING MECHANISM PARTICIPANTSSOCIO BOSQUE,ECUADOR

Ecuador

Background: The Ecuadorian government started the Socio Bosque (Forest Partners) program in

September 2008 as a national incentive-based conservation program. It is a central component o the

Ecuadorian proposal or REDD+. Through the scheme, the government provides biannual payments under

a 20-year contract to private landholders and communities or the conservation o native orests and other

native ecosystems in Ecuador. Payments are conditional on the verifcation o conservation activities,

which is carried out through satellite monitoring and feld visits by local ministry ofcials. Participants in

the Socio Bosque can be categorized as ollows:

Funders: Since its launch, the program has received 100 percent o its unding rom the government o

Ecuador. However the German development bank KW has signed an agreement to support the program,

providing EU 13 million over fve years, starting at the end o 2011.

Benefciaries: The principal benefciaries are orest-dependent communities and private orest

landowners.



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1.5 BENEFIT SHARING MECHANISMS AND REDD+

1.5.1 Why Are Beneft Sharing Mechanisms Important or REDD+?REDD+ encompasses a broad set o orest mitigation activities, including reducing emissions rom

deorestation and orest degradation, sustainable management o orests, and the enhancement o

orest carbon stocks in tropically orested countries.

Depending on the detailed implementation o REDD+ at a national and international level, orest

nations may be able to secure unding or reducing emissions rom orest degradation and

deorestation rom a range o sources, including donors and multilateral unds (a unded approach)

and the voluntary and compliance carbon markets (a carbon markets-based approach):

A nonmarket approach to REDD+ may include monetary or nonmonetary compensation

or the opportunity costs o implementing REDD+ activities; support or SFM, aorestation, or

reorestation; improvements in orest governance; institutional capacity-building; and orest law

enorcement. REDD+ unds are already being disbursed as part o donor nations Fast Startcommitment o US $4.5 billion made in Copenhagen.

A carbon market-based approach is likely to require carbon credit rent to be disbursed

among REDD+ stakeholders to ensure the long-term success o the REDD+ mechanism.

This rent may be disbursed directly as monetary payments or may be used to provide

nonmonetary benets (see table 1.1 or more detail). A limited number o private, NGO, and

government partnership REDD+ projects are already accessing unding through the voluntary

carbon markets.

A carbon-market approach may require the transer o opportunity cost compensation with

support or productive activities and institutional development (see table 1.1) or orest

communities to complement the REDD+ rent they receive. This could be particularly importantwhere communities receive only a raction o REDD+ rent, which may not ully compensate or

lost earnings rom reraining rom conventional orestry activities (Vickers 2009).

Administrators: The Ministry o Environment is responsible or the overall coordination o the program,

and the Ministry o Finance is in charge o transerring the incentives rom the central bank account.

Implementing agencies: The Ministry o Environment has ormed a specialist team to implement the

Socio Bosque program. Team responsibilities include community engagement and capacity building,monitoring benefciary perormance through feld assessment and GIS analysis, registration o community

lands, and contracting with benefciaries.

Local NGOs have provided additional implementation support. For example, Nature and Culture

International provides benefciaries with assistance or mapping and GIS (at a cost o about US $1.5 to

US $2 per hectare), legal support to confrm land ownership, and land registration.

Independent verifers: At present, verifcation o benefciary perormance is undertaken internally by

the Socio Bosque monitoring team. I the program wishes to link to international REDD+ markets, or

qualiy or perormance-based donor unding in the uture, it is likely that independent verifcation by athird-party entity will be required.



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The success o both approaches is dependent on any monetary or nonmonetary REDD+ benets

being distributed eectively, equitably, and eciently. IUCNs 2009 report REDD-plus and Benet

Sharing highlights two reasons or this:

Benets and incentives must be created that reward individuals, communities, organizations,

government agencies, and business or actions that change land use and reduce emissions.

These incentives must be at least equal to or in excess o the opportunity cost o legal REDD+activities6 to make it economically rational or these stakeholders to participate in the benet

sharing mechanism.

Equitable benet sharing mechanisms can build legitimacy or REDD+ programs at an

international and national level by ensuring that both the people directly aected by REDD+

actions and the wider public are treated airly and equitably.

1.5.2 Looking ForwardFor national REDD+ systems to succeed, they must be based on appropriate and careully designed

benet sharing mechanisms. These need to take into ull account not only the countrys REDD+

strategy but also the institutional, legal, and und management realities locally.

The process o designing REDD+ benet sharing mechanisms should involve all relevant

governmental, private sector, civil society, and community actors to achieve legitimacy and achieve

an equitable distribution o REDD+ development benets.

6 Adapted and expanded rom original source.



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2.1 DEFINING TYPES OF BENEFIT SHARING MECHANISMForest sector benet sharing mechanisms can range rom local-level arrangements among private

companies and communities to national-level public-payment mechanisms. In the interests

o practicality, we have classied benet sharing mechanisms according to two distinguishing

characteristics:7

Scale o operation: National versus subnational

The conditionality o benet disbursement: Input-based versus perormance-based.

Table 2.1 provides an overview o these characteristics and how they shape benet sharing

mechanisms

When the scale o a benet sharing mechanism is taken into consideration alongside the

conditionality o benet disbursement, our benet sharing mechanism types can be identied as

shown in gure 2.1.

The ollowing section provides a more detailed account o each o these our orest sector benetsharing mechanism types and their relevance to REDD+, using a series o case study examples.

2.2 FOREST SECTOR BENEFIT SHARING MECHANISM TYPESAND THEIR RELEVANCE TO REDD+

National level benet sharing mechanism types are applicable to national approaches to REDD+.

In contrast, subnational benet sharing mechanism types are applicable to subnational or nested

approaches. Each is likely to have the greatest relevance to particular phases o REDD+. REDD+

initiatives involve three phases:

Phase 1Readiness and capacity building

Phase 2Implementation o policies and measures

Phase 3Payment or perormance

In this three-phase ramework, input-based benet sharing mechanisms are likely to be more

prominent during the earlier phases o REDD+ (i.e., Phases 1 and 2). In contrast, perormance-based

7 An alternative classication between National and Project approaches is oered by Peskett (2011), although the ocus

is on REDD+ rather than all orest sector benet sharing mechanisms. National approaches involve sharing benets with

communities as a whole (oten through inrastructure investments), community groups, or individuals. Under project

approaches, benets can also be transerred to whole communities, community groups, or individuals.

FOREST SECTOR BENEFIT SHARINGMECHANISM TYPES AND THEIRRELEVANCE TO REDD+2

11Cp 2: Forest seCtor BeneFIt sharIng MeChanIsM tyPes and theIr releVanCe to redd+


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benet sharing mechanisms are likely to be more prominent in Phase 3. It is important to recognize

that these benet sharing mechanism types are not mutually exclusive and may be implementedsimultaneously within REDD+ nations. This may allow or the transer o input-based benets to

communities with lower monitoring capacity and perormance-based benets to communities

where monitoring capacity is higher.

Input-based Performance-based

1. National input-basedbenefi t sharingmechanism

3. Subnational input-based benefit sharingmechanism

National

Subnational

Nationalperformance-basedbenefit sharingmechanism

2.

Subnationalperformance-basedbenefit sharingmechanism

4.

FIGURE 2.1. FOUR TYPES OF FOREST SECTOR BENEFIT SHARING MECHANISMS

TAB LE 2. 1. CHARAC TERI STIC S FOR CLASSIFY IN G BE NEFIT SH ARIN G ME CHAN IS M

BENEFIT SHARING MECHANISM

CHARACTERISTICS SCOPE

Scale o operation National Distribute benefts rom a national to subnational or local level. Beneftsmay either be distributed directly to the end recipient (e.g., communitygroups) or through a subnational organization (e.g., local governmentinstitutions).

Subnational, includingboth provincialand project levelbeneft sharingmechanisms

Distribute benefts rom a subnational to local level (e.g., rom aprovincial government institution to community groups) or betweensubnational actors (e.g., benefts disbursed rom provincial to municipalgovernment).

Conditionality o

beneft disbursement

Perormance-based Distribute benefts on the condition that the partners receivingthe benefts (e.g., community groups) have achieved a predefned,measurable, and verifable standard o perormance against a baseline(e.g., have restored or protected X number o orest hectares).

Input-based Benefciaries agree with the beneft sharing mechanism manage-ment body to carry out specifed actions, or rerain rom certainactions, in return or up-ront monetary or nonmonetary inputs romthe beneft sharing mechanism. No link is provided between thedistribution o benefts and uture measurable perormance in orestmanagement.



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TAB LE 2. 2. SU ITABIL ITY OF FO REST BE NEFIT SH ARIN G ME CHAN IS M TYPE S TO DIFFER EN T PHASES OF RE DD+

FOREST BENEFIT SHARING MECHANISM TYPE PHASE 1 PHASE 2 PHASE 3

National input-based

National performance-based

Subnational input-based

Subnational performance-based

Table 2.2 summarizes the suitability mentioned above.

It is important to note that table 2.2 shows where each benet sharing mechanism type is o

greatest relevance, although subnational input-based benet sharing mechanisms could be used

or ongoing capacity building during the Phase 3 approach.

2.2.1 Relevance o National Input-Based Beneft Sharing Mechanisms to REDD+National input-based benet sharing mechanisms can support REDD+ programs in the ollowing ways:

They provide a useul mechanism to build REDD+readiness: Both Phases 1 and 2 o REDD+

involve an upront distribution o nonmonetary benets. For example, benets may be in the

orm o institutional and orest governance capacity building, or in the orm o improvements to

the implementation o community orestry laws and support or communities to demonstrate

and access their land and orest carbon rights. This is also an important role o subnational input-

based benet sharing mechanisms (see below).

They may be appropriate in countries with low MRV capacity: Many key REDD+ nationsare some way rom having the MRV coverage and precision needed to implement a national

perormance-based REDD+ benet sharing mechanism. Even or proxy measures o carbon,

such as hectares o orest protected or restored, many countries have inadequate MRV capacity.

In these environments, it is perhaps more realistic to begin with a national input-based benet

sharing mechanism, which can migrate to a perormance-based benet sharing mechanism as

a countrys MRV capacity grows.

2.2 Relevance o National Perormance-Based BeneftSharing Mechanisms to REDD+

National perormance-based benet sharing mechanisms can support REDD+ programs in theollowing ways:

They are likely to be required or Phases 2 and 3 o REDD+ or which a national-level

approach is taken, regardless o whether a nonmarket- or market-based approach is

applied: As REDD+ nations progress toward Phases 2 and 3 o REDD+ they will be required to

monitor, report, and veriy carbon abatement, poverty alleviation, and conservation results.

In Phase 2, input-based benet sharing mechanisms may transition to perormance-based

benet sharing mechanisms using a blended approach o both input- and perormance-based

benet transers. This will be particularly important in acilitating and providing incentive toward

the ormation o REDD+

policies at a national and subnational level. Perormance-based beneft sharing mechanisms can provide an added level o

accountability and assurance that benefts disbursed are having the desired eect: Where

veried carbon emissions are not required, linking unding to veriable proxy measures o carbon



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abatement (e.g., the number o orest hectares restored or protected) can provide benet sharing

mechanism beneciaries with a clear perormance target. Perormance-based benet sharing

mechanisms can similarly be used to support poverty alleviation, conservation, and institutional

and policy development goals.

An additional benet is perormance data that can add urther accuracy to the benet sharing

mechanism review process, and can orm the basis or strategic improvements in the design andunction o the benet sharing mechanism over time.

2.2.3 Relevance o Subnational Input-Based BeneftSharing Mechanisms to REDD+

Subnational input-based benet sharing mechanisms can support REDD+ programs in the ollowing

ways:

They can be designed to meet dierent provincial or state-level REDD+ readiness

needs: The dierence in REDD+ readiness between provinces or states may be as great as

the dierences between readiness in REDD+ countries (e.g., Brazil, Indonesia). Subnationalinput-based benet sharing mechanisms allow or REDD+ readiness benets to be tailored to

the exact political, economic, social, and geographic needs o local governments, civil societies,

community groups, and the private sector.

Subnational input-based benet sharing mechanisms can provide local-specic institutional and

orest governance capacity building. For instance, they can help address the specic challenges o

provinces or municipalities in implementing community orestry laws and support communities

to demonstrate and access their land and orest carbon rights.

They allow provinces or states to implement demonstration projects to trial concepts and

address stakeholder concerns around REDD+: Demonstration projects play an important

complementary role or REDD+ policy development. They allow trial runs or REDD+ policiesand benet sharing arrangements with dierent stakeholder groups. Lessons learned rom these

trials can be taken into account beore a perormance-based national or subnational REDD+

system is begun.

2.2.4 Relevance o Subnational Perormance-Based BeneftSharing Mechanisms to REDD+

Subnational perormance-based benet sharing mechanisms can support REDD+ programs in the

ollowing ways:

They can link directly with national perormance-based beneft sharing mechanisms,allowing the eective implementation o the nested approach to REDD+: Subnational

perormance-based benet sharing mechanisms may be o particular interest to those countries

considering a nested approach because they can allow or veried carbon reductions at

a subnational level to be included in a national REDD+ carbon accounting system. On the

basis o these veried carbon reductions, perormance payments rom either a carbon und or

the international carbon market can then be transerred down to subnational benet sharing

mechanism beneciaries.

They allow or states and provinces with higher MRV capacity to move orward to Phase 3

o REDD+within the subnational approach to REDD+: For countries considering a subnational

or nested approach to REDD+, subnational perormance-based benet sharing mechanismsmay allow the most REDD+-ready provinces to access international carbon unds or carbon

market nances with appropriate leakage saeguards in place.



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2.3 WHAT IS THE TIME LINE FOR SETTING UP A FOREST SECTORBENEFIT SHARING MECHANISM?

The development time line or a benet sharing mechanism can involve three phasespre-

establishment, establishment, and maturation. The activities associated with each o the phases are

as ollows:

Pre-establishment, which may include

z Consulting with all relevant stakeholders and potential recipients

z Drating a benet sharing mechanism strategy with completed operational plans

z Reviewing laws that may enable or, conversely, pose a challenge to, benet sharing mechanism

implementation

z Drating terms o reerence or benet sharing mechanism management and implementation

z Funding or the rst phase o benet sharing mechanism establishment

Establishment, which may include

z Establishing new laws to enable a benet sharing mechanism to unction (i needed)

z Hiring management and implementation teams and beginning operation

z Creating a benet sharing mechanism management board

z Implementing the fow o monetary and nonmonetary benets to beneciaries

z Taking the pilot phase, where a piloting approach is used, to ull-scale operation, with

appropriate monitoring, reporting, and verication systems under way.

Maturation, which may include

z Reviewing the monitoring and evaluation reports o the establishment phase by the benet

sharing mechanism management board and team

z Recording the lessons learned and using the experience to revise the benet sharing

mechanism strategy when the evaluation reports demonstrate sucient perormance to

continue and to expand the benet sharing mechanism

z Expanding the benet sharing mechanism to ull-scale implementation and beginning to

distribute benets to all intended beneciaries

z Continuing to monitor activities and regularly reporting to benet sharing mechanism

management and the board

z Raising additional unding, based on the success o the benet sharing mechanism, to use or

continuing and expanding the benet sharing mechanism

2.4 HOW DOES EACH FOREST SECTOR BENEFIT SHARINGMECHANISM TYPE WORK?

The gures presented in this section provide a step-by-step account o how dierent benet sharing

mechanism may work in practice. Please note that although the diagrams include all potential

actors and benet fows that could orm a ully unctioning national input-based benet sharing

mechanism, in reality it would be unlikely that all o these would be present in any one given benetsharing mechanism. In each diagram, each step is numbered, with each number corresponding to

the explanatory text below the diagram.



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2.4.1 National Input-Based Beneft Sharing MechanismsFigure 2.2 and associated text describe how a national input-based benet sharing mechanism may

work.

Steps in a National Input-Based Beneit Sharing Mechanism

1. Potential unding sources or national input-based benet sharing mechanisms include public

unds (e.g., state-owned enterprise prots, tax revenues) and international Fast Start donor

unding. Benet sharing mechanism unding is likely to be directed toward the government

nance department, which would manage the unding either within the national budget or as

a separate und.

2. There are then our potential options or disbursing the monetary benets downward rom the

national level:

i. Monetary benets (e.g., cash payments, salaries, grants, loans, or tax relie) may be directed

rom the national budget or national benet sharing mechanism und directly to benet

sharing mechanism partners. In these circumstances, no step 3 benet transer is required.

However, the potential o this approach is likely to be limited because without technical

agency, civil society, or private sector involvement, there is little potential to disburse

nonmonetary benets to benet sharing mechanism beneciaries.

ii. Monetary benets may be directed to local government bodies.

iii. The National REDD+ Agency or government agencies responsible or REDD+ (e.g., orestry

department) may be appointed as a national und administrator. This agency may then direct

monetary benets to benet sharing mechanism partners. The administration body may also

include representation rom the civil society, academia, and the private sector.

iv. The National REDD+ Agency or government agencies responsible or REDD+ (e.g., orestry

department) may direct monetary benets to local government bodies or disbursement tobenet sharing mechanism beneciaries.

Public funds Fast Start donor funding

National budget or national benefi t sharing mechanismfund

Financedepartment

Local government

bodies

Benefit sharing mechanism beneficiaries:

Communities Individuals Land use industries

National benefi t sharing

mechanism administrator (e.g.,

REDD+ agency, partnership

with civi l society, academia,

pri vate sector)

Civi l society/

pri vate sector

Key:

Monetarybenefit flow

Nonmonetarybenefit flow

1 1

2

2

2

2

3

2

3

3

3

FIGURE 2.2. NATIONAL INPUT-BASED BENEFIT SHARING MECHANISM



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It is important to note that these options are not mutually exclusive, and a REDD+ benet

sharing mechanism may incorporate a combination o a number o these options. Furthermore,

the monetary and nonmonetary benets could be disbursed jointly.

3. Using the nancing received, nonmonetary benets (e.g., capacity building and training in orest

management, registration o community land titles, organized consultations) can be transerred

to the benet sharing mechanism beneciaries rom the national REDD+

administrator, localgovernment bodies, the civil society, or the private sector. For the rst two options, without the

involvement o a technical intermediary, the potential to disburse nonmonetary benets to

benet sharing mechanism beneciaries is likely to be limited.

2.4.2 National Perormance-Based Beneft Sharing MechanismsFigure 2.3 and associated text explain how a national perormance-based benet sharing mechanism

may work. Key dierences between this benet sharing mechanism type and a national input-

based benet sharing mechanism, in terms o unding sources, processes, and actors, have been

highlighted with either bold text or bold arrows.

Steps in a National Perormance-Based Beneit Sharing Mechanism

1. Potential unding sources or national perormance-based benet sharing mechanisms include

the ollowing: public unds (e.g., state-owned enterprise prots, tax revenues) and international

donor unding (this unding may be linked to national perormance targets based on proxy

measures or avoided deorestation). In the longer term, once sucient MRV capacity exists and

FIGURE 2.3. NATIONAL PERFORMANCE-BASED BENEFIT SHARING MECHANISM

Public

funds

Performance-based international

donor funding or Fast Start

International

carbon markets

International

carbon funds

National budget or national benefit sharing mechanism fund Finance

department

Local governmentbodies

National benefit sharing mechanismadministrator (e.g., REDD+ agency,

partnership wi th ci vil society,

academic institution, private sector)

Independent verif iers (e.g., NGO,

academic institution, consultancy)

Civil society/ pri vate sector

Benefit sharing

mechanism

beneficiaries:


Key:

Monetary benefit

flow

Nonmonetary

benefit f low

Monitoring,

report ing, and

veri fi cati on data

Funding

source/ mechanismactors differ

from input-based

mechanism

1

2

3

5

4

11 1

2

2

2

2

3

3

3

4

4

5

4

5



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perormance can be measured in terms o veriable carbon emission reductions, unding could

also be sought rom national or international carbon markets.

2. Funding received by the government nance department may be disbursed to the ollowing:

i. A national benet sharing mechanism administration body. This may be managed by the

designated national REDD+ agency or in partnership with civil society, academia, or the

private sector. I a trust und model is used, the board may comprise representatives rom allaorementioned stakeholder groups

ii. Local government bodies

iii. Civil society and the private sector.

These options are not mutually exclusive, and a REDD+ benet sharing mechanism may

incorporate a combination o any number o these options. Additionally, monetary benets

could be disbursed with nonmonetary benets.

Monetary benets (e.g., cash payments deposited in individual or community bank accounts)

may be disbursed directly rom the centralized benet sharing mechanism und, or they may

be disbursed by decentralized government entities, together with civil society or private sector

groups.

3. Using nancing received, nonmonetary benets may be transerred to benet sharing

mechanism beneciaries by the national administration body, local government bodies, civil

society, and the private sector (e.g., capacity building and training in orest management, ormal

land titles, FPIC [ree, prior, and inormed consent] consultations, or materials such as seeds and

ertilizers) to create enabling conditions or their eective participation in a perormance-based

benet sharing mechanism.

For example, civil society organizations may hold training workshops in developing social

investment plans; local government bodies may host public consultations and raise awareness

o the benet sharing mechanism; central government departments may assign land titles

to beneciaries; and private sector organizations may hold trainings in improved agricultural

practices or orest-management techniques.

Once sucient enabling capacity is developed, a set o perormance criteria may be agreed

on through a contract between the beneciary and the benet sharing mechanism national

administrator.

Steps our and ve are dierent rom those in input-based mechanisms.

4. Field-level perormance data are monitored and reported to the benet sharing mechanism

national administrator. These data may be collected by one partner or a combination o benet

sharing mechanism partners depending on their respective capacities. For example, benetsharing mechanism beneciaries may be responsible or collecting periodic eld data in line

with preagreed methodologies on a monthly basis.

5. Decentralized government extension workers or external evaluation bodies may be charged

with ground-truthing eld data on a biannual or annual basis, and a centralized benet sharing

mechanism monitoring team, academic institution, or external consultancy may veriy eld

results against remotely sensed images. The benet sharing mechanism administrator veries

beneciaries perormance against preagreed criteria and requests benet sharing mechanism

centralized und management agents (e.g., the nance department) to release unding or

benet disbursal. In instances when donor unding is linked to national perormance targets,

the benet sharing mechanism administrator may be required to present veried data to theinternational donor agency to trigger und transer into either the national budget or a specic

benet sharing mechanism und. I the MRV system is suciently robust to accurately veriy



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perormance in terms o GHG emission reductions, the government may choose to sell credits

into international carbon markets or seek unding through international carbon unds.

Box 2.1 highlights some o the commonalities between national perormance and input-based

benet sharing mechanisms

BOX 2.1. SIMILARITI ES BETWEEN NATIONAL INPUT AND PERFORMANCE-BASED BENEFITSHARING MECHANISMS

1. Public unds represent a potential unding source or both national beneft sharing mechanism types.

2. During step 2, the national fnance department or beneft sharing mechanism und transersbenefts to the national beneft sharing mechanism administrator, local government bodies, civil

society, and the private sector.

3. It is possible or a national input-based beneft sharing mechanism to migrate to a perormance-

based beneft sharing mechanism over time with sufcient monitoring resource input and with

capacity-building support.

2.4.3 Illustrative Examples o National Beneft Sharing MechanismsTo demonstrate how national benet sharing mechanisms may be applied in practice, illustrative

examples o each o the two types o national benet sharing mechanism are presented

(boxes 2.2, 2.3). The examples contain summarized inormation about the background, the

development time line, and key lessons the benet sharing mechanisms may hold or the design o

REDD+ benet sharing mechanisms. Further inormation on the case studies is included in Appendix I.

BOX 2.2. EXAMPLE OF A NATIONAL INPUT-BASED BENEFIT SHARING MECHANISMTH E RE DE VANC E FO RE STI RE AN NU EL LE (R FA ), CA ME RO ON

Background

Established in national law in 1994, Cameroons RFA is a ee orestry companies pay to beneft communities

throughout the country. The ee is calculated according to the land area o the concession and the amount

a company bid to acquire it.

The fnance law o 1998 mandated that 50 percent o RFA demanded rom Forest Management Units

and Sales o Standing Volume should go to the state, 40 percent to local councils, and 10 percent to

local communities that are adjacent to concessions. Following a June 2010 national decree (not yet ully

implemented), the 40 percent ee or local councils is now split equally between the council that is adjacent

to, or contains, the concession, and an equalization und managed by a national agency called FEICOM. As

such, the RFA should beneft local councils throughout Cameroon, including those in nonorested areas.

These public unds allocated or beneft sharing are distributed in three ways: Twenty percent is

transerred rom the orest company into a und that is administered by FEICOM and used to harmonize

(continued)



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the development o local government. Another 20 percent is paid rom the central treasury directly to

local councils. Ten percent o the collected royalties is to be distributed rom the central treasury directly

to community bank accounts or communities adjacent to the concessions. Currently the 10 percent is

distributed to council bank accounts, and the council is distributing the unds to villages upon approving

proposals or using the fnancial resources or community projects.

Three government ministries have distinct roles in administering these unds: Ministry o Forestry and

Wildlie, Ministry o Economics and Finance (MINFI), and Ministry o Territorial Administration and

Decentralization.

Community and council eligibility is based on geographic proximity to the concession. The use o the

RFA unds is monitored at three levels: through local council committees, through local administrative

authorities, and through government ministries. The monitoring o RFA use is at the council and community

levels.

Forest concessionaires pay RFA

Centraltreasury (keeps50 percent)

FEICOM

Affected

counc i l s

Affected

c ommun i t i e s

Local council Councils in country

80 percentof RFA

20 percentRFA

20

percent10 percent

Monitoring by local administrativeauthority

Benefts Distributed

Following the June 2010 decree, orestry companies transerred the relevant proportion o the RFA to the

national treasury to be taxed; it was then transerred to recipient bank accounts. At the local level, the

designated 10 percent o the RFA must be spent on approved community-development projects, while

the 20 percent or the council must be spent on authorized activities (running costs and investments).

Examples o the types o benefts that may be delivered include developing electricity and water supply

projects, building and supplying health centers and schools, and constructing and maintaining the local

inrastructure.



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Time Line

Lessons rom the Design o REDD+ Beneft Sharing Mechanisms

The lessons learned rom the RFA can be divided into the ollowing sections, which correspond directly

to the our building blocks identifed in chapter 3 under capacity building, legal ramework, und

management, and monitoring capacity and experience. These lessons are not necessarily based on bestpractice and may instead be derived rom what could be improved in the RFA.

Capacity building

Distinct ministerial roles or administration o the RFA provide the necessary institutional ramework

or the RFA. Strong cross-ministerial oversight is important or REDD+ beneft sharing mechanisms.

A central government secretariat or committee is needed to provide ongoing support or the operation

o the RFA.

The use o community management committees and project proposals is intended to help prioritize

local development projects and align them with community development priorities.

Legal ramework

The implementation o a law mandating the orestry industry to pay an area ee to be redistributed

to communities (and the subsequent 1998 fnance law and 2010 national decree) has helped raise

awareness within the benefciary community o their monetary entitlements.

The relative simplicity o the calculation o the orestry ee and the beneft transer mechanism

has helped gain broad public understanding o the mechanism. The ee is based on the area o the

orestry concession and the value o the winning bid.

Establishment (1994):

- Local management committees are established, with broad

representation rom a variety o local stakeholders.

- Clear und transer mechanisms supported by national banking

system that can be eectively accessed at local levels.

Pre-establishment (circa: 1990 to 1994):

- Joint decision and commitment across key

ministries to adopt a transparent system to

share benefts rom national orestry activities tocommunities.

- A new law passed to implement the RFA and

unds provided or local economic development

programs.

Maturation (1998 to present):

- A 1998 fnance law clarifes the proportion o the

ee to be received at dierent levels.

- A 2010 decree ormalized the roles o 3 keyministries or the administration and monitoring

o RFA.

- Requirement that communities receive unds

on the basis o developing project proposals is

strengthened.

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Policy reorm on the use o revenues rom logging, which links to the RFA, provides an opportunity

or improved orest governance with greater public participation and rights. These improvements in

orest governance are important or the success o REDD+ beneft sharing mechanisms.

Fund management

RFA ees paid by orestry companies are paid into the national treasury and, once taxed, are managed and

transerred directly into benefciary accounts by the Programme de Scurisation des Recettes Forestires,

which is responsible or the fscal monitoring o the timber industry. The ability o government orestry

agencies to transer unds directly to benefciaries may be needed in national REDD+ beneft sharing

mechanisms.

Forest sector beneft sharing mechanisms should include the design o an eective communications

program through which all stakeholders can regularly understand the volumes and disbursement o

available unds throughout the lietime o the program.

Beneft sharing mechanisms should be supported by a national banking system that can be

successully accessed at local levels.

Monitoring capacity and experience

In the case o the RFA, overall responsibility or monitoring is held in one ministry. A similar

allocation o monitoring responsibility to one government agency may help REDD+ beneft sharing

mechanisms maintain accountable and consistent monitoring systems.

BOX 2.3. EXAMPLE OF A NATIONAL PERFORMANCE-BASED BENEFIT SHARINGSOCI OBOSQUE, ECUADOR

Background

The Socio Bosque is a national incentive-based conservation program in Ecuador. Its objective is

to preserve native orests and other native ecosystems, and to increase the well-being o the orest-

dependent population. The mechanism aims to protect 4 million hectares o native orest and other native

ecosystems, signifcantly reducing greenhouse gas emissions caused by deorestation, and improving the

living conditions o 1 million o the countrys rural population. US $9.6 million has been invested under

the program to date.

Public unds are used or the monetary benefts associated with this incentive program. The monetary

benefts are transerred directly into individual or community bank accounts. Any nonmonetary benefts

arising rom the program result rom the investment o incentives. Monitoring is done using GIS and

annual feld visits by local ofcials associated with the Ministry o Environment. The results rom the

monitoring exercise are what trigger payments.

NGOs are involved in delivering related nonmonetary benefts. NGOs are helping local parties register theirland and gain legal tenure rights so they can enroll in the national program.



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Mini stry of Finance

Private landowners and

community groups

Local off icers of Ministry ofEnvironment

Ministry of Environment

NGO/ CSO

Benefts Distributed

Per hectare monetary payments (US $30 per hectare per year or plots up to 50 hectares, per hectare

payments decrease or larger plots) and capacity building in the development o community investment

plans, orest management practices, and monitoring techniques.

Time line

Lessons rom the Design o REDD+ Beneft Sharing Mechanisms

The lessons learned rom Socio Bosque can be divided into the ollowing sections, which correspond

directly to the our building blocks identifed in chapter 3: capacity building, legal ramework, undmanagement, and monitoring capacity and experience.

Pre-establishment (circa: 2008) :

- Design phase with a group o experts rom

Government and NGOs

- Operations manual sets out detailedprocedures o the unctioning o the

programand the responsibilities o dierent

actors

Maturation (circa 2010 to present):

- NGOs help create a communication bridge

between local community groups and the

Ministry o Environment- Further increase in public unding; USD 6

million in 2011

- Use o GIS monitoring and ground-truthing

- Additional external unding rom KW, partly or

REDD+ readiness (to start last quarter 2011)

Establishment (circa 2008 to 2009):

- Funds can be transerred directly rom Ministry o

Finance to benefciary accounts, with proo o land tenure

- Increase in number o benefciaries to approximately

40,000 and annual public unding to USD 3 million

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Capacity building

The pilot phase implemented between September and December 2008 in the three main provinces o

Esmeraldas, Morona Santiago, and Sucumbos helped to quickly and efciently refne the design o

the mechanism ready or national roll out in 2009.

NGO alliances were important in building community capacity and participation. For example, the

NGO NCI (Nature and Culture International) assists communities with identiying the status quo

and gaining legal tenure rights through the Ministry o Agriculture and the land registry (although

in cases or which land is in protected areas, the Ministry o Environment can recognize ancestral

land rights).

The program operations manual clearly sets out the roles o dierent ministries and the reporting

procedures between the Ministry o Environment and the Ministry o Finance.

The program has eectively used the Internet, newspaper, radio, and television communication

channels to increase public engagement with the program, although there is still urther

communication work to do in the more remote parts o the country.

Legal ramework

The establishment o the program received high-level political support, which meant it took only

three months or a ministerial decree to be in place or Socio Bosque. The speed at which the

decree took place was criticized by the NGO community because o concerns over a perceived lack

o consultation with civil society.

An important reason or the political support given to Socio Bosque was that the program waslinked in with Ecuadors new national development plan, which targeted deorestation, poverty, and

protected areas or 200913.

Fund management

The administration team o the Socio Bosque program in Ecuador made an agreement with a national

bank to streamline the process or the establishment o benefciary bank accounts. The scheme

enabled participants to establish a bank account in a communitys name upon presentation o legal

documents, without the usual requirement o an up-ront deposit, and with reduced transaction

costs incurred on incoming perormance-based payments.

Communities had to submit an investment plan to the Ministry o Environment, helping to ensure

that unds were used or locally appropriate economic and poverty-alleviation activities.

The Ministry o Finance made payments directly to individual or community bank accounts.

Legal documentation was required to set up a bank account. Agreements with the National Bank

streamlined the process o setting up community bank accounts (e.g., removing the requirement or

an up-ront deposit).

NGOs such as NCI helped Socio Bosque create a communication bridge between local community

groups and the Ministry o Environment. This allowed or the eective communication o community

concerns and helped communities comply with the governments due diligence procedures.



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Monitoring capacity and experience

Several communities hired orest keepers rom among their members. They were responsible or

control and surveillance activities.

The use o GIS monitoring and a ground-truthing monitoring methodology meant that payments orverifed carbon emission reductions may be easible in the uture.

In the rare event o inringement o the conditions o the program (as stated in the operations

manual) payment may be withheld or the return o previous payments may be demanded, depending

on the severity o the inraction.

The Socio Bosque is starting to assess the eects o incentive provision under the program on

socioeconomic and gender groups.

The operations manual made clear how monitoring inormation rom the Ministry o Environment

was linked to and triggers payments rom the Ministry o Finance to program benefciaries.

2.4.4 Subnational Input-Based Beneft Sharing MechanismsFigure 2.4 and associated text detail how a subnational input-based benet sharing mechanism

may work.

Steps in a Subnational Input-Based Beneit Sharing Mechanism

1. Potential unding sources or a subnational input-based benet sharing mechanism include

public unds (e.g., state-owned enterprise prots, or tax revenues collected at the subnational

level or allocated rom the national budget) and international Fast Start donor unding.

Public funds Fast Start donorfunding

Subnational budget or subnational benefit sharing

mechanism fund

Subnational

financedepartment or

independent

fund

management

agent

Local government

bodies

Benefi t sharing mechanism beneficiari es:


Subnational benefit shari ng

mechanism administrator (e.g.,

provincial REDD+ agency,

partnership wit h civil society,

academia, pr ivate sector)

Civil society/pr ivate sector

Key:

Monetarybenefit f low

Nonmonetarybenefit f low

1

International NGO/

private foundationfunding

1

2

2

2

2

2

3

3

3

3

1

FIGURE 2.4. SUBNATIONAL INPUT-BASED BENEFIT SHARING MECHANISM



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Because o the lower unding requirements o a subnational (versus national) approach,

nongovernmental donor unding rom international NGOs or private philanthropic oundations

may also be applicable.

These unds are directed into a subnational (e.g., provincial government) budget or benet

sharing mechanism und.

2. A subnational benet sharing mechanism administration body may be managed by a provincialnational REDD+ agency or in partnership with civil society, academia, and the private sector.

I a trust und model is used, the board may be composed o representatives rom all the

aorementioned stakeholder groups.

Funding is disbursed to the subnational benet sharing mechanism administration body

and/or local government bodies or urther disbursement to the benet sharing mechanism

beneciaries.

Alternatively, monetary benets may be disbursed directly rom the subnational budget or

benet sharing mechanism und to benet sharing mechanism beneciaries. In this scenario,

step 3 may not be needed

3. Nonmonetary benets (e.g., capacity building and training in orest management, FPIC, or

construction o public inrastructure) could be disbursed directly rom the subnational benet

sharing mechanism administration body, local government bodies, civil society, or private sector.

For the rst two options, without the involvement o a technical intermediary, the potential

to disburse nonmonetary benets to benet sharing mechanism beneciaries is likely to be

limited. I the civil society or private sector is disbursing the nonmonetary benets, unding

or their activities would be provided either by the subnational benet sharing mechanism

administration body or by local government bodies.

2.4.5 Subnational Perormance-Based Beneft Sharing MechanismsFigure 2.5 provides a step-by-step account o how a subnational perormance-based benet sharingmechanism may work in practice. Key dierences between this benet sharing mechanism type and

a subnational input-based benet sharing mechanism in terms o unding sources, p

Assessing Options for Effective Mechanisms to Share Benefits

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