Overview of REDD+ Financing Landscape, Sources and Types of Funds Charlie Parker
Overview of REDD+ Financing Landscape, Sources and Types of Funds
Charlie Parker
Presentation overview
• What are the main sources of REDD+ finance?
• What is the magnitude of REDD+ finance?
• What is the role of the public finance?
• What is the role of the private finance?
• Conclusions
09 October 2014
2
What is REDD+?
• Distinguish between REDD+ as an outcome versus
REDD+ as an international mechanism
• There are multiple ways to achieve REDD+ as an outcome
• Very few activities receive finance from one source
• A broad definition of REDD+ helps us to understand the
range of activities that can achieve REDD+ outcomes and
address the drivers of forest loss.
09 October 2014
3
Main sources of REDD+ finance
09 October 2014
4
Private sector
Direct markets
•Voluntary and compliance carbon markets
•Payments for watershed services
•Biodiversity offsets
Other markets
•Green commodities
•Certified timber
•Clean Cookstoves
Public sector
Earmarked budget
•PES mechanisms
•Carbon taxes and fees
Other Budgetary
•International climate finance allocations
•Domestic budgetary allocations
Current scale of REDD+ finance
• Domestic budgetary finance is
the main source of finance for
REDD+
• Combined, public finance
constitutes over 90% of REDD+
finance
09 October 2014
5
US$15
billion
1%
7%
64%
28%
Voluntary markets Sustainable supply chains
Domestic ODA
1. Public Finance
09 October 2014
Budgetary finance: domestic and international
• Made up of domestic and
international ODA
• Donors and domestic
governments have different
(competing) priorities
09 October 2014
7
US$ 14
billion
Private sector
Direct
• Voluntary and compliance carbon markets
• Payments for watershed services
• Biodiversity offsets
Indirect
• Green commodities
• Certified timber
Public sector
Earmarked
• Auctioning of allowances
• Financial transaction tax
• Carbon taxes and fees
Budgetary
• ODA and international climate finance allocations
• Domestic budgetary allocations
Domestic REDD+ finance
• Data on domestic REDD+
finance is lacking
• Does not include Brazil’s ABC
programme, PA management,
etc.
09 October 2014
8
US$ 10
billion
Brazil Mexico
Indonesia China
Brazil’s Low Carbon Agriculture (ABC) Programme
• Federal credit and capacity building program founded in 2010 and coordinated
by the Agriculture Ministry (MAPA) and the Ministry of Agrarian Development
(MDA)
• Sustainable intensification / land reclamation, especially in the context of
freeing up land through productivity increase and recovery of degraded pasture
• Initial on-set was slow, with zero disbursement during the first year
• Strict environmental provisions, when compared to abundant sources of
finance for traditional agriculture, and to uncertainties associated with the
Forest Code revision.
• To increase funding uptake, the government increased their marketing efforts
and broadened eligibility by including additional activities
• A recent government press release reported disbursements of $2.3 billion by
April 2013, equivalent to 80% of total funding and 15,000 concluded contracts
09 October 2014
9
International REDD+ finance
• LAC is the largest recipient of
international REDD+ finance
09 October 2014
10
US$ 6.5
billion
pledged
Source: ODI (forthcoming) The State of REDD+ Finance
2
2.2
1
0.8
0.5
Asia and Pacific LAC
Africa Global
Other
International REDD+ finance
0
500
1000
1500
2000
AmazonFund
FCPFCarbonFund
FCPFReadiness
fund
FIP NICFI UN-REDD IFCI CBFF
Pledged
Deposited
Disbursed
• Disbursements are still very slow.
• Just US$ 485.85 has been disbursed from 2007-2012 (equivalent to <10% of total pledges) and < US$ 100 million per year.
09 October 2014
11
Source: ODI (2012) Climate Finance Thematic Briefing: REDD+ Finance
Bilateral REDD+ Finance
Major bilateral initiatives include:
• Norway’ s Amazon Fund contributions: USD 402 million to date
• Japan’s Grant aid for forest preservation programmes: USD 159 million to date
• Norway’s GRIF contributions: USD 67 million to date
• Germany’s Forestry Programme in Indonesia: USD 32 million to date
• UK’s Forests, Governance, Markets and Climate initiative: USD 25 million to date
• US’ Tropical Forest Conservation Act (TFCA): USD 32 million to date
09 October 2014
12
Norway Germany Japan
International REDD+ finance: other sources
• Many non-REDD+ funds finance
REDD+ activities
09 October 2014
13
US$ 130+
million
Source: ODI (forthcoming) The State of REDD+ Finance
58
56
30
40
PPCR LDCF
Adaptation Fund SREP
PPCR: Lurio Sustainable Forestry Project. Mozambique
• The PPCR will provide USD 11 million
concessional loan from its private sector
set-aside, in addition to an equity
contribution and loans from the AfDB and
EIB.
• Species from the genera Eucalyptus,
Acacia and Melina are being tested to
determine the best fit between commercial
viability and environmental and social
sustainability.
• The Lurio trial plantation will identifying
species with higher potential and more
resilience to droughts
09 October 2014
14
Scaling Up Renewable Energy (SREP): Nepal biogas investments
09 October 2014
15
• Nepal is seeking USD 40M in grant funds
from SREP to scale up renewable energy
in the country.
• SREP investments will support on-grid
Small Hydro Power, and off-grid Mini and
Micro Energy Initiatives.
• Nepal is targeted to install 160,000 biogas
plants (mostly domestic) under the
investment plan.
• Biogas uses a readily available waste
product as feedstock, and therefore does
not depend on firewood that may be
sourced indiscriminately which leads to
deforestation and related environmental
damage.
Earmarked REDD+ finance
• Mexico’s PES (>USD 100 million)
• Vietnam’s PES (USD 58 million)
• Costa Rica’s PES (>USD 12 million)
09 October 2014
16
US$ 170+
million
Private sector
Direct
• Voluntary and compliance carbon markets
• Payments for watershed services
• Biodiversity offsets
Indirect
• Green commodities
• Certified timber
Public sector
Earmarked
• Auctioning of allowances
• Financial transaction tax
• Carbon taxes and fees
Non-market
• ODA and international climate finance allocations
• Domestic budgetary allocations
Costa Rica’s PSA program
• Fuel tax is fixed according to the 2001 Law of Tax Simplificatio and Efficiency
and adjusted four times a year for inflation
• 3.5% allocated to FONAFIFO
• 66.4% to Ministry of Finance
• 29% to National Road Council
• Equivalent to ~ $11,300,000/yr in 2007
• FONAFIFO disburses to small and medium forest producers
• Every year, both FONAFIFO and MINAE (Ministry of Environment and Energy)
publish a PES budget, procedures and criteria for selection of priority areas.
• FONAFIFO allocates PES funds to landowners through forest conservation
contracts, sustainable management contracts, and reforestation contracts.
09 October 2014
17
2. Private Finance
09 October 2014
Magnitude of REDD+ financeDirect market mechanisms
• Currently through voluntary markets
• Potential to scale up under a future
compliance market
09 October 2014
19
US$ 140+
million
Private sector
Direct
• Voluntary and compliance carbon markets
• Payments for watershed services
• Biodiversity offsets
Indirect
• Green commodities
• Certified timber
Public sector
Market-linked
• Auctioning of allowances
• Financial transaction tax
• Carbon taxes and fees
Non-market
• ODA and international climate finance allocations
• Domestic budgetary allocations
REDD+ carbon markets
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
VCS FCPF AustraliaETS
NZ ETS California Japan GermanREM
UNFCCC
Low
Mid
High
• Under High Scenario, REDD+ demand could reach 2.5 Gt over 7 years.
• Equivalent to 350 Mt / year or 7% of emissions from tropical deforestation
• Under a Mid Scenario this would be just 1% of emissions
09 October 2014
20
Source: FCMC (2012) Emerging compliance markets for REDD+: an assessment of supply and demand
Magnitude of REDD+ financeOther market mechanisms
• US$ 1 billion through FSC and other
certification systems
• Cookstoves for REDD+ could be
applicable in some countries
09 October 2014
21
US$ 1+
billion
Private sector
Direct
• Voluntary and compliance carbon markets
• Payments for watershed services
• Biodiversity offsets
Other markets
• Green commodities
• Certified timber
• Clean cookstoves
Public sector
Market-linked
• Auctioning of allowances
• Financial transaction tax
• Carbon taxes and fees
Non-market
• ODA and international climate finance allocations
• Domestic budgetary allocations
SOY
USA - China: $11.9bn
Brazil - China: $8.2bn
Brazil – EU: $5.2bn
MAIZE
USA – Japan: $3.0bn
USA - Mexico: $1.6bn
USA – China: $0.9bn
BEEF
Aus – Japan: $3.0bn
Canada - USA: $1.6bn
Brazil – Russia: $1.0bn
DAIRY
NZ – China: $1.5bn
Belarus - Russia: $1.2bn
EU– Russia: $1.1bn
RICE
Vietnam - Phil: $0.9bn
India – S. Arabia: $0.7bn
India – UAE: $0.6bn
USA - China: $11.9bn
USA – Japan: $3.0bn
Au
str
alia
–Ja
pa
n: $
3.0
bn
NZ
–C
hin
a: $
1.5
bn
International Trade Flows in Agriculture
Source: authors caculations using FAOStat
Cookstoves and REDD+
• Cookstove finance offers a way to
achieve REDD+ outcomes in some
countries with high emissions from
cookstoves compared to REDD+
• Dominican Republic: 109%
• Honduras,53%
• El Salvador,36%
• Guatemala,28%
• Chile:18%
• Mexico,11%
• GACC have raised USD 38 million,
and leveraged over USD 200 million
09 October 2014
23
Source: authors caculations
Reframing REDD+ finance
MITIGATION ADAPTATION / RESILIENCE
ENHANCING CARBON
STOCKS
CONSERVING CARBON
STOCKS
REDUCING EMISSIONS
SUSTAINABLE
WOODFUEL LOTS
SOIL CARBON
PROTECTED AREAS
BIODIVERSITY
CONSERVATION
SFM
AGROFORESTRY
SOIL CONSERVATION
PEAT LAND
REHABILITATION
CONTROLLING
FOREST FIRES
CLEAN COOKSTOVES
AGRICULTURAL
PRODUCTIVITY
ECOSYSTEM BASED
ADAPTATION
COASTAL
MANGROVE
CONSERVATION
EXPANSION OF
RESISTANT CROP
VARIETIES
• We are too narrowly focused on finance that is labeled as "REDD+”. Instead we should
focus on Climate Smart Land Use Finance
• When we talk about the landscape of CSLU finance, we need to include activities like
agroforestry, cookstoves, commodity certification etc.
• We should align adaptation / mitigation and energy / land use policies
• Our understanding of this landscape is limited
09 October 2014
24
Conclusions
• Short term finance is available but disbursements are slow, at the
same time there are no adequate long term strategies to meet the
financial needs of REDD+
• In the absence of ambitious climate change mitigation goals, for the
foreseeable future most REDD+ finance will be mobilised through
public finance
• It will be important during this phase to test a variety of financing
options that leverage private sector finance and directly address the
drivers of deforestation
• Wealthier REDD+ countries may opt to self-finance a significant part
of REDD+, for which they may receive results-based finance
• The more fragile states are likely to rely on official development
assistance (ODA)-type finance
09 October 2014
25
Thank you
Climate Focus Netherlands
Sarphatikade 13,
1017 WV Amsterdam,
The Netherlands
Climate Focus US
1730 Rhode Island
Avenue NW,
Suite 601,
Washington, DC 20036
USA
Climate Focus Colombia
Calle 95 #l 0-50,
Bogota, Cundinamarca,
Colombia
LEAF Project Office
Liberty Square, Suite 2002,
287 Silom Road, Bang Rak,
Bangkok 10500,
Thailand
Charlie Parker
09 October 2014
26