Forest Carbon Partnership Facility’s Carbon Fund
The FCPF was declared operational in 2008 and has a current membership of 44 developing countries (or “REDD+ countries”) and 18 financial contributors (including donor governments, private sector supporters, and one NGO contributor). The Participants Assembly, comprised of all forest countries and financial contributors, annually elects a Participants Committee, the decision-making body of the FCPF, comprised of 14 REDD+ countries and 14 financial contributors as well as observers from indigenous groups, the private sector, and international organisations. The World Bank acts as trustee, secretariat, and one of several implementation agencies (referred to as Delivery Partners). The Facility consists of two funding windows: the Readiness Fund and the Carbon Fund.
The current capitalisation of the Carbon Fund is about USD 390 million committed or pledged by 11 public, private and non-profit contributors. It will use such funds to pilot results-based payments for verified greenhouse gas emission reductions from REDD+ in FCPF member countries only.
In December 2013, the Carbon Fund adopted a Methodological Framework (MF) to provide “overarching guidance and act as a standard that is designed to achieve a consistent approach to carbon accounting and programmatic characteristics” of Emission Reduction Programs (ER Programs) financed by the Carbon Fund. The MF is a set of criteria and indicators that ER Programs are expected to meet. The information below is based largely on the December 2013 version of the MF formally adopted by the 8th meeting of Carbon Fund. The Carbon Fund has agreed to review the MF after one year (unless Carbon Fund Participants agree to another time period) to consider any lessons learned or relevant guidance from UNFCCC negotiations on REDD+, and may modify the MF after such a review.
The Carbon Fund will strive to be consistent with existing and evolving UNFCCC decisions. The eligible scope of activities/categories is therefore consistent with the set of REDD+ activities explicitly named in the Cancun Decision, i.e. reduced emissions from deforestation, reduced emissions from forest degradation, conservation, sustainable forest management, and the enhancement of forest carbon stock. ER Programs must account for emissions from deforestation and emissions from forest degradation also should be accounted for where emissions are significant (i.e. more than 10% of total forest-related emissions in the accounting area). Programs can choose to include the other REDD+ activities.
The Carbon Fund supports national or subnational ER Programs. Such programs must be “ambitious, demonstrating the potential of the full implementation of the variety of interventions of the national REDD+ strategy, and […] implemented at jurisdictional scale or programmatic scale”. The ER Program must contain ER Program Measures (i.e. policies, measures, or projects) that aim to address a significant portion of forest-related emissions and removals. The ER Program accounting area must be of significant scale and align with one or more jurisdiction or a national-government-designated area (e.g. eco-region) or areas. A programmatic approach is defined as involving multiple land areas, landowners or managers within one or several jurisdictions.
The Carbon Fund has taken a historical approach to setting reference levels, i.e. the reference level is the average annual historical emissions over the reference period. For a limited set of ER Programs (i.e. high forest cover, low deforestation countries where historical data underestimates future rates of deforestation), the reference level may be adjusted upward by a limited amount (0.1% per year of carbon stocks) above average annual historical emissions. The reference period is generally defined by an end date that is the most recent date prior to 2013 for which forest cover data is available to enable IPCC Approach 3 (i.e. spatially explicit data), and a start data that is about 10 years prior to the end date.
In addition, the development of a Reference Level should be informed by (or inform) the development of a forest reference emission level or forest reference level for the UNFCCC. It should be expressed in tonnes of carbon dioxide equivalent per year and explain its intent for consistency with the existing or emerging national GHG inventory. The forest definition used should be specified and follow guidance from UNFCCC decisions.
Key data and methods that are sufficiently detailed to enable the reconstruction of the reference level must be documented and made publicly available online.
Additionality is primarily addressed through conservative approaches to setting Reference Levels (e.g., including existing and clearly funded programs or activities within the Reference Level), rather than through additionality tests.
The ER Program should be designed and implemented to prevent and minimize potential leakage. Deforestation and degradation drivers that may be impacted by the proposed ER program measures are identified and their associated risk for displacement is assessed, as well as risk mitigation strategies. This assessment categorizes displacement risk as high, medium, or low. The program must have in place an effective strategy to mitigate or minimize potential displacement and, by the time of verification, implemented this strategy.
The ER Program should be designed and implemented to prevent and minimize reversal risk and address the long-term sustainability of the ERs. It should undertake an assessment of the anthropogenic and natural risk of reversals that might affect ERs during the term of the ERPA and, as feasible, after the end of the term. It must also demonstrate how effective ER Program design and implementation will mitigate significant risk of reversals and address the sustainability of ERs.
During the term of the ERPA, the ER Program must also either deposit ERs into an ER Program-specific buffer managed by the Carbon Fund (the “ER Program CF Buffer”), or have in place a reversal management mechanism that is substantially equivalent to the assurance provided by the Carbon Fund buffer approach. The ER Program must monitor and report major emissions that could lead to reversals of ERs transferred to the Carbon Fund during the term of the ERPA. The ER Program must also have in place a reversal management mechanism to address the risk of reversals after the term of the ERPA.
The amount of “Buffer ERs” to be deposited into the ER Program’s chosen buffer mechanism is not yet decided and specified in the MF.
ER Programs must meet the World Bank social and environmental safeguards and promote and support the safeguards included in UNFCCC guidance related to REDD+. Safeguard plans must consider social and environmental issues and related risk mitigation measures identified during the national Readiness process e.g. relevant measures in the Strategic Environmental and Social Assessment (SESA) process and the Environmental and Social Management Framework (ESMF).
The ER Program must also develop and provide a Benefit Sharing plan that describes the categories of potential beneficiaries; the types and scale of potential monetary and non-monetary benefits; criteria, processes and timelines for distribution; and monitoring provisions for the implementation of the Benefit Sharing Plan.
In some circumstances, ER Programs also undertake and make publicly available an assessment of the land and resource tenure regimes in the accounting area.
In addition, appropriate Feedback and Grievance Redress Mechanisms must be developed during the Readiness phase or otherwise exist before the signing of an ERPA.
ER Programs must meet the World Bank social and environmental safeguards and promote and support the safeguards included in UNFCCC guidance related to REDD+. Safeguard Plans must consider social and environmental issues and related risk mitigation measures identified during the national Readiness process (e.g. relevant measures in the SESA process and the ESMF). ER Program host countries must select an appropriate arrangement to ensure that any ERs from REDD+ activities under the ER Program are not generated more than once, or that ERs sold and transferred to the Carbon Fund are not used again by any entity for sale, public relations, compliance or any other purpose.
An ER Program must provide information on how it meets the World Bank social and environmental safeguards, and addresses and respects the safeguards included in UNFCCC guidance related to REDD+, during ER Program implementation.
Benefit Sharing plans must be prepared through a consultative, transparent and participatory process. Safeguard Plans and Benefit Sharing Plans are then publicly disclosed in a form, manner and language understandable to the affected stakeholders of the ER Program.
Information on the implementation of Safeguard Plans and Benefit Sharing Plans is provided in each ER Monitoring Report and Interim Progress Report. The implementation of such plans is required prior to receiving payment for ERs.
The ER program monitors emissions by sources and removals by sinks included in the ER Program’s scope using the same methods or demonstrably equivalent methods to those used to set the reference level. Activity data are determined at least twice during the Term of the ERPA; deforestation is determined using IPCC approach 3 (i.e. spatially explicit data) while other sources and sinks may be determined using indirect methods such as survey data, proxies, or statistical data. Emission factors must use IPCC Tier 2 or higher methods (Tier 1 may be considered in exceptional cases), and uncertainties must be documented.
Consistency is expected with the national forest monitoring system, and community participation in monitoring and reporting is encouraged. Information on the implementation of Safeguard Plans and Benefit Sharing Plans, and the generation and/or enhancement of priority non-carbon benefits, are included in annexes to each monitoring report and is made publicly available.
ER Program host countries must select an appropriate arrangement to ensure that any ERs from REDD+ activities under the ER Program are not generated more than once, or that ERs sold and transferred to the Carbon Fund are not used again by any entity for sale, public relations, compliance or any other purpose. The ER Program host country may decide to maintain its own national ER transaction registry or use a centralised ER transaction registry managed by a third party on its behalf.
The ER Program must also work with the host country to select an appropriate arrangement to avoid having multiple claims to an ER title. This could be through a national REDD+ program and projects data management system, or use of a third party system. Such systems need to track and record the entity that has title to the ERs produced; the geographical boundaries of the ER Program or project; the scope of REDD+ activities and carbon pools; and the reference level used. Information contained in the system should be publicly available, including via the internet and in the national official language of the host country. A third party audit of the operations of the system is carried out periodically, as agreed with the Carbon Fund.
Carbon Fund Participants review and assess early proposals in the form of Emission Reduction Program Idea Notes (ER-PINs) submitted by participating countries or authorized entities, and provide advice on how to improve them. Those selected enter into the pipeline of the Carbon Fund portfolio, and a Letter of Intent is signed between the country/authorized entity and the World Bank (as trustee of the Fund). Then REDD+ countries or entities revise the proposals and submit an “ER Program Document” (ERPD) for approval. After the ERPD is selected, the country/entity enters into the ER Purchase Agreement (ERPA) negotiation and eventual signing. Finally, the ER Program is implemented, verified and payments made to the country/entity following the monitoring and reporting process mentioned above.