Financing REDD+: Institutions, lessons and target areas for the next decade

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Summary

Over the past few years, international efforts aimed at Reducing Emissions from Deforestation and Forest Degradation (REDD+) in developing countries have expanded significantly. Along with the increased focus on REDD+ as a key near-term mechanism for reducing greenhouse gas (GHG) emissions has come a large increase in international REDD+ financing. In 2008, a major development occurred with the launch of two multilateral funds to support REDD+ readiness and capacity building, the World Bank Forest Carbon Partnership Facility (FCPF) and the UN-REDD Programme. REDD+ fi nancing received another boost in 2009 at the meeting of the United Nations Framework Convention on Climate Change (UNFCCC) in Copenhagen. At COP 15, the Copenhagen Accord called for mobilizing $100 billion per year by 2020 to support climate mitigation and adaptation, with REDD+ explicitly recognized as part of the former. This would lead to the establishment in the following year of the UNFCCC Green Climate Fund at COP 16 in Cancun, Mexico, where the decision on REDD+ of the international climate agreement was agreed as well. This process has been accompanied by the establishment of a number of bilateral fi nancing arrangements for REDD+ by Norway and other governments.

The UNFCCC and other bodies have recognized that national REDD+ systems will be best developed through a phased approach, broadly defi ned as three phases: capacity building, with development of national REDD+ plans, forest inventories, reference levels, MRV systems and pilot projects; national policy and MRV implementation, with potential payments for performance based on proxy indicators; and crediting and payments for verifi ed emission reductions (VERs), with potential sales on global carbon markets. The FCPF, UN-REDD and many other international REDD+ funds have focused primarily on Phase 1, building capacity in tropical forest countries to develop the technical and policy infrastructure needed for effective implementation of REDD+ at the national level. 

Some $7 billion had been made available for REDD+ through multilateral, international, regional and bilateral programs and projects.1 The future level of fi nancing needed for REDD+ will be far greater, as countries move into Phases 2 and 3 and receive payments for performance or sell VERs on carbon markets. International REDD+ financing over the coming decade will therefore need to support pilot efforts to test such payment arrangements, and to provide the resources suffi cient to purchase the level of REDD+ credits made available globally.

This paper explores the existing government and multilateral institutions most likely to provide support for payments for performance efforts. The goal is to detail the emerging funding sources for REDD+ beyond readiness and policy support that will comprise the fi nancial landscape in the coming years, and to draw some useful lessons to guide future REDD+ funding. The paper begins with an in-depth summary and evaluation of the most prominent multilateral and bilateral REDD+ fi nancing programs. (The paper focuses on institutions that provide payments for performance or VERs. Programs which are not expected to provide such support are not considered here.) This summary is followed by a presentation of some general lessons learned for REDD+ fi nancing. The paper concludes with a discussion of other focus areas that are not yet major targets of current funding, but are important for the long-term success of REDD+ and could be considered for support through future funds.

Authors

Ogonowski, M.