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

©2014 GLOBAL CANOPY PROGRAMME

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Moving forward with REDD+ between 2015-2020…


2©2014 GLOBAL CANOPY PROGRAMME

• To meet 2 degrees limit – global deforestation levels need to be significantly reduced.

• There is a lack of demand for REDD+ emission reductions in the ‘interim period’ between 2015 and 2020.

• EC target: 50% reduction in deforestation levels by 2020 = equal

to a max of 9,900 MtCO2e from forests and land use between 2015 and 2020

• Can be achieved through a combination of measures taken by forest countries and the private sector:

1. Domestic policy and regulatory reform in forest countries2. Overseas development assistance between governments (including

performance based payments)3. Payments in exchange for fungible REDD+ emission reductions

THE PROBLEM



• To meet 2 degrees limit – global deforestation levels need to be significantly reduced.

• There is a lack of demand for REDD+ emission reductions in the ‘interim period’ between 2015 and 2020.

• EC target: 50% reduction in deforestation levels by 2020 = equal

to a max of 9,900 MtCO2e from forests and land use between 2015 and 2020

• Can be achieved through a combination of measures taken by forest countries and the private sector:

1. Domestic policy and regulatory reform in forest countries2. Overseas development assistance between governments (including

performance based payments)3. Payments in exchange for fungible REDD+ emission reductions

THE PROBLEM



• Who will buy these REDD+ emission reductions?

• Current counterparties between 2015 and 2020:1. California ETS2. BioCarbon Fund3. FCPF Carbon Fund4. KfW REDD+ Early Movers Programme5. Voluntary pre-compliance market

• Total existing potential demand = 253 MtCO2e

• This is less than 3% of the total 9,900 MtCO2e REDD+ emission reductions needed to meet the EC target

THE PROBLEM



• BUT lets assume that some of the 9,900 MtCO2e needed may be achieved through (1) policy and regulatory reform; (2) ODA between governments (including performance based payments).

• Let’s call it 75% to be generous (or 7425 MtCO2e)

• If we estimate the remaining 25% (2475 MtCO2e) of the 9,900 MtCO2e reductions needed is paid for by exchanging fungible REDD+ credits in an international trading mechanism.

• This means that supply is still 3-10 times larger than the current demand of 253 MtCO2e

THE PROBLEM



Demand vs. Supply



Demand vs. Supply



Demand vs. Supply



Without interim demand:

1. Little incentive for tropical forest countries to generate long term emissions reductions

2. Little incentive for the private sector to invest in REDD+ without demand.

3. This will delay action towards a post 2020 compliance regime.

And ultimately increase the future cost of tackling climate change.

Why is lack of interim demand a problem?



A strategic intervention is needed by donor country and tropical forest country governments, and public financial institutions, to unlock public/private investment in REDD+ activities by scaling up interim demand.

Objective is to:

1. Increase demand for REDD+ emission reductions before 2020.

2. Catalyse private sector investment in activities generating REDD+ emission reductions before 2020

The Solution



The strategic intervention should stimulate demand by:

1. Creating performance-based financial incentives to enable forest countries to enter long term contracts to reduce emissions by offering greater certainty over the price/volume of REDD+ credits.

2. This will catalyse private sector investment in activities that generate REDD+ emission reductions by creating investable conditions and a track record for REDD+.

3. Mimicking other successful interventions, such as the GAVI and its Advanced Market Commitment (AMC).

4. Utilising existing funds and mechanisms for delivery, such as the FCPF, Green Climate Fund, etc.

The Solution: What?



1. Raise minimal public sector capital for interim period (including already committed capital, e.g. Indonesia LoI with Norway), leveraging maximum possible from private sector

2. Offer greater certainty over price and volume of REDD+ emission reductions, using price floors, ERPAs, options contracts, to stimulate private sector investment

3. Offer upfront concessional finance, insurance, technical assistance, etc, to support the ‘supply side’

4. Channel funding from the public sector through existing structures, such as the FCPF, GCF, national funds (e.g. FREDDI) or others

The Solution: How?



1. It can attract private finance

2. It saves public sector money in the long term

3. It supports the development of a post-2020 framework

4. It helps meet existing climate agreements

5. It builds on money already spent on REDD+ Readiness

6. It can pilot the GCF or other funds/mechanisms in development

The Solution: Why?



• Aim:– address the lack of finance and demand for REDD+ emission

reductions between 2015 and 2020 (when a global climate change agreement is anticipated).

• Method:– facilitate, by the UNFCCC COP20 in Lima in December 2014, an

agreement among REDD+ donor country governments to set up an intergovernmental interim forest finance working group, to:

1. Examine ways to spend the funding that has already been committed by donor country governments

2. Investigate the need for additional public funding 3. Examine the capital-raising options, deployment instruments and the

institutional frameworks

– support the delivery of recommendations, by the working group, by COP21 in Paris in December 2015

The Interim Forest Finance Project


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Thank you

Education

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