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Published by: Sébastien Duyck on May 22, 2012
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Differing views on market-based approaches forREDD+plus finance
Bonn, 22 May (Hilary Chiew) – Parties differed intheir views on the use of private finance for forest-related activities at the spin-off group under the AdHoc Working Group on Long term Cooperative Action under the Framework Convention on ClimateChange (AWG-LCA) to discuss the financing systemfor ‘REDD-plus’ on 19 May. While most countries that made interventionspreferred the use of both public and private funding sources and favoured the market-based approaches,Bolivia, Sudan, Tanzania and India differed,particularly in the use of offsets within these market-based approaches. The forest related activities, known as ‘REDD-plus’,cover reducing emissions from deforestation andforest degradation in developing countries, the role of conservation, sustainable management of forests andenhancement of forest carbon stocks,
pointed to its proposal on the idea of jointmitigation and adaptation approaches that is reflectedin paragraph 67 of Decision 2/CP.17. It said there isno doubt that in the context of REDD-plus, thedevelopment has been related to the carbon marketand mitigation.(Paragraph 67 of the decision adopted by theConference of Parties last December in Durban readsas follow: “
 Notes that non-market-based approaches, such as  joint mitigation and adaptation approaches for the integral and sustainable management of forests as a non-market alternative that supports and strengthens governance, the application of safeguards as referred to in decision 1/CP.16, appendix I , paragraph 2 (c-e) , and the multiple functions of forests, could be developed 
”. Decision 1/CP.16 was adopted inCancun in 2010.)It warned that Parties must be careful of thetemptation to move automatically to market againstnon-market and that to move forest towards the non-market approach is imperative. It said to start thisnon-market approach requires moving the thinking on mitigation to incorporate both mitigation andadaptation, moving from carbon to the multiplebenefits of forests, thus applying what integraldevelopment means in practice.Stressing that this approach is closely related to asustainable reduction of emissions and has a lot of co-benefits, Bolivia said the challenge from now until theend of the year is to move work towards non-marketapproaches and linking forests to public funding.
rejects offsets and requested for major sourcesof public funding. It said MRV (measuring, reporting and verifying) of funding must be provided for theimplementation of the third phase of results-basedaction with full implementation of direct and indirectbenefits.
said Parties are deceiving themselves if they think that finance is coming from the market. Itsaid the Durban decisions has not changed theprinciples of the Convention which said that largeshare of finance should come from the public sector.It highlighted that the financial mechanism forREDD-plus should take into account that drivers of deforestation differ from one country to another. Inthe LDC (Least Developed Countries) context where80% of the biomass are needed for food security, thedrivers of deforestation are linked to needs of localcommunities. It warned that market-basedapproaches cannot address this type of drivers of deforestation.
said conservation of forest carbon stocks needto be incentivised through non-market basedmechanisms and not through market-basedmechanisms and that there should be a proportionaldistribution among the activities between (a) to (e)(referring to paragraph 70 of Decision 1/CP.16 onthe five specific activities of REDD-plus).
TWN Bonn Update No. 14
22 May 2012
Papua New Guinea
said most of what is needed tostart REDD-plus activities in developing countrieshas been achieved since Bali (in 2007). It said it isdetermined to finish work since Durban (referring toCOP 17 at the end of 2011) and the key missing element is the implementation of financing REDD-plus activities.It asked for a dedicated window for REDD-plusfinancing in the Green Climate Fund (GCF) and new market mechanism for results-based actions in phasethree of implementation with a measuring, reporting and verifying (MRV) process at national level.It believed it will be most useful to coordinate thecurrent session with synergy with the GCF and non-market mechanism.It also suggested that the existing financing mechanism under the various processes like the World Bank’s Forest Carbon Partnership Facility, theUN-REDD, and the REDD-plus Partnership bereplaced as soon as possible by the GCF and theREDD-plus mechanism (under the Convention).
said any vision for a 2°C goal can only beachieved if REDD-plus is part of the solution. It saidthat many rainforest countries depend on their forestsas a source of finance for growth and development,and to ensure that we need to incentivise thesustainable management of forest. And because of thescale of finance, no single source can do the jobhence the logic of the Durban decision that says bothpublic and private.It suggested that public financing should bechanneled to the GCF and believed that privatesources can be utilised for both market-based andnon-market approaches. For market-based approach,financing can be generated through auctioning of assigned amount units (AAUs) and it would prefer anew market mechanism under the guidance andauthority of the COP.It would also support REDD-plus bonds and advancemarket commitments. It believed that payment forresults-based actions should be subjected to a robustaccounting system and it saw merits in linking thediscussion on finance with existing financediscussions elsewhere (referring to the GCF).
agreed that REDD-plus is an important partof the solution to combat climate change and thatlack of finance for it will threaten its implementation.It said at Durban, Parties agreed that results-basedfinance for REDD-plus must come from a wide variety of sources including from market-basedmechanism with environmental integrity preserved,safeguards addressed and respected, and a robustMRV system.It said at Doha (venue of COP18 at the end of thisyear), a national, results-based financing mechanismfor REDD-plus must be established, adding thatincreasing finance in Doha will increase momentumof countries to take action.It also suggested a REDD-plus window in the GCFfor payments for emission reductions, rewarding countries for taking action.Norway added that Parties must also make progresson the architecture for REDD-plus to provide rulesand regulations in ensuring environmental and socialintegrity, and that guidance from SBSTA (Subsidiary Body on Scientific and Technological Advice of theConvention) on technical issues such as forestreference level and MRV of results and how safeguards are addressed and respected is important.It said there must be clear signal that significantfinance will be available for the period 2016 to 2020and REDD-plus must become part of the globalagreement after 2020.
said any Party should be able to access acombination of market and non-market basedincentives.It said before participating in REDD-plus, Partiesshould establish a national REDD-plus registry to verify carbon stock enhancement and emissionreductions. The registry can be used to ensure that theREDD-plus emission units have not been used forcompliance purposes elsewhere and that thisinformation can be transferred to the UNFCCC.It said the GCF should finance results-based actionsand that Parties should receive monetary incentive forREDD-plus units, adding that adequate andpredictable funding is critical.Mexico also said that public funding alone isinsufficient, therefore, REDD-plus units outside of the GCF can be used for compliance from 2013,adding that any transactions outside the GCF shouldbe reported to the registry to reduce the risk forprivate investment.Increased direct funding for results-based actionshould be provided by the GCF as well as otherbilateral and multilateral funds, it added.
said many developing countries havestarted REDD-plus activities both with internationalfunding as well as domestic support. It acknowledged
TWN Bonn Update No. 14
22 May 2012
that success of REDD-plus implementation alsodepends on success in addressing drivers of deforestation.It felt that public fund itself cannot support all theactions needed by developing countries, and thatfunding from the GCF should be made available forall phases of REDD-plus activities implementation.It also said that a new mechanism should be used forresults-based actions. MRV and a safeguardsinformation system should be in place. As long asMRV of SIS (safeguards information system) andother systems for reference emission level are inplace, it should satisfy the requirements for results-based payment.
 The European Union
said it is here to developfinancial mechanisms to support full implementationof results-based actions. Halting forest cover andcarbon loss by 2030 at the latest would require broadparticipation of countries and it would also supportbio-diversity protection and other benefits. The results, it said, will have to be assessed againstindependently reviewed and UNFCCC approvednational reference level and Parties will have todevelop some sort of baseline for provision of results-based actions, taking into account nationalcircumstances.It pointed out that the discussion is related to othernegotiation groups including finance, Nationally  Appropriate Mitigation Actions and new marketmechanisms, adding that the concept of baselinediffers from the concept of reference levels.It said there is the need to encourage financial entitiesand other public and private entities to apply theseresults-based procedures when financing REDD-plus.It also invited the private sector to work onaddressing the drivers of deforestation.
agreed that a variety of sources isneeded. It said funding needs to be harmonise withother mechanisms of the Convention such asNAMAs and Parties need to define modalities forgovernance before they get to market-base sources.National governments need to build the enabling environments for REDD-plus implementationincluding safeguards being addressed, capacity-building is provided and working with private sectorto generate and secure finance.It said that further negotiation is needed on how eachof the sources of finance identified at Durban is to bemobilised in Phase 3 of REDD-plus.
said Parties had identified a broad range of sources to be mobilised and therefore should focuson operationalising these at a scale and speed tounlock the significant contribution of REDD-plus.Parties need to use this moment to think strategically about the coming years especially in relation tooperationalisation of support for results-basedactions. With regards to appropriate market-based and non-market-based approaches, it said discussion this yearshould enhance understanding of Parties beforeengaging in the consideration of financing options,adding that appropriate market-based approachesshould exclude the use of offsets.It hoped a technical paper and a workshop wouldhelp deliver on what has been mandated.
said there is need to obtain adequate andpredictable finance for full implementation. NationalREDD-plus activities, demonstration projects andscaling up of activities will have to be financed foreffective implementation. Crucial systems such asnational forest monitoring system, MRV, forestreference level, development of safeguardsinformation system as well as identification of driversof deforestation will all require financial support.It further said a flexible combination such as adedicated window for REDD-plus through GCF,market based and non-market based approaches areneeded for sustainable support for REDD-plus.
emphasised two main aspects of REDD-plus:the source of finance and secondly, modalities andprocedures. It stressed that finance for results-basedaction should mainly come from public sources but isopen to exploring the other sources.It said all actions and activities defined should beprovided with equal opportunities to access thefinance.
 The Philippines
supported the call for a REDD-plus window in the GCF and that the finances shouldinclude all phases of REDD-plus and not just the lastphase.It said all processes of developing REDD-plusactivities from the development of the national forestmonitoring system, MRV system, safeguardsinformation system as well as addressing drivers of deforestation have to be supported financially as mosttropical forests are found in countries with low income.

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