Photo courtesy of David Larsson

DURBAN, South Africa (1 December, 2011)_Developed countries must commit to long-term climate financing and encourage multiple funding pathways to reassure forested countries that their “massive investment” in REDD+ will pay off.

“Getting ready for REDD+ is a big investment for developing countries, and they need long term financial commitments from developed countries to assure them that REDD+ is the right development path to take. Without this, investing a lot in the development of national level REDD+ programmes may become difficult to justify said Kristy Graham, researcher at the Overseas Development Institute (ODI) and Coordinator of REDD-Net, at the sidelines of the UN climate Summit in Durban.

“Greater long-term financial certainty would also help to secure other types of funding, for example, from the private sector, that could help countries move from the REDD readiness stage to the next stage of implementation,” she added.

Developing countries are already moving ahead with REDD+ preparations, including drafting regulations and establishing supporting institutions.

Negotiators from these forested nations are hoping that an outcome on climate finance from Durban, which would include a decision over the structure and governance of the Green Climate Fund, would see $100 billion flowing from developed countries annually by 2020 for climate mitigation and adaptation activities.

Currently Reducing Emissions from Deforestation and Degradation schemes (REDD) — a mechanism designed to compensate forest rich countries for the carbon stored in forests — is mainly publicly funded through multilateral and bilateral partnerships. However, the distribution of funds to countries preparing for REDD programmes has been slow, raising concerns that forest rich countries will get frustrated with the climate scheme.

According to ODI’s latest report, to access a Readiness Preparation Proposal grant of $200,000 under the Forest Carbon Partnership Facility Readiness Fund (FCPFRF), developing countries have reported heavy bureaucracy and lengthy disbursal procedures. Not only is the amount relatively small, but the fixed grant rate is given regardless of individual country circumstances.

Another reason for the delays, said Graham, is ensuring that countries meet the environmental and developmental safeguards in order to ensure that funds are spent effectively.

“This is one of the biggest dilemmas: how do you balance the need for countries to comply to these safeguards, yet distribute the money quickly, and remain flexible enough to allownational ownership of the scheme?” she said.

An estimated $7.2 billion has been committed to REDD+ since 2008, and $4.5 billion has been pledged as “Fast Start” finance for 2010-2012, but a significant proportion of this has yet to be allocated.

According to a PricewaterhouseCoopers report commissioned by the UK government in July 2011, the FCP has disbursed only 8 percent of its funds since inception. As of September 2011, the UN-REDD Programme has disbursed US$63 million to its programmes, but expenditures were limited to less than a third, at US$20 million.

Other opportunities for funding, such as through the private sector, are currently under consideration, yet the financial risks for businesses remain high. It is hoped that the current negotiations will provide incentives for private sector funding by guaranteeing the quality of projects to justify the high transaction costs.

“If the talks in Durban are able to resolve this, able to have a framework on private sector participation in climate, in a way that is transparent, accountable and just, that would be a big advance,” said Tony La Viña, REDD facilitator for UN climate talks in a CIFOR interview.

REDD+ has started to attract interests from the private sector. For example, in Indonesia, investment banks such as Macquarie and BNP Paribas have started to develop funds to invest in forest carbon credits.

As the talks progress into the end of the week, developed countries will need to inspire confidence that they are serious about supporting the countries most vulnerable to climate change. Forest bonds and national trust funds are just some of the ideas put forward to raise the additional funds.

However, Graham said, despite the challenges there was some optimism that multinationals were working to the address delays in funding.

“There has been a lot of good work done this year to harmonise the safeguards process, using multi-delivery partners  to disburse funds refining safeguards so that they are appropriate to the amount or REDD funds disbursed or the REDD activities taking place — so a very positive move forward,” she added.

For other reports from the event, visit the blogs of these organisations:
–The Center for People and Forests (RECOFTC)

– Overseas Development Institute