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Number crunching: Making sense of REDD+ and results-based payments

Building climate-effective enterprises to realize forest-related emissions reductions
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Log driving in Central Kalimantan, Indonesia. CIFOR/Achmad Ibrahim

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BONN, Germany (CIFOR) – Making the conservation of tropical forest ecosystems financially attractive for communities and smallholder farmers is critical for meeting U.N. climate targets aimed at preventing post-industrial average temperatures from rising to 1.5 degrees Celsius or higher.

Worryingly, the one-degree target has already been surpassed in parts of the planet: Global warming on land now averages 1.53 degrees Celsius, the U.N. Intergovernmental Panel on Climate Change stated in its latest report.

While the average global temperature is what matters for the targets, a much higher-than-average heating on land shows that the climate change effects on human systems can be more dramatic. One-point-five degrees has been associated with higher risks for human health and a reduction in environmental services offered by ecosystems.

Research demonstrates that financial investments into climate-smart projects in resource-based communities can lead to sustainable landscape management, self-sufficiency and poverty alleviation. However, interdependent challenges lie in the difficulty of unlocking public-private funds and streamlining the disparate goals of community, business, climate and international development sectors.

A broad range of strategic approaches, policy and economic challenges were the subject of discussion among scientists, policymakers and economists on the sidelines at recent U.N. climate talks in Bonn, Germany.

Forests are central to keeping global warming in check. Each year, about a quarter of greenhouse gas emissions are released as a result of deforestation or agriculture-related land degradation from burning biomass, techniques such as conversion of land to livestock pastures and monocrop production.

Many researchers consider blended finance – a combination of public funds and private investment – crucial for kickstarting successful projects. In addition to REDD+, community-based forestry has been a major focus.

REDD+ REDUX

The REDD+ (Reducing Emissions caused by Deforestation and forest Degradation) initiative, hailed in 2005 by U.N. climate negotiators as a potential incentive to conserve forests, has been hobbled by the failure to create a market system that would make retaining carbon stored in forests financially beneficial, said Arild Angelsen, a senior associate scientist with the Center for International Forestry Research (CIFOR), a professor at the Norwegian University of Life Sciences and editor of Transforming REDD+: Lessons and New Directions (2018).

At the outset REDD+ was conceived as a means for industrialized countries to pay forest owners and users in developing countries to deliver tangible results by reducing emissions and meet global climate change targets.

In part, REDD+ projects have faced challenges for attracting funding because it is difficult to adequately measure impact, Angelsen said.

Challenges include determining forest reference emissions levels (FREL) upon which these results-based payments (RBP) should be based, what costs these compensatory payments should cover and who exactly should be paid – governments, subnational programs or local people. RBP were originally intended to be tied to predefined results and the recipient was to use their own discretion to decide how to achieve results, which would then be verified independently, he added.

EMISSIONS BENCHMARKS

Setting reference levels is a hypothetical process because it is impossible to know what the levels of deforestation, forest degradation and resulting emissions would be in the absence of REDD+, Angelsen said.

“Ongoing disagreements on how to implement results-based payments for REDD+ are partly due to various ways of quantifying results,” he said.  “Only by recognizing the pitfalls can we avoid them, RBP are attractive in theory, but they should be evaluated.”

FUNDING CONUNDRUM

In the absence of global and national carbon markets, REDD+ initiatives are largely funded by donors. Multilateral RBP projects are backed by the Green Climate Fund, the financing arm of the UNFCCC, and the Carbon Fund under the World Bank’s Forest Carbon Partnership Facility. Several other bilateral funds are supported by funders, including Germany and Norway. Most recipient countries are still in the implementation stage, during which they are laying the groundwork to participate in REDD+ by improving forest governance and the capacity to monitor and report quantities of carbon released or sequestered.

Despite the challenges getting RBP off the ground, they are still considered a cornerstone of REDD+. So far, 39 countries have submitted reference levels (RLs) to the UNFCCC.

“If you are paying for results that are being claimed, you must ensure that they comply,” said Erika Lennon, senior attorney at the Center for International Environmental Law.

“We want to ensure that efforts to implement REDD+ don’t infringe on people’s rights and that they are participatory and that the community benefits,” she added.

UNTAPPING BLUE CARBON

Communities throughout Indonesia may benefit from the inclusion of mangrove ecosystems in FREL, said Daniel Murdiyarso, principal scientist with the Center for International Forestry Research (CIFOR).

Blue carbon and coastal blue carbon, terms for carbon stored in the oceans and on coastlines in tidal wetlands, including mangroves, salt marshes and seagrass meadows, outweigh the carbon burial rates in temperate, tropical and boreal forests about 20 times, Murdiyarso said. As ecosystems, mangroves store three to four times as much carbon as boreal, temperate and tropical upland forests.

In Indonesia, deforestation generates 30 percent of the countries’ emissions and as a result there is a huge potential for climate change mitigation.

“There is an opportunity to regulate blue carbon to enhance contributions to emissions accounting systems, mangroves have huge carbon storage, REDD+ could be one of the mechanisms that Indonesia can pursue to include Blue Carbon”, Murdiyarso said, explaining that the country is in the process of improving its FREL by incorporating blue carbon data.

REDD+ is not the only vehicle through which emissions-reducing projects can become climate-effective enterprises, said Lalisa Duguma, a scientist specialized in sustainable landscapes and integrated climate actions with World Agroforestry (ICRAF), delivering a presentation on performance-based financing for promoting resilient ecosystems.

He conducts research into Cameroon’s 260 legal community-based forestry projects, many of which are not delivering on their objectives, in part due to a lack of funding and financing in addition to poor technical capacity and infrastructure.

In particular, he oversees a project to enhance viable community forest enterprises with sustainable livelihoods and environmental benefits through performance-based public finance and support mechanisms.

“Community forests have difficulty attracting private investors due to underlying risks of failures,” Duguma said, adding that communities don’t have the capital to run viable enterprises due to poor livelihood conditions.

He recommends an initial public financing base, careful planning and preparation with support until a project reaches the break-even point when private financing should be the aim to run the enterprises. A new partnership model was developed. It includes a technical analysis and monitoring of performance in part through a basic mobile application. Feedback helps keep community projects on track.

By including research organizations, local non-governmental organizations, financial institutions and community forests, and carefully selecting specific enterprises for investment, Duguma has seen successful initiatives grow.

Now there are 34 enterprises managed by 29 community forests under the project. Almost 100,000 hectares of forests are committed to adopting sustainable practices, including reducing deforestation and forest degradation.

“We learned that sustained positive cashflow is more important than high profits because communities don’t have the capacity to run enterprises if they have no cash flow”, Duguma said.

“If our efforts to conserve ecosystems don’t generate values that directly solve the problems of communities, the motivation for sustainable management in such a setting remains a challenge and deforestation and forest degradation become persistent problems rather than being solvable issues,” he said.

The proceeds of the projects finance a number of community development projects, Duguma added.

“Overall, these presentations showed the situation is still quite dynamic,” said Christopher Martius, Team Leader for Climate Change, Energy and Low-Carbon Development (CCE) at CIFOR.

“While some donors move out of so-called ‘readiness’ funding, we see that many of them still need this kind of support: to build national understanding, capacities and institutions for REDD+. We hope that countries can  combine various strategies to see some real and fast progress over the next few years – in fact they must, as we are perilously close to surpassing the planetary thresholds for dangerous climate change.”

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For more information on this topic, please contact Christopher Martius at c.martius@cgiar.org or Daniel Murdiyarso at d.murdiyarso@cgiar.org.
This research forms part of the CGIAR Research Program on Forests, Trees and Agroforestry, which is supported by CGIAR Fund Donors.
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