The Green Climate Fund (GCF) has in recent years emerged as an important financial mechanism for funding REDD+ (Reducing Emissions from Deforestation and forest Degradation) and has put in place a system for results-based payments for forest related emissions reductions.
The GCF system has provided a learning example of a non-market-based approach to REDD+. The emission reductions that are paid for by the GCF cannot be traded and ownership is not transferred to the GCF upon payment.
This system is now under review.
Many tropical forest countries have for some time been going through extensive national processes to establish the systems required for REDD+ payments. These include national forest monitoring systems and construction of “forest reference emissions levels” (FRELs) that provide baselines against which to measure changes in forest carbon.
Once a country has a FREL established for a designated period of time, it measures the changes in carbon within that period. If a reduction is claimed, then that country could seek “results based payments” (RBPs) from the GCF at a rate of $5 per tonne through a proposal that is assessed by the GCF against a range of criteria.
Sounds simple enough, but as usual, the devil is in the detail, especially when it comes to the highly complex issue of measuring forest emissions reductions.
For example, how does a country measure emissions from fires?
Will the emissions go back into the atmosphere at some time in the future?
Or, does a country use methods that could inflate their baseline?
The GCF Pilot Programme for REDD+
In 2017, the GCF set aside $500 million and put in place a Pilot Program, for tropical forest countries to seek payments for emissions reductions related to deforestation, forest degradation and through conservation.
When an application for RBPs is made to the GCF by a country, a number of criteria need to be met, including related to the FREL, social and environmental safeguards, and the ways in which the country will use the financial proceeds.
The Terms of Reference for the Pilot Programme for REDD+ Results Based Payments sets out what is needed in terms of eligibility, access, valuation, ownership and legal title, FRELs, compliance with GCF policy, the approvals process, assessment criteria and GCF Board consideration.
The GCF Pilot Programme has now exhausted its initial $500 million allocation and approved payments for Brazil, Indonesia, Ecuador, Colombia, Paraguay, Chile, Argentina and Costa Rica as set out in the following table. For more details on payments made under the first GCF pilot program click here.
Many of these RBP proposals have been met with concerns raised by Civil Society Organisations (CSOs), as well as some GCF Board members.
For example, at the time the Brazilian proposal was approved, alarm bells were being raised that the incoming Bolsonaro Government would increase deforestation in the years ahead. The proposals from both Indonesia and Colombia were met with concerns related to the environmental integrity with Board members from both Norway and Germany pointing out the importance of serious reviews required to the current GCF Scorecard and assessment system, specifically on the subject of permanence, risk of reversals and the long periods over which the FREL is established.
Many CSOs went into the 26th GCF Board meeting in 2020 calling for the REDD+ Pilot Programme to cease immediately.
REDD+ under review
The GCF is now reviewing the RBP system. Many lessons have been learnt, both in the process of its initial development and through the Pilot Programme.
At the launch of the Pilot Program, it was agreed that a midterm review would be undertaken in 2019. This midterm review was provided to the Board at the 25th Meeting in early 2020 and received inputs from a number of experts in the field and addressed both the procedural and technical issues in some detail. It is intended that the mid-term review inform next steps related to how the GCF addresses REDD+ RBPs.
In terms of procedural issues raised, challenges include: a lack of clarity on roles and responsibilities of AEs. Concerns have also been raised related to lack of transparency in the process, with calls for more publicly available information. The “scorecard” approach in itself has been called into question, including the appropriateness of the weighting system currently being used.
In terms of technical issues raised, concerns include, use of the ‘average annual historical emissions’ during the reference period, and the potential for inflated baselines, and the extent to which there could be any recalculation of the FREL at the GCF following the U.N. Framework Convention on Climate Change (UNFCCC) technical assessment.
REDD+ safeguards, agreed in 2010 in Cancun and recognized as being one of the areas of progress in REDD+, have also been a challenge in terms of how they should be applied in relation to the GCF’s own risk management system.
Countries need to show how they plan to use the proceeds received, however concerns have been raised in terms of clarity on the monitoring and evaluation systems of the accredited entities as well as equitable benefit sharing arrangements.
The good, the bad and the not so perfect
There is no shortage of issues being raised related to this system and serious questions remain as to whether many of these fundamental issues can in fact be resolved at the GCF in its capacity as a financial mechanism of the UNFCCC.
For example, challenges related to FRELs are entrenched in the UNFCCC Warsaw Framework on REDD+, and the GCF has traditionally taken a position that it cannot venture outside of this UNFCCC Framework to implement its own system, whilst countries strongly reject any suggestion that the REDD+ framework can be further negotiated within the UNFCCC.
There is a huge amount of work to be done if the GCF is to put in place a robust system for REDD+ RBPs that pays for real and permanent emissions reductions. In doing so, the GCF may wish to take into consideration the following suggestions:
- To encourage Accredited Entities, NDAs and REDD+ Focal Points to enhance participation of stakeholders at the national level in the preparation of RBP proposals, and projects associated with the use of funds;
- The GCF should undertake its own independent assessment as to how proponent countries are addressing drivers of deforestation and forest degradation;
- Further analysis should be undertaken by the GCF to prevent any possible double payments;
- The GCF needs to put in place more robust processes to:
- prevent double counting and use of inflated baselines;
- ensure safeguard compliance and incentivising improvements to safeguards systems; and
- ensure emissions reductions are permanent, without risk of reversals or leakage.
A new proposal for the GCF’s RBP system is expected to come before the Board in 2022. Whilst it will not be perfect, many lessons should have been learnt; hopefully enough to ensure a system is presented, which provides for an efficient and effective use of GCF funds, and pays for genuine, real, and permanent emissions reductions from deforestation and forest degradation.
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