Crossing the Bridge of Donor Finance:
REDD+ in business and sustainable enterprises

Presented by:
Gabriel Eickhoff
Managing Director
Forest Carbon Partners LtdIndonesia • Laos • Singapore

Quick History• Around 2008…a split emerged between donor-driven
REDD+ initiatives and market-based “voluntary”
approaches.
– Market-based approaches advanced technical and methodologicalknowledge to where it is today– Donor initiatives focused on readiness (institutions, capacities andpolicy)– By 2009 and 2010, two visions of REDD+ emerged that werecompletely isolated from each other.

• What has emerged is a split in the REDD+ sector
between fund-based REDD+ and voluntary marketbased REDD+

Relevant Developments on REDD+
2008…until today
DemandDonor
Supported andFund-based
REDD+?

?

?

?
?
Benefit Sharing

Methods
Safeguards
Technical Guidance

FPICPolicies Laws?

?

Technical Capacities
Institutions?
? ?

MarketOriented
REDD+

Relevant Developments on REDD+

Donor
Supported andFund-based
REDD+Bridging

MarketOriented
REDD+
2014 2015

20162017

20182019 2020 2021 2022

2023 2024…

The Market Today• Today we are in the early bridging phase.
• Donor finance is filling the financial risk ofdevelopment REDD+ Readiness:– REDD+ governance and policy are being drafted– General methodological guidance– Safeguards• Subnational REDD+ and green growth strategies

1 - Ecosystem Marketplace, State of the Forest Carbon Market 2014

…yet something is missing.
• Private Sector– Drives land use and land use change faster and on a scale larger thanany other sector.
– Technical knowledge, resources and flexibility– Can drive markets• Is it possible that we are inefficient in REDD+ because
we are fostering a market failure by focusing on
development objectives…and inadvertently avoiding
the one sector that is able to adjust it?

1 - Ecosystem Marketplace, State of the Forest Carbon Market 2014

The Market Today• The answer is both “Yes” and “No”.
• 2013 Marketplace1– 32.7 MtCO2e traded in 2013 on voluntary basis within AFOLU– 24.7 MtCO2e attributed to REDD+– $1 billion market value in 2013
– VCS
• 161,000,000+ VCU Issued (all sectors)• 1,234 Projects• Buyers– 89% of offsets sold were forest carbon offsets to private sector:• Energy Companies• Food and Beverage Companies

1 - Ecosystem Marketplace, State of the Forest Carbon Market 2014

What Prevents Markets?
What?

Commodity fragmentation, uncertainty and risk.

Who?

Piloting which results in capacity building but not the reliable
and replicable production of a commodity.

How
Lack of any reason why a commodity should be produced.

Inefficiency due to inconsistency inmethods and onerous standards

Why

Uncertainty about where commodities end up, at what priceand for how long they can continue to be sold.

Where?

Potential Roles of Private Sector
Role 1 - Financing REDD+ Activities
1.
2.
3.

As Corporate Social Responsibility (CSR)
As investments
As offsets for a compliance market

Role 2 - Development of REDD+ Activities
1.
2.
3.

As primary business model
As added value to modified business activities
As a contribution to national performance

Development of REDD+ Activities
1. As primary business model
2. As added value to modified business activities
3. As a contribution to national performance

The Cowboy Legacy
1. As primary business model
2. As added value to modified business activities
3. As a contribution to national performance
InternationalNGOsEarly Private Sector
MoversDamaged the image ofthe private sector inREDD+“Speculators”

Tested many systems in
the real world.
Gained awareness that
we still had a lot to learn

Government
Involvement

Sustainable
Entrepreneurship
Following Standards•••••

Kasigau, Kenya
Rimba Raya, Indonesia
Seima, Cambodia
Mai Ndombe, DRC
Others…

Development of REDD+ Activities
1. As primary business model
2. As added value to modified business activities
3. As a contribution to national performance

REDD+ as added value to business• Some companies have been exploring ways of adding
value to existing activities. Mainly in agro-industry
and forestry• However, this is often a tough sell:– Both “stick” and “carrot” are missing.
– Little or no visibility on market for the value-add product (i.e. carbon)– Viewed as adding risk, with little reward– Carbon-related investments are often skipped unless more direct andtangible benefits to business operations or profitability are visible.

• So why is this such a hard sell to business?

What Markets Need
What?
StandardizedCommodity

Convergence of methods, not fragmentation in to different carbon
commodities.

Who?
Accountable
Producers

Producers which are operationally and financially accountable
for the production of a commodity.

How
Efficient
Process
Private sector producers need a reason to participate.

Clear regulations, user ownership andstandards.

Why
Incentives

A clear pathway towards the sale of the commodity.

Where?
MarketDemandDevelopment of REDD+ Activities
1. As primary business model
2. As added value to modified business activities
3. As a contribution to national performanceAs a Contribution to NationalPerformance• If we look at REDD+ as only single development drivenactivities, we limit ourselves to the local stakeholders andgovernment actors that fall within project activities.
Often these are:– Key technical line Ministries– NGO partners– Villages– National Protected Area Mangers• Proposition:– To get business to engage in REDD…don’t engage through REDD+.
– In a jurisdictional/landscape context, all public, private and civil society
actors are already engaged in REDD+ together. They just don’t realize it.

As a Contribution to NationalPerformance• Example: Indonesia’s Jurisdictional Approach (JA)– “the nationwide approach under which REDD+ is implemented and administeredthrough Indonesia’s provincial and district government units, with performance
aggregated at the national level.”– National program broken down by jurisdictional (Provincial andDistrict) programs.
– Programs target not just avoided deforestation but overall multi-sector
green economic growth.
– Results-based monitoring first– Performance-based monitoring later• Thus, every actor is contributing to performance or
non-compliance, every day, by default.

As a Contribution to National
Performance• How to get the priority actors engaged?
• How to incentivize businesses that contribute tonational performance and indirectly pressure thosethat do not?
• Rather than carbon, green growth oriented businesspractices can be engaged through:– Tax incentives for contributing to performance– International and domestic market incentives for commodity suppliers
meeting, no-deforestation pledges or low emission/sustainableagriculture certification– Later, consider constraints on market access for commodity producers
making large cuts in sub-national/jurisdictional performance.

Observations
1. The necessary market environment does not yet
developed enough to engage meaningful privatesector finance.
2. Private sector drives the largest area of land usechange in the world, yet it is not actively involved inREDD+.
3. In a jurisdictional/landscape context, we should
consider engagement with private sector througheconomic and tax-based approaches rather thanREDD+.

Thank You

www.forestcarbon.com

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Vientiane

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Acknowledgements