Linkages between Different Types of REDD+ Financing, Including the
FCPF Carbon Fund and the Forest Investment Program
Ellysar Baroudy (World Bank)

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Linkages between Different Types of REDD+ Financing, Including the FCPF Carbon Fund and theForest Investment Program
Ellysar Baroudy (World Bank)

1. The FIP and FCPF
The FIP and FCPF

Forest Carbon Partnership Facility
Linkages between different typesof REDD+ financing, including the
FCPF Carbon Fund and the Forest
Investment Program
REDD+ Finance, International Seminar, Tokyo (VC)
February 3, 2015

Objectives of the different instruments:• FIP Design Document: “The FIP would not in itself provide the
incentives presently necessary to significantly reduce forest related
GHG emissions, but would enable pilot countries to leverage suchincentives if established under a UNFCCC forest mechanism”• FCPF Charter objectives:• “To assist Eligible REDD Countries in their efforts to achieve Emission
Reductions from deforestation and/or forest degradation by providingthem with financial and technical assistance in building their capacity
to benefit from possible future systems of positive incentives for
REDD;• To pilot a performance ‐ based payment system for Emission
Reductions generated from REDD activities, with a view to ensuring
equitable benefit sharing and promoting future large scale positive
incentives for REDD”
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I would like to talk about two of the instruments that we have at the World Bank.

One is theForest Investment Program and one is the Forest Carbon Partnership Facility. The easiest way to distinguishbetween these programs is that the Forest Investment Program really does investments in forestry. The
Forest Carbon Partnership Facility has two sources of funding.

One is for technical assistance upstream, andmore important is that we have a fund that can purchase emission reductions.
I have in a summary on the slide explained what the objectives of the different instruments are. I
hope this is clear for the audience. Again, in summary, the Forest Investment Program does investments but
it does not really need to measure any emission reductions.

The Forest Carbon Partnership Facility ismeasuring emission reductions but it is also assisting countries in the REDD+ readiness process.

Food for thought

I just wanted to introduce some issues that are really important for thinking through in terms of
REDD+ finance.

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2. Issue: Timing of REDD+ Financing
Issue 1: Timing of REDD+ financing• Cancun identifies phases of REDD+ as• Development of national strategies or action plans, policies and measures andcapacity building• Implementation of national policies and measures and national strategies or
action plans that could involve further capacity‐building, technology
development and transfer and results‐based demonstration activities• Results‐based actions that could be fully measured, reported and verified• However:• Slowing and ultimately halting deforestation and forest degradation will be a longprocess.
• Strategies and other components will need to be regularly updated and revised
to reflect changes in country circumstances and the drivers of deforestation.
• Strategies and other components may overlap or in turn be informed by
activities undertaken
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The international agreements do identify that there are phases of REDD+ finance.

Here thephases are seen as those that can help the development of national strategies or action plan, policies andmeasures and capacity building, but very much upstream preparation, what we call the Readiness Work.
However, there is also implementation of national policies and measures and national strategies or action plansthat could involve further capacity building, technology development and transfer and results-based
demonstration activities.

From our perspective, we consider this as moving in the direction of investments tomake changes to business as usual so that the final piece of this puzzle (results-based actions) can be fullymeasured, reported, and verified.
This, I am sure, the audience is aware, is the importance and the phasing, if you like, of the REDD+
finance.

However, one thing we always stress is that it is very important to consider the timeframe and that inorder to halt deforestation and forest degradation it is a long and a difficult process. Also, the strategies thatcountries are developing will need to be regularly updated and revised.

We need to recognize that in timethings do change, so what do we need to do to think about that? Also, some strategies may overlap.
have seen that in the existing work that we are doing.

We

Strategies and components can overlap or in time be

informed by other activities undertaken.
Evolution of thinking about the timing of REDD+
financing

Evolution of thinking about the timing of REDD+
financing (cont’)

In the beginning, REDD+ finance was seen as a linear process

Realization that there was an overlap between the different phases

Strategies andplans
Strategies andplans

Implementation

Monitoring ,reporting andverification
Implementation

Monitoring ,reporting andverification
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It is important here to consider how we have changed in our way of thinking about the timing of
REDD+ finance.

In the beginning, we thought this would be a linear process where you would have thereadiness strategies and plans upfront.

You would then move to implementation.

You would then move toLinkages between Different Types of REDD+ Financing, Including the
FCPF Carbon Fund and the Forest Investment Program
Ellysar Baroudy (World Bank)

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Session 2

monitoring, reporting, and verification.
However, here again we are learning, and, in time, we realized that there is an overlap between thephases because sometimes the strategies and plans can be thought of at the same time. There are actions being
taken and some implementation processes happening, which in turn overlaps with MRV1 systems being set up
for the production of emission reductions and the verification of those.
Evolution of thinking about the timing of REDD+
financing (cont’)… but with the need to revise and update Readiness components, experience incountries is showing that REDD+ is actually more of a continuous cycle

Strategies andplans

Monitoring,
reporting andverification

Implementation

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However, this has also changed and this is how we are now thinking of REDD+ financing.

This iscoming about because of our experience. These two funds are working in more than 40 countries onreadiness, in eight countries on investments through the Forest Investment Program, and through 11 countries
for emission reduction programs.

Our own experiences have taught us that we no longer think of the threephases as a continuum but more as a cyclical and continuous cycle with the different pieces feeding through toeach other.

It is important to think that as a country is starting readiness, it will gain experience as it goes into

implementation.

That in turn, feeds into experiences of monitoring and verification.

Therefore, the country

may need to go back to adjust what its strategy was or how it is undertaking some of its REDD+ actions intime.

3. Issue: Definition of Emission Reductions
Issue 2: Definition of emission reductions• The Charter of the FCPF defines Emission Reductions as “real andverifiable emission reductions generated from Emission Reductions
Programs”.
• Other types of financing might rely more on proxy approaches to do
an ex‐ante estimation of emission reductions that might result fromcertain interventions.
• However the assumption for REDD+ is that emission reductions do notneed to be attributed to specific policies or actions• Hence the MRV systems are usually designed to provide the net
emission reductions resulting from a set of policies and interventions.

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Measurement Reporting and Verification

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The other thing that is important is how to consider the definition of emission reductions.

In

terms of what we are doing in the Forest Carbon Partnership Facility, emission reductions are real andverifiable emission reductions generated from the emission reductions programs.
in our pipeline 11 of these programs.

I have mentioned we have

In another respect, other types of financing outside of this program

might rely on proxy approaches to do an ex-ante estimation of emission reductions that might result fromcertain interventions.

Increasingly, we are seeing a lot of financial interventions occurring where one of theconditions for that financial intervention is that there is not a large carbon footprint.

However, an ex-anteestimation is very different from a real and verifiable emission reduction and what it entails to get that emission
reduction.
Another important aspect for us is that there is the assumption for REDD+ that emission
reductions do not need to be attributed to specific policies or actions.

This is very different from the Clean

Development Mechanism world where we had very strong attribution between a specific action and a specificemission reduction, but REDD+ is really changing scale, so this direct attribution is not expected in our
programs.
The MRV systems are designed to provide net emission reductions resulting from a set of a wide
variety of policies and interventions.

This is also an interesting shift in the mindset of how we think about

emission reductions, but it is driven by scale and the importance of achieving scale to make a difference.

4. Issue: Size of Financing Needed
Issue 3: Size of financing needed

Issue 3: Size of financing needed• Many countries face barriers for implementing the national REDD+ policies
and measures• Significant and different types of funding are required to overcome some ofthese barriers.
• Helping countries to change their trajectory on the forest transition curve
which is very much related to general sustainable development• Many countries face barriers for implementing the national REDD+ policies
and measures• Significant and different types of funding is required to overcome some ofthese barriers.
• Helping countries to change their trajectory on the forest transition curve
which is very much related to general sustainable development

REDD+ trajectory?

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Third, one of the things that we are starting to realize is that the size of financing needed for
REDD+ is very significant.
policies and measures.

Many countries are facing barriers for implementing their national REDD+

Of course, these barriers are very different, so they require significant and different

types of funding.
What we are talking about here is that countries have to change their trajectory on the forest
transition curve.

If we want to change the trajectory, this takes a lot of investment, a lot of understanding ofwhat is driving deforestation.
sustainable development.

It is really a question of green growth for a country and how it can attain real

Linkages between Different Types of REDD+ Financing, Including the
FCPF Carbon Fund and the Forest Investment Program
Ellysar Baroudy (World Bank)

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Issue 3: country example Ghana

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We often use an example of Ghana because we have many programs operating there.

You can see

the different phases: the readiness phase, investment phase, and results and performance based payments.

We

have highlighted the amount of funding that we are bringing to the table as the World Bank Group.

Issue 3: country example Ghana (cont’)• However, to succeed the ER Program will need to leverage and re‐direct other types of public and private finance that is often manytimes larger than climate finance

Annual turn‐over of the cocoa
sector

FIP financing (country wide)

CF result based financing

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I think the next slide illustrates the point very well. Our programs in Ghana relate to the cocoa
sector.

You can see the chart where the annual turnover of the cocoa sector is estimated at $2 billion.

You

can see in comparison what the Forest Investment Program and the Carbon Fund Program are bringing to thecountry.

It is very small in comparison to what needs to change within a very important economic activity

within the country.
In order to succeed, REDD+ finance is not the solution by itself, but it has to leverage and redirect
other types of public and private finance that is often many times larger (as you can see in this graph) thanclimate finance.

I think it is really important to understand that we cannot offer a solution in terms of climate

finance by itself but it has to be in parallel with what public and private finance is also doing within a country.

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5. Current Thinking within the FMT
Current thinking within the FMT

Current thinking within the FMT (cont’)

It is likely that the finance package for the ER Program will change over time andother types of finance will need to be leveraged and redirected to support
sustainable land use

The Fund is interested in the long‐term, cumulative emission reductions fromthe ER Program but these will be created and maintained from a different andcomplementary mix of different types of finance

Result based climate financeAmountofFinanceAmountofFinance

Climate finance (investment)

Cumulativeemission
reductions

Result based climate finance

Climate finance (investment)

General finance for sustainable
land use

General finance for sustainable
land use

General finance for activities
leading to
deforestation/degradation

General finance for activities
leading to
deforestation/degradation

TA

TA

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Time

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Time

Our own thinking of what finance packages look like is on this colorful graph where you can see
right at the bottom that, over time, the technical assistance component is expected to be relatively large early,
but will probably ease off in time. The color red indicates where we are hoping finance for activities that leadto deforestation and degradation go down, and finance for sustainable land use can kick-in.
what we have in terms of the climate finance.

You can then see

It is relatively a smaller proportion and may not be very wellreflected in this graph, but where your investment finance would be larger in the early stages, and then yourresults-based climate finance can kick-in in a slightly later stage.

It is very important and it is most likely that afinance package for an ER2 program will change over time and other types of finance will need to be leveraged
and redirected to support sustainable land use.
On the next chart, what we expect is that you can see accumulative emission reductions that will
happen over time. This fund is certainly interested in those long term cumulative emission reductions, but wereally believe that these will be created and maintained, which is very important, from a different andcomplementary mix of types of finance.

6. Key Points
Key points• Many countries face barriers for implementing the national REDD+
policies and measures and significant funding is required to overcome
some of these barriers.
• Need to leverage existing finance and redirect this to sustainable
land use (amount often many times larger than climate finance)• Long‐term, cumulative emission reductions from the ER Program willbe created and maintained from a different financing mix• So far, the assumption for REDD+ has always been that emission
reductions do not need to be attributed to specific policies or actions• Going forward, it might be useful to think of REDD+ financing as
supporting the three crucial pieces required to make REDD+ work:
technical assistance, investments and RBF. These pieces are notdistinct phases, but rather a structured finance package to create
long‐term emission reductions.
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THANK YOU!

www.forestcarbonpartnership.org

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To conclude, I would want to just say that, from our point of view, there are some takeaway

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Emissions Reduction

Linkages between Different Types of REDD+ Financing, Including the
FCPF Carbon Fund and the Forest Investment Program
Ellysar Baroudy (World Bank)

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messages that we feel are really important for anybody who is interested in REDD+ finance.

These key

points are that many countries face barriers for implementing their national REDD+ policies and measures andsignificant funding is required to overcome some of these barriers.

Funding is really needed to change what

has been decades of “business as usual” which has not helped at all in the deforestation issues related to thecountries involved.
The second point that is really important and a key point to take away is that there is a real need toleverage existing finance and redirect this to sustainable land use. Often this is going to be much larger than
the finance that can come from the climate stream.
The third point here is that we believe the long-term cumulative emission reductions from anemissions reduction program will be created and maintained from a different financing mix.

It is important tothink different finance sources will be important to achieve successful REDD+.
Another point that we think is very important is that the assumption so far for REDD+ has always
been that emission reductions do not need to be attributed to specific policies or actions.

Again, I would liketo emphasize this point because, if we want to go to scale, it means moving away from the project basis that wehave known in climate finance to more of a program in a large jurisdiction.

This is a very important point inorder to achieve that scale.
Finally, going forward, it might be useful to think of REDD+ financing as three very crucial pieces
that are needed to make REDD+ work. These are the technical assistance, investments, and payments forresults; the results-based finance. These pieces are not distinct phases but there should be a structured
financial package in order to create long-term emission reductions and to achieve sustainable development.
On that note, I think that is the final piece of my presentation.

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