Crossing the Bridge of Donor Finance, REDD+ in Business andSustainable Enterprises
Gabriel Eickhoff (Forest Carbon Partners)

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Crossing the Bridge of Donor Finance, REDD+ in Business and Sustainable Enterprises
Gabriel Eickhoff (Forest Carbon Partners)

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

I come from a slightly different background than my colleagues here.

I and my partners founded

our company in 2007 and since then have been working on providing technical services to REDD projects
primarily across South East Asia but as well as in Congo and Ecuador, parts of South America. We do notdevelop projects, we advise on them. As such have, we have been able to get a very interesting cross-sectionof donor, multilateral, private and NGO projects over the last years. We have worked with between 30 and 35
REDD projects on the ground quite literally. This presentation represents much of what we have seen over
the years since 2007.
1. Quick History

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+A quick history on REDD from our perspective: from around 2008 we saw a split in the REDD
sector, which was represented by a divide between REDD+ initiatives that were primarily donor-driven andthose which were seeking market certification. The market-based projects advanced a lot of our technicalthinking that we have today and in some cases went far beyond where we necessarily needed to be in terms of
methodological knowledge. Donor-driven initiatives on the other hand focused on necessary aspects ofsetting up institutions, policies, laws and starting to build capacities, things that private sector, for example,
would not necessarily want to get their hands into. However, by 2009-2010, two really unique visions of
REDD began to emerge that were in a lot of ways very isolated from each other.

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2. Relevant Developments on REDD+

Relevant Developments on REDD+
2008…until today
Policies Laws

Donor
Supported andFund-based
REDD+

?

?

?

?

Demand?

Technical Capacities
Institutions?
? ?

MarketOriented
REDD+?
?
Benefit Sharing

FPIC Methods
Safeguards
Technical Guidance

In this slide here we see that the donor community was really focusing on building a house, so to
speak, focusing on FPIC 1, on methods safeguards, benefit sharing schemes, technical guidance but on a very
general level and really setting the stage for making REDD work on a national scale. On the other hand,market driven activities were really focused on the nitty-gritty details of how you make these things work on
the ground.
The problem is that both of these communities were not communicating with each other, and inoften cases, they were viewing each other skeptically. What you found, and we find often today, are large scale
multinational and bilateral programs which are struggling to figure out how to implement on the ground and abunch of project level activities that are not based in any law or policy whatsoever and are struggling to survive.

Relevant Developments on REDD+
Donor
Supported andFund-based
REDD+

Bridging

MarketOriented
REDD+
2014 2015

2016

2017

2018

2019 2020 2021 2022

2023 2024…

What we are hoping to see and what we anticipate is that this is a bridging period. We are kind of
somewhere in it where these two communities are starting to come together, share ideas, nest projects within
national systems, and begin to communicate with each other. Keeping in mind that the donor community andthe multinational community is doing something setting the stage and taking on the risks of establishing
REDD in a way that the private sector was not able to do and was not willing to do as far back as 2006, 2007,
or 2008
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Free, Prior and Informed Consent

Crossing the Bridge of Donor Finance, REDD+ in Business andSustainable Enterprises
Gabriel Eickhoff (Forest Carbon Partners)

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3. The Market Today

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

I think Maria captured this right in saying that today what we are seeing is that donor finance is filling
this financial risk and that sub-national programs are starting to take off but something is missing right now.
Something is missing from the table and it is private sector. We know this. This is the sector thatdrives the largest amount of land use change, creates the largest amount of emissions, yet it is the sector that ismost of the time totally absent when it comes to on the ground implementation and activity. However, this isalso the sector that has the technical knowledge and resources and flexibility to actually work on the ground.
As a former German employee of the German government working on REDD in developing countries, I
often compared myself and my program’s ability to cause change in the agro forestry sector versus the agro
forestry sector’s ability to change. It is very clear. We have to interact with the sector if we want to achieve
the kind of scale and the kind of emission reductions that are necessary.
I put forward maybe a bit of a provocative question here. Is it possible that we are inefficient in
REDD right now because we are fostering a market failure (which is what climate change actually is) by
focusing primarily on development objectives and inadvertently avoiding the one sector that is actually able toadjust it?

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

Of course, the answer is both yes and no. We are just not ready to accommodate that sector yet.
As we were looking at before, from the ecosystem marketplace 32.7 million tons were traded in 2013 justDAY1
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within the AFOLU 2 sector. VCS projects themselves across all sectors were 161 million tons. That is the
beginning of something. It is not there yet. It is the start. The private sector is acting on the fringe rightnow because we have not set up the right environment yet.

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

Inefficiency due to inconsistency inmethods and onerous standards

Lack of any reason why a commodity should be produced.

Why

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

Where?

What prevents that environment from happening? We have too much fragmentation of what is acarbon credit. We have too much fragmentation of the market itself. We are piloting results in capacity
building, but not necessarily in the replication or the reliable replication of a commodity. We are having
inefficiency due to inconsistent standards, inconsistent methods and we have a lack of any reason why theprivate sector should engage or should act because we are not obligated to. Lastly, there is uncertainty about
where those commodities end up in the end. Is it a market? Is it a fund? How do I get there? This istotally not clear to the private sector right now.
4. Potential Roles of Private Sector

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

What are the roles of the private sector potentially? One is obviously financing REDD activities;
CSR 3, which is the number one source of private finance right now or as investments or as offsets for acompliance market which currently do not exist. Or, in a second role development of REDD activities firstas a primary business model, second as added value to modified business activities and third as a contribution
to national performance.
23

Agriculture, Forestry, and Other Land Use
Corporate Social Responsibility

Crossing the Bridge of Donor Finance, REDD+ in Business andSustainable Enterprises
Gabriel Eickhoff (Forest Carbon Partners)

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We have dealt a lot with this role one in the past and I think we are all very familiar with it, so I am
going to focus on role two.
5. Development of REDD+ Activities

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

Io
CarbonSomewhere in the tropics…
Circa 2008

The Cowboy Legacy
1. As primary business model
2. As added value to modified business activities
3. As a contribution to national performance
International
NGOs

Early Private Sector
MoversTested many systems in
the real world.
Gained awareness that
we still had a lot to learn

Damaged the image ofthe private sector in
REDD+

Government
Involvement

Sustainable
Entrepreneurship
Following Standards
•
•
•
•
•

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

“Speculators”

REDD as a primary business model has not worked out really well so far. As a business model, theprivate sector has had a very hard time early on (for the reasons we talked about before) because they started todevelop projects ahead of national institutions being established, ahead of national policies and ahead ofnational programs being in place. Therefore, the projects that they were developing, the agreements that they
were making had no institutional home, they could not be nested and they were unfortunately left out on theirown while national programs were being put in place. What happened was that those which acted selfishly or
too quickly ended up damaging the image of the private sector and any investments that they were trying to
make at that time.
Those that did survive actually went on to form what in many ways are new business models ofsustainable entrepreneurship.

Those private actors that recognized that they needed partnerships withinternational NGOs like WWF, the Wildlife Conservation Society 4, and others and they needed government
involvement. It was very clear that there was a right way for business to interact and there was a wrong way.
It made us aware that we still had to test a lot of things in the real world and that there was still a lot to learn.

4

http://www.wcs.org/

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REDD+ as added value to business

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

As added value to modified business activities, this is currently a pretty hard sell. Some companies
have been working on exploring ways of adding value to existing activities. For example, if I am running
conventional logging activities somewhere in Malaysia or somewhere in Indonesia and I can do some
reduced-impact logging maybe then I can get some carbon credits on top of that. However, it really is a hardsell for industry because the stick and the carrot are both missing in this situation. They do not need to act.
What they do with the commodity that they are producing and the ability to produce it are completely not clear
for them still.

What Markets Need
What?

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

Standardized
Commodity

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?
MarketDemandWhy is it such a hard sell? What do markets actually need? How do we get these guys going?
We have to combine methods. We have so much technical knowledge now that we have to set aside some ofthe differences between some of the leading technical standards and begin to come to common grounds. It
does not mean the approaches to mitigation or the approaches of the national system need to be the same but
we have to start agreeing on the fundamental underlying science behind them.
We need accountable producers. Pilot projects are great, but they end, and then what? We needto have producers in the private sector which are producing emission reductions in a way that they areaccountable to producing any other kind of commodity.

The process needs to be clear and efficient.

Policies need to be clear at the national level. Ownership needs to be clear at the national level and standards
need to be.
Second to last is that they need a reason to participate. Currently, they do not need to, and theyneed to know where they are going.

Therefore, we need to show them the way to the market and where that

Crossing the Bridge of Donor Finance, REDD+ in Business andSustainable Enterprises
Gabriel Eickhoff (Forest Carbon Partners)

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market is.

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 National
Performance• If we look at REDD+ as only single development driven
activities, 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.

If we look at REDD as only a single development activity, project by project, which I think the JCM
is really keen on doing right now then that is fine. However, that fits a very niche role in the larger landscape.
Projects are very suitable when they are addressing drivers of deforestation that are not efficient or effective forgovernment itself to address. Often times, these projects fall within key stakeholder partnerships like line
ministries, NGOs, villages, and national protected areas, but not necessarily the private sector. This is thesector that is driving change. Therefore, why is there this disconnect? How do we actually get them onboard and on the table?
The proposition here is to get businesses to engage, we do not start communicating with them on
the context of REDD. We do not start with REDD. Start understanding business as being part of thatlarger landscape, jurisdiction, or whatever you would like to call it. They are part of the larger map of what
we are doing. By looking at REDD across an entire landscape, every actor inside of it is already participatingin the sub-national or national performance or noncompliance with performance.

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Let us look at Quang Binh province in Vietnam. If I were looking at this map, I would see some
red areas here which indicate deforestation. Still, I really would not know what to do.
I could look at it in terms of carbon. Even then, I still really would not know what to do.
If looked at it in terms of land use then I might start to get a little bit better picture.
If I combine land use, deforestation, and carbon altogether into one thing then I start to understand these are
the industries that I need to engage with. Maybe it is not the production forest. Maybe it is these other areas.
What are the businesses there that need to be engaged?

As a Contribution to National
Performance• 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.

Third, as we continue on as a contribution to national performance, let us take Indonesia as an
example of this larger landscape concept, trying to dovetail in with this idea that Peter was just talking about.
It is looking at national programs broken down by jurisdiction, like what we are talking about in Indonesia,
perhaps until recently. We will have to see. Programs target not just avoiding deforestation but overall
multi-sectoral green growth. It is not just deforestation. It is industry. It is transport. It is water andsanitation. It is all of these things tied up into one thing. Results-based monitoring comes first and thenperformance comes later. Business is part of that landscape.
means rubber, it means cocoa, and it means everything.

That means agro industry, it means palm, itCrossing the Bridge of Donor Finance, REDD+ in Business andSustainable Enterprises
Gabriel Eickhoff (Forest Carbon Partners)

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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.

If a province wants to perform then it does not need to just go around chasing little pieces ofdeforestation here and there. It needs to interact with all of the players, stakeholders, and business at the table.
Instead of engaging with business in the context of REDD itself, maybe we can begin to engage from thecontext of looking at it from a jurisdictional scale and looking at talking about regulation, taxation, tax
incentives and other macroeconomic drivers that business understands, not just REDD.
6. Observations

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 in
REDD+.
3. In a jurisdictional/landscape context, we should
consider engagement with private sector througheconomic and tax-based approaches rather than
REDD+.

Thank You
Jakarta

www.forestcarbon.com

Jl. Kemang Timur Raya 66
Keamng, Jakarta,
Indonesia

Singapore

1 Raffles Place #44-02
One Raffles Place,Tower One
Singapore

Vientiane

Phonesinuan Village 354
Dongpalane Road,
Vientiane,
Lao PDR

Acknowledgements

These are just some observations that we have been putting together and we have been observing
and thinking about how to get private sector on board. First is that the necessary market environment does
not exist yet. If we want business in, we have to create those ‘who, what, how’ scenarios. All of those haveto be clarified, especially the demand. If there is no demand, then all the rest of it does not matter at all. It
is not enough just to set up registries. It is not enough just to set up trading desks. We have to actually havea source and outlet for all that to be used.
Private sector drives the largest area of land use in the world, yet it is not actively involved in REDD.
In a jurisdictional landscape context, we have to consider engagement of the private sector as though they are apartner, as though they are a player because they are. They are part of that landscape. By looking at
engagement with them through other methods than just REDD, we could get through to partnerships between
the private sector and government actors in order to achieve jurisdictional performance in order to achieve
national performance.

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