Design and Implementation of REDD+ Results-based Finance at theJurisdictional Scale through the FCPF Carbon Fund
Alexander Lotsch (World Bank)

Video Conference

Design and Implementation of REDD+ Results-based Finance at the Jurisdictional Scale
through the FCPF Carbon Fund
Alexander Lotsch (World Bank)

As you just learned, I do cover up the Asian countries as part of my portfolio and I will featuresome of the work in the region.
be with you in Tokyo today.

Unfortunately, I just returned from the region and was not able to

However, I hope that I can give you a short overview and a couple ofexamples of the work that we are doing internationally through our global programs managed by theWorld Bank, and give you a few examples of the work we do specifically in the Asia region, which may
be of most interest for you.

Let me start with a quick example just to give you a sense of how our

work is about.
What you see here are pictures from the Humbo landscape in Ethiopia.

In the upper left is adenuded hillside in 2004, and the picture at the bottom right is as it is today.

Clearly, it is muchgreener, more forested, and much richer in carbon. You see the same landscape seen from space inthe upper right.

That is precisely the kind of transformation we hope to achieve through thefinancing and the funds provided by the World Bank.

The example that you see here was at the scaleof 500,000 hectares approximately, and generated about seven million tons of CO2 equivalent in termsof emission reductions over a 10-year period. While this was pioneering, significant, and we learned73Video Conference
many things from that, and in fact this was even placed at the BioCarbon Fund 1 of the World Bank,we want to take this experience to a very different scale, including to another initiative of the
BioCarbon Fund, the Initiative for Sustainable Forest Landscapes 2 (ISFL), and in particular the Forest
Carbon Partnership Facility that you should learn about.

With that example in mind, let me give you a bit of a background to set the stage for our work.
This is a statistic in background that you are probably very well aware of.

What you see here in thischart is the increasing requirements from different sectors on land, which are multiple large andcompeting. What you see in the colors in this pie chart is the land area globally that is accessible inpink, remote in green, and unavailable in yellow, for instance, because it is urban.

What you see in thepie chart on top of that labeled with the black font is the demand for land as protected by the middleof the century.

As you can see, very quickly in the scenario we will be running out of land (certainly

accessible land) to accommodate all the land users that are needed for forests, for crop lands, forbioenergy, and etcetera.
Just this as a backdrop, you will obviously know that transforming landscapes in this context isvery challenging.
1
2

It requires a number of innovations.

I want to touch on three areas in particular

https://wbcarbonfinance.org/Router.cfm?Page=BioCF&ItemID=9708&FID=9708
http://www.biocarbonfund-isfl.org/

74

Design and Implementation of REDD+ Results-based Finance at theJurisdictional Scale through the FCPF Carbon Fund
Alexander Lotsch (World Bank)

Video Conferenceof how we engage people differently in an innovative fashion to make this transformation possible,
how we harness technology to get results, achieve that scale, and measure that scale, but also how weleverage finance differently from how we have done it in the past.
The Challenge We Address

As a bit more background, we obviously implement these funds with climate financing throughthe World Bank Group, which is development organization, and so we try to achieve two objectives.
One is to make a contribution through piloting emission reduction schemes at scale, to make acontribution to global mitigation, and make a dent into the roughly 25% of global greenhouse gas
emissions coming from the forest and land use sector.

At the same time we want to achieve andpromote development objectives, address poverty, boost their prosperity, and to create development
opportunities for people living in and around forests. We have dual objectives, which makes this very
challenging and requires climate smart ways of achieving both at the same time.
Now, what we have at the World Bank are two major funds. You have heard just a moment ago alittle bit about the Forest Carbon Partnership Facility, and I just mentioned also another fund, which issignificant, the BioCarbon Fund, and in particular the Initiative for Sustainable Forest Landscapes.
Between those two funds alone we have roughly USD$1.6 billion in carbon sinks, carbon finance, andfor sustainable forests, landscape transformation, and forest development.

75

Both funds pioneer anVideo Conference
incentive-based mechanism scheme, results-based finance for emission reduction at scale.

That work

actually entails work across the sectors including environment, agriculture, energy, and extractives.

I

will show you in a moment that we work with over 50 countries in all major regions, and we have an
active collaboration with the private sector both through the International Finance Corporation 3 (IFC),
the private sector arm of the World Bank, as well as other commodity corporates at the global andlocal level.
Our Funds

Here we have a different view on the funding that we are working with.
almost on a monthly basis.

The numbers changed

They have changed quite significantly after initial measures were made at

the Conferences of Parties in Paris just a month ago.

Currently we have roughly USD$1.6 billion

across these two major funds in the Forest Carbon Partnership Facility, which you see at the top. We
basically operate two windows. One is the readiness fund, which supports technical assistance andcapacity building at the national level in about 50 countries, and the sister fund is the Carbon Fund,which was capitalized with almost $1 billion US for results-based finance for jurisdictions that
implement REDD+ programs at that scale.
for Sustainable Forest Landscapes.

Below you see the respective number for the Initiative

Again, it is well capitalized with USD$300 million approximately,

a portion of which can go to technical assistance, but the lion’s share of that would also go towards
results-based payments.

3

http://www.ifc.org/

76

Design and Implementation of REDD+ Results-based Finance at theJurisdictional Scale through the FCPF Carbon Fund
Alexander Lotsch (World Bank)

Video Conference

Here visually is a representation what we try to achieve over time over the work across these funds
over the next 10-15 years.

What you would see at the bottom left is the kind of example I started out

with, projects that started at the scale of tens or hundreds of thousands of hectares and achieved
perhaps a few million tons of CO2 in terms of emission reductions.

Through the funds that I justdescribed, the ISFL and the FCPF carbon fund, we want to take this experience to a different scale andget into the millions of hectares with the idea that eventually under the incentive mechanisms under
the Climate Change Convention, this could be split up to entire countries going to the things inabsolutely like hundreds of millions of hectares in terms of accounting for carbon across these large
areas.

This is very much the objective to pilot this middle section of this curve that you see here

going from project to jurisdictional level implementation of these transformational schemes.
Here is the global map of the countries we are working with.

The green ones that arehighlighted and labeled are the ones that are currently in the pipeline for the FCPF Carbon Fund
and/or the BioCarbon Fund Initiative for Sustainable Forest Landscapes. You see we are nicely
covered in all major regions, including some major countries in the Asia region, which is perhaps of
most interest to the participants here in Tokyo.

77

Video Conference

We indicated that this work entails cross cutting work and integration across various sectors.

Infact, many of the drivers are obviously outside of the forest sector per se in the agriculture or energy
sector for instance, so one of the challenges and the areas of work that we pursue is to, for instance,
we decouple deforestation from agricultural commodity growth, or provide energy without poachingon the forest resource, just as two of the examples shown here.
Our Business Model

What is the business model of these funds? Again, this applies to both funds (the Forest
Partnership Facility as well as BioCarbon Fund), and this will resemble what is probably known to you
as the three phase approach from the Cancun Agreement from some years ago under the COP.
Starting on the left with financing, it is grant financing largely for the creation of an enabling
environment or in countries in the development of polices and strategies; build capacities mostly at thenational level, but also establish sound mechanisms for social inclusion and consultation.

Both funds’

resources will offer this enabling environment set of activities.
The second and key phase is on the basis of this capacity to develop actions that would result inemission reductions and mitigation actions in the long term.

This is where other sources of financecome into the picture, and here we actually rely mostly on finance coming from other funds other thanthe ones that we manage ourselves. Here is where the private and public financing comes in through78

Design and Implementation of REDD+ Results-based Finance at theJurisdictional Scale through the FCPF Carbon Fund
Alexander Lotsch (World Bank)

Video Conference

IDA, the World Bank’s own investments, Forest Investment Program 4 , or Global Environment
Facility 5 (GEF) financing, and provide private sector is important source of financing here as well tofinance the actions that would result in emission reductions and mitigation results in the long term.
Of course, the other major source of financing that we have is then from results-based finance forverified emission reductions that were achieved in a fashion that achieves both development objectives
and climate objectives at the same time.
This is our basic phased model and this follows basically the framework under the Climate Change
Convention.

This is the kind of framework that many countries are putting in place.

in the first box on the left, but are transitioning swiftly to the second box.
schemes that will be implementing the scheme on the ground.
those in just a moment.

45

http://www.climateinvestmentfunds.org/cif/node/5
https://www.thegef.org/gef/

79

Many are still

Soon I think will have

I will give you a few examples ofVideo ConferenceThis is a visual impression here that stakeholder engagement is very important, also for scaling.
This involves the involvement of stakeholders at all levels from national down to jurisdictions and thecommunity levels.

Much of what these funds have achieved so far is the establishment of soundinstitutional structures and the engagement of stakeholders, which is one of the prerequisites for
successful implementation on the ground and the scaling up thereon.

I can discuss that in moredetail if that is of interest in particular.
Another area of course is the role of technology in achieving these results at scale.

As many ofyou will know and appreciate there has been a proliferation of technology in recent years in terms of
how we can now map natural resources, the landscapes, forest areas, and agricultural areas at increasing
scales with increasingly reliable precision.
That can and does lead in many to our countries to a high degree of confusion in terms of how tomost effectively harness all this technology.

One of the areas that we are supporting through thetechnical assistance programs are essentially capacity building on methodologies, but also decisions of
the board that help countries again at the national and jurisdictional level to make the right choices interms of the data, technologies, and the methods that they choose to achieve the results, measure, anddemonstrate the results that they have achieved through their programs.
The REDD+ Decision Support Toolbox

80

Design and Implementation of REDD+ Results-based Finance at theJurisdictional Scale through the FCPF Carbon Fund
Alexander Lotsch (World Bank)

Video Conference

As a bit of an advertisement of the kind of work that we have done and promoted through thiswork, here is an example of an online REDD+ Decision Support Toolbox 6 that helps in an interactive
fashion through a web-based interface, countries to develop incrementally the reference level anddesign a forest monitoring approach.

It pulls in various sources of globally available datasets to comeup with back-of-the-envelope approximate estimates for reference levels at various scales nationally or
sub-nationally going down to the district level in most countries.

That helps facilitate the design ofreference level and coordination and harmonization of that design at the jurisdictional level and at thenational level.

Several countries have used and explored this as they were preparing reference levels,

for instance, reference level submissions through UNFCCC over the last couple of months, andharmonizing that with their efforts to develop a program for the FCPF Carbon Fund.

This is one of

the areas where we support technical work that allows the scaling from bottom up and top down at thesame time through exploration of data and interactive data analysis.
This is again just a quick snapshot of the capacity building that is necessary as a key element for
scaling.

Here is the training materials that we have developed with several partners that you see

identified at the bottom of the slide.

This is material that we have been rolling out and are rolling out

going forward as countries are preparing programs for Carbon Fund financing.

6

https://redd-dst.ags.io/accounts/login/81Video Conference
Another area that I would like to point out here are the standards that have been developed in thecontext of the work, in particular of the FCPF Carbon Fund so far, but also the readiness fund.
area of innovation is the notion and definition of readiness.

One

Of course, many of you will appreciatethat readiness has been a key element of the REDD+ negotiations for the last couple of years.
Through the work of the FCPF as well as other programs like the UN-REDD 7, we have a much better
understanding what the key ingredients are now for effective REDD+ preparation and implementation.
We have developed an assessment framework that many countries are currently using as a they comeout of several years of capacity building at the national level and are transitioning in to a climate
finance phase to assess their progress and identify the gaps including financing gaps.
The second picture that you see here is the Carbon Fund Methodological Framework 8, which wasdeveloped in participation with many of our countries and our donors that essentially has established atechnical guidance under which the Carbon Fund programs need to operate.

It specifies certain

requirements on how reference levels need to be designed and the quality standards that need to be
met as emission reductions are measured, reported, and verified.

That is effectively amounting to a

standard under which all these programs need to operate.
Also on the legal side we have made headway.
emission reduction payment agreements.

We have developed general conditions for future

That is a piece of legal work that fundamentally defines therelationship between the sellers and buyers of carbon, or the relationship between the donors and thecontributors to the fund and the REDD countries that will generate emission reductions through theimplementation of the programs.

I can go into any of these areas in a bit more detail.

I just wanted

to point out that through the work that we have done, from the perspective of scaling, it is very
important to have sound frameworks to measure progress, to establish standards, and the legal
relationship.

7
8

http://www.un-redd.org/

https://www.forestcarbonpartnership.org/sites/fcp/files/2014/MArch/March/FCPF%20Carbon%2
0Fund%20Methodological%20Framework%20Final%20Dec%2020%202013.pdf

82

Design and Implementation of REDD+ Results-based Finance at theJurisdictional Scale through the FCPF Carbon Fund
Alexander Lotsch (World Bank)

Video Conference

Moving on to a bit more specificity on the countries that we have in the pipeline, what you see
here across the top are the number of the countries that are currently in the pipeline for the Carbon
Fund.

What I would like to point out is the first row, which shows the accounting areas in millionsof hectares and the fraction of the land area of the respective countries. As you can see, many of the
programs that have been proposed have proposed a very large area of the country’s land area. You
can see Costa Rico’s program encompasses 80% of the country’s land area, or Guatemala, the entire
country.
On the second slide is the most recent addition to our pipeline.

Those were decisions made justthree months back by the Carbon Fund participants. Again, you see that the jurisdictions that havebeen proposed encompass a relatively larger share of those countries and land area, and therefore havethe potential to make a significant impact on the mitigation objectives of these countries.
An Example from Vietnam

Just to wrap up, I will provide a few examples from our portfolio.

I take an example from theAsia region. One of the programs that is proposed and currently being prepared at the jurisdictional
scale is one in Vietnam, which includes six provinces in the north central coast area that we see here on
the map.

Several of these areas have also been supported by Japan through technical assistanceprovided by JICA, as well as many other development partners.

83

We are talking about five million

Video Conference
hectares of land area, 16% of Vietnam’s land area, and 2.5 million hectares of forests in an area that is
estimated to have a relatively high level of emissions historically.
What is currently happening, again with the support by JICA and other development partners
including the US as well as the FCPF, is the development of so-called Provincial REDD Action Plans
which are meant to be ambitious, scalable and financially sound schemes.

We implemented a seriesof actions that would achieve the results that would be compensated for or paid for by the Carbon
Fund later on.

Again this relies on broad support from a number of development partners, and only

through this collaborative financing technical assistance and programmatic approach like the one you
see here, it is becoming possible.

The way this is going to be rolled out is, from the perspective of Vietnam, in the same threephases that I described earlier, so we already have experience of several years of capacity building at
the national level as well as piloting various elements of REDD+ at the sub-national level. What iscurrently being prepared is a program at the level of the six provinces that would result in sustained
stream of results-based finance starting later in this decade and going to the next decade.
Another important area is the necessary financing of program activities, so the kind ofinvestments that are needed to generate the emission reductions, so that needs investments in forest
sector development, planning, land use planning, energy programs, and etcetera, these are currently
they are being developed and require financing.

One of the areas of constructive collaboration,

84

Design and Implementation of REDD+ Results-based Finance at theJurisdictional Scale through the FCPF Carbon Fund
Alexander Lotsch (World Bank)

Video Conference

including with Japan through JICA and through World Bank policy lending, which is currently
prepared, that would provide investment and finance through budgetary supports to make theseactions financially viable.
One last example is the Humbo landscape.

What has resulted from that experience is a muchlarger program in the Oromia Forested Landscape. A much larger program is now being developed
encompassing almost 30 million hectares with a population of over 30 million people with the
expectation that several tens of millions of US dollars could be generated in terms of emission
reduction payments over the next couple of years.

That is a program that is mostly financed throughthe ISFL of the BioCarbon Fund, but packaged and bundled nicely with upstream capacity building
from the FCPF and other development partners.

This is the kind of result that countries are now atthe verge of being able to implement these types of programs at a much larger scale having benefitted
from the experience of piloting such teams at a smaller scale previously.
Conclusion

I will now give a few concluding thoughts.

Let me just emphasize the importance of soundgovernance and stakeholder engagement, an absolute prerequisite for scalability and in the long term.
Equally important is the leveraging of financing, results-based finance. As a standalone financing
vehicle, it is unlikely to achieve the goals that the countries have set themselves.

85

Therefore, it requiresVideo Conference
leveraging from other sources of financing from the private sector through development of financing
and other investment financing.

The leveraging of that is absolutely critical.

Also critical is theassociated benefit sharing, which has to be designed differently once operated at the scale of entire
jurisdictions, and eventually countries, and where the attribution of specific results to different
communities or individual stakeholders is very difficult to achieve.
support and capacity building are necessary going forward.

Of course, sustained technical

We have been talking about the readinessphase that leads to an enabling environment, that in fact continuous capacity building, especially at thejurisdictional level, which is the level at which most countries are working now, is an important element
going forward.

Last but not least is the political leadership at all levels from the national level down

to the jurisdiction, and the associated effective inter-sector coordination make these schemes viable
and financially viable, as well as having environmental and climate integrity
I am looking forward to a round of questions and answers.

86