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USAIDWashington, DC4 October 2010
NESTED APPROACHES AND MOBILIZING EARLY START PRIVATE
FINANCE FOR REDDJacob Olander
Director, Katoomba Incubator
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REDD in Context
• 17% of global emissions
• Can’t keep to < 2°C without dealing with DD
• Rare point of consensus in international negotiations
• $4.5B commitment for 2010-2012, post-Copenhagen CoP
• Enthusiasm for REDD projects builds after Bali
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Context for projects changing rapidly
• Common expectation: Projects in compliance markets will operate in ways similar to projects in voluntary markets, or to CDM
• Current situation: Uncertainties surround both projects and markets
• Stand-alone projects likely to be, at best, transitional approach
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Trends
• 2009-2010 growing emphasis on national-level frameworks
• Projects questioned Insufficient scale, need to be complemented by
policies and programs Environmental integrity Leakage risks
• UNFCCC: 3 Phases for REDD (FCCC/AWGLCA/2009/L.7/Add.6):
1. development of national strategies or action plans, policies and measures and capacity-building,
2. implementation of national policies and measures, and [sub] national strategies or action plans
3. and evolving into results-based actions
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Elements from US legislation (APA)
• Emphasis on national, sector-wide approach to forests “the quantity of the offset credits is determined by
comparing the national emissions from deforestation relative to a national deforestation baseline for that country established, in accordance with [a bilateral or multilateral treaty with the US]”
Country should establish a trajectory to zero net deforestation in 20 years
• Subnational (state, province) frameworks recognized during a 5-year transition phase
• Very limited recognition of projects If quantity of credits is determined by reference to
national baseline, credits may be issued to projects
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Challenges for national approaches
• Lag time to create institutional capacity and frameworks to • Measure, monitor and report emissions• Implement measures to reduce deforestation
nationwide• Need for local rights, control and benefits• Private investors prefer projects
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REDD funding in context: Finance Gap
$0.70 $1.50
$15.00
0
2
4
6
8
10
12
14
16
ODA for forest conservation (2005-2007 p.a.) *
REDD+ Partnership commitments
Needed
Finance per yer (US$BN)*World Bank, 2008. in
Lawlor and Olander, 2009
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REDD funding in context: Scale of regulated markets
$0.70 $1.50
$15.00
$144.00
0
20
40
60
80
100
120
140
160
ODA for forest conservation
(2005-2007 p.a.)
REDD+ Partnership commitments
Needed Carbon market 2009
Finance p.a. (US$BN)
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Nested Approach
Originally proposed by Pedroni, Streck et al, introduced in negotiations by group of Latin American countries as an alternative to an exclusively national approach
Allows project-level activities to generate offsets in a transitional phase and/or in frameworks linked to national level accounts and crediting
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Key elements for nesting, national level
• Accounting: Consistency across scales for measurement and monitoring
• Attribution: Net reductions for which project is responsible
• Allocation: How and to whom are rights to credits or revenues distributed?
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Accounting: Measurement and monitoring
Scientific guidance and methods are relatively established, and data sets improving at multiple scales
Need for national guidance to ensure consistency across scales, e.g.
• Eligible activities, pools
• Spatio-temporal consistency
• Stratification
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Attribution: Baselines
National aggregate projections based on technical/political formulae (historical adjusted for national circumstances)
Reductions below BAU or some, “crediting baseline” would be recognized/compensated
Nepstad et al, 2010.
Far more difficult to determine who is likely to deforest where at finer resolution
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Attribution: Baselines (2)
Project-level approaches with spatially explicit projections (e.g. VCS)
Useful transitional tool, while national systems established but• Expensive
• Potential for inconsistencies across projects and scales
• Risk of gaming
Move to national or subnational spatially explicit baselines• “Public infrastructure:” Shared platform
• Basis for project-level baselines or
• Mechanism for assigning incentives, prioritizing investments
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Attribution: Leakage
Reduces net emissions benefits attributable to projects
Expanding boundaries (subnational or national systems) can help capture
Needs to be
• Mitigated or quantified by project
• Assumed by subnational or national system
Leakage protocols
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Allocation: Who owns carbon?
• Need for legal clarity, little existing specific legislation
• Systems may recognize rights to carbon credits or rights to revenue
• But legal rights are only part of the equation…
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Allocation: Rights to how much?
Intimately linked to questions of attribution and overall REDD strategies
Project-level calculations adjusted to ensure integrity of overall system
• Leakage mitigation/stock maintenance
• Permanence buffers
• Enabling policies and programs
Under national systems, project-level baselines and accounting could become only indicative for allocation of carbon credits
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Allocation: Linking project- and national-levelperformance
BAU
Crediting baseline
National emissions 1
National emissions 2
Project emissions reductions
National emissions reductions
Volume of project credits likely to be linked, to country performance against crediting baseline
Emis
sio
ns
red
uct
ion
s
Significant additional risk for projectdevelopers
t
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• Freestanding subnational activities, direct international crediting
• Subnational activity linked to national accounting
International crediting
National crediting
• National activities, no subnationalcrediting
Climate Focus-Forest Trends. 2010.
Options: International level
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Options: Early-stage actions
• Build public information infrastructure for nested projects (baselines, MRV)
• Establish policies that recognize early-action projects Recognition of carbon accounting and baselines using
approved protocols (limited duration)
Registries
Commitment to incorporate into national accounting and subnational allocations of credits or revenues
• Establish national and international mechanisms to reduce risks and leverage private investment