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Understanding REDD: Implications for Lao PDR, Nepal and Vietnam

Richard McNally, Nathan Sage, and Tim Holland

Commissioned by SNV April 2009

TABLE OF CONTENTS

Abbreviations………………………………………………..................………….......................5

Preface………………………………………………..................……………………....................... 7

Executive Summary………………………………………………..................….....................8

Introduction………………………………………………………………………………..................... 9

Chapter 1: Design of a Future International REDD Mechanism.…..................11

1.1 BACKGROUND……………………………………………………………………………………...........

111.2 DESIGN ISSUES IN INTERENATIONAL REDD PROPOSALS…………………………………

12Issue 1: Scope of a REDD mechanism12Issue 2: Estimating carbon credits under a REDD mechanism

13Issue 3: Framework and financing under a REDD mechanism14Issue 4: Acceptability of credits under the REDD mechanism 14Country submissions on REDD15

1.3 PROJECT LEVEL REDD: THE NESTED APPROACH……………………………………………… 16

Chapter 2: REDD Initiatives…………………………………………………….......................… 18

1: Noel Kempff Mercado Climate Action Project, Bolivia182: The Pilot Program to Protect the Brazilian Rain Forest and Amazonian

Protected Areas Program, Brazil

233: Congo Forest Partnership and Commission of Forest Ministers of CentralAfrican 254: Ulu Masen Ecosystem Project, Aceh, Indonesia 285: The Juma Sustainable Development Reserve RED Project, Brazil306: International and Project-based Initiatives Underway

32LESSONS LEARNT FROM REDD: SUMMING UP……………………………………………34

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Chapter 3: REDD Methodology……………………………………………….....................…36

3.1 THE VOLUNTARY CARBON STANDARD: GUIDANCE FOR AGRICULTURE, AND OTHER LAND USE PROJECTS………………………………………………………….36

3.2 THE WORLD BANK BIO-CARBON FUND RED METHODOLOGY………………………….38

3.3 THE CLIMATE, COMMUNITY AND BIODIVERSITY STANDARD………………………….38

Chapter 4: Remote Sensing (RS) and REDD...................................................41

4.1 RS PRODUCTS AVAILABLE..............................................................................424.1.1 Optical Sensors 444.1.2 Radar and Laser Sensors44

4.2 FOREST COVER, BIOMASS, AND DEGRADATION..............................................444.2.1 Measuring Biomass 444.2.2 Assessing Degradation 45

4.3 PROJECT METHODOLOGIES........................................................................... 464.3.1 Noel Kempff Mercado Climate Action Project 464.3.2 Juma Sustainable Development Reserve484.3.3 Ulu Masen484.3.4 Central African Forests Commission (COMIFAC) Pilot Project494.3.5 ARBCP Project 494.3.6 General Lessons50

4.4 OPERATIONAL RECOMMENDATIONS FOR RS IN REDD PROJECTS....................51

4.5 NATIONAL FOREST MONITORING SCHEMES...................................................534.5.1 Lao PDR 534.5.2 Nepal 534.5.3 Vietnam 54

4.6 FUTURE PRIORITIES FOR REMOTE SENSING AND REDD.................................55

Chapter 5: Understanding the Impacts of REDD on the Poor…....................57

Issue 1: How the REDD mechanism is designed…..……….…………………………57Issue 2: Who owns the credits……………………………………………………………….58Issue 3: Estimating compensation under REDD……………………………………….59Issue 4: The benefit sharing mechanism………………………………………………...59

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Issue 5: The REDD measures introduced……………………………………………….. 60Summing up ........................................................................................... 61

Chapter 6: Country Case Studies………………………………………….….....................63

6.1 LAO PDR……………………………………………………………………………………………………

63(i) Background on forestry in Lao PDR

63(ii) REDD readiness of Lao PDR

666.2 NEPAL……………………………………………………………………………………………………….

69(i) Background on Forestry in Nepal 69(ii) REDD readiness of Nepal 72

6.3 VIETNAM……………………………………………………………………………………………………

74(i) Background on forestry in Vietnam

74(ii) REDD readiness of Vietnam

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Chapter 7: Stakeholder Mapping………………………………………………....................80

ORGANSATIONS WORKING ON REDD IN LAO PDR, VIETNAM AND NEPAL 80Overview 80Multilateral Donors 80National Governments & Bilateral Overseas Development Assistance

84International Organisations 86Non-governmental Organisations 88Lao PDR 90Vietnam 91Nepal 92

Appendix I Methodology for estimating reductions of GHG emissions from Mosaic deforestation....................................................................................................... 93

Appendix II Key issues in designing pro-poor REDD agreements.............................101

References........................................................................................................ 103

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TablesTable 1-1: Definition of Forestation, Deforestation, and Degradation......................

12Table 1-2: Country Submissions on REDD.............................................................

15Table 2-1: Nöel Kempff Mercado Project: Contributions and Offsets Assigned.........

21Table 4-1: Summary of selected RS sensors.........................................................

43Table 4-2: Remote sensing use by selected projects.............................................

50Table 4-3: Vietnam's four rounds of forest inventory............................................

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FiguresFigure i -1: A Breakdown of Global Greenhouse Gas Emissions.............................

9Figure 1-1: An Explanation of the Baseline to Calculate Carbon Credits.................

13Figure 3-1: The Steps Toward Validation of REDD Projects...................................

39Figure 3-2: CCB Standards................................................................................. 40Figure 4-1: Impact of measurement uncertainty on carbon crediting.....................

42Figure 4-2: Example of NDFI images from Brazilian Amazon.................................

46Figure 4-3: Map of Noel Kempff Mercado Climate Action Project...........................

47Figure 5-1: Possible Measures Under a REDD Mechanism.....................................

61Figure 7-1: The Steps for Piloting REDD.............................................................. 81

MapsMap 6-1: Deforestation and Poverty in Lao PDR.................................................. 64Map 6-2: Forest Cover Map of Nepal…………………………………….............................

70Map 6-3: Land Use and Cover Change in Vietnam...............................................74Map 6-4: Poverty and Protected Areas in Vietnam...............................................

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ABBREVIATIONS

AFOLU Agriculture, Forestry and Other Land Use ProjectsA/R CDM Afforestation and Reforestation Clean Development MechanismCDM Clean Development Mechanism Executive BoardCCBA Climate, Community and Biodiversity AllianceCER Certified Emission ReductionCoP Conference of PartiesDNA Designated National AuthorityFAO Forestry and Agriculture OrganisationFFI Fauna and Flora InternationalFSC Forest Stewardship CouncilIPCC Intergovernmental Panel on Climate ChangeIPCC GPG Intergovernmental Panel on Climate Change Good Practice GuidanceLULUCF Land Use, Land Use Change and ForestryPES Payment for Environmental / Ecosystems ServicesRECOFTC Regional Community Forestry Training Center for Asia and the PacificRED Reduced Emissions from DeforestationREDD Reduced Emissions from Deforestation and forest DegradationR-PIN Readiness Plan Idea Note SNV SNV Netherlands Development OrganisationUNFCCC United Nations Framework Convention on Climate ChangeUNREDD United Nations REDD programVCS Voluntary Carbon StandardVCU Voluntary Carbon Unit VER Voluntary Emission ReductionWBCSD World Business Council for Sustainable DevelopmentWB-FCPF World Bank Forest Carbon Partnership FacilityWWF World Wide Fund for Nature

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SNV Netherlands Development Organisation is a Netherlands based international NGO that delivers capacity development advisory services to over 2,000 clients in 32 countries in Africa, Asia, Latin America and the Balkans. In Asia, SNV provides capacity development services to government, non-government and private sector organisations in Nepal, Vietnam, Bhutan, Lao PDR, Cambodia and Bangladesh as well as to a number of regional organisations and networks. Our 140 advisers in Asia work with local capacity builders and local actors, primarily those who operate at national and meso levels, in strengthening their capacity to effectively realise poverty reduction and good governance. SNV aims to achieve development results in two areas:

(1) Reducing extreme poverty by increasing production, employment and equitable income opportunities via our work in three sectors: Smallholder Cash Crops, Pro-poor Sustainable Tourism, Forest Products, and

(2) Improving the access, coverage and quality of basic services via our work in two sectors: Water, Sanitation & Hygiene, and Renewable Energy.

ICC IndoChina Carbon was established in 2008 with the aim of promoting cleaner development and forest conservation across the region by tapping into finance from carbon markets. The company’s founders bring over 25 years of experience designing, negotiating and managing projects in the region. Our main activities include: (i) offset projects; (ii) corporate strategies; (iii) climate solutions. With our experience in the forestry sector, the issue of reduced emissions from deforestation and degradation (REDD) has become a growing focus for the company. ICC is a project developer of REDD projects and a provider of advisory services on REDD.

For further information:

SNV-Asia IndoChina Carbon (ICC)Rob Ukkerman Richard McNally / Nathan SageRegional Network Leader Forest Products [email protected] 218 Doi Can, Hanoi, VietnamTel: +84 4 3846 3791 Fax: +84 4 3846 3794 [email protected] www.snvworld.org/Asia

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The content, findings, interpretations and conclusions of the papers in this publication are solely the views of the authors and do not necessarily reflect those of SNV or other organizations participating in this publication. The material presented in this publication does not imply the endorsement or the expression of any opinion about the legal status of any country, territory, administration or authority, or the delimitation of its frontier or boundaries by SNV or other organizations that have participated in the preparation of this publication.

PREFACE

During the Asia Pacific Forestry Week, held in Hanoi in April 2008, much of the attention was focused on climate change and carbon funding. The new Reduced Emissions from Deforestation and forest Degradation (REDD) initiative that was launched in Bali during the COP 13 of the UNFCCC, triggers great expectations for new funding mechanisms in the forestry sector. Carbon funds could for a first time in history finance services that forests deliver and are normally not integrated in the market system. The feeling was that issues such as illegal logging, sustainable forest management and certification can all be dealt with when carbon funding becomes a reality. As REDD still has to be developed, there are many concerns about how the system will operate, especially towards the poor and indigenous people who depend on forests.

To jump start REDD the World Bank launched their Forest Carbon Partnership Facility at the Bali COP, aimed at supporting countries in creating capacity to deal with REDD. Countries were invited to write a Readiness Plan Idea Notes to qualify for FCPF support. SNV, together with a number of other organisations, supported the Governments of Vietnam and Nepal in drafting these documents. Both countries together with Lao PDR qualified for this WB programme.

At the APFW and during the process of drafting the R-PINs, it became clear that REDD raises many questions. To inform all stakeholders on the current understanding on carbon funding and REDD in particular the current study was commissioned to IndoChina Carbon. The objective was to do an inventory of proposed REDD mechanisms, including the technical methodologies for implementation and ideas for both compliance and voluntary financing systems and give an overview of the involved stakeholders and their activities. Special attention is given to pro-poor issues as poverty alleviation is SNV’s core business. The study focuses on Asia with special attention to Vietnam, Lao PDR and Nepal, where SNV has forestry programmes.

Rob Ukkerman, Regional Network Leader Forest ProductsSNV-Asia

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EXECUTIVE SUMMARYForests play an important role in the regulation of the climate though the sequestration of carbon. An estimated 18 percent of annual global emissions are a result of the removal of forests. As concerns intensify over global climate change as a result of man- made activities, so too does the debate over the importance of forests as carbon sinks. Although afforestation and reforestation is addressed through the Clean Development Mechanism there continues to be a lack of adequate incentives to protect forests for the ecological services they provide to the global climate. This may be changing.

There is renewed interest in the notion of ‘compensated reductions’ where individuals, groups and/or governments are compensated for not cutting down forests. This is a highly cost effective way to reduce emissions of Carbon Dioxide into the atmosphere. Although this issue of reduced emissions from deforestation and forest degradation (REDD) has been hotly debated in the past and ultimately rejected, it would appear that there is growing support and momentum to bring about an international agreement on REDD. How that will be designed is unclear and this report goes some way in understanding the likely design of any future agreement. However, even if an international agreement is not reached there are already REDD projects appearing across the globe and ever more sophisticated techniques and methodologies are being developed to monitor and measure REDD credits. Some of the latest methodological developments are outlined in this report.

As well as concerns over whether there exist adequate technologies and methods to estimate carbon emissions avoided from reduced deforestation and degradation, there has also been concerns over the impact of such schemes on the poorest –in particular how such schemes could harm the livelihoods of the many forest dwelling communities who do not have security of tenure. Such concerns must be properly addressed for any REDD mechanism to survive. The relationship of REDD and the poor is explicitly examined.

As the interest and possible opportunities from REDD grows, so to does the desire for different groups to fully understand how it works and how they should engage. This report, commissioned by SNV, helps the reader navigate the rapidly developing world of REDD. It is also designed to be used as guide and to provide recommendations on how to move the REDD debate forward in a number of countries. Of particular interest to SNV are Lao PDR, Nepal and Vietnam. Each of these countries is receiving support from ongoing international initiatives to become ‘REDD ready’ and are therefore important countries to learn lessons from REDD in the run up to Copenhagen. At this meeting there will be decisions on a future REDD agreement.

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INTRODUCTION

Approximately 35 per cent of greenhouse gases in the atmosphere are a result of past deforestation and 18 percent of annual global emissions are from continued deforestation.1 As shown in Figure 1 deforestation is the second single greenhouse gas source, behind energy production. How forests are managed has a profound impact on the global climate.

Figure i-1: A breakdown of global GHG emissions

In the lead up to the Kyoto Protocol there were expectations that significant finances could be mobilized to arrest deforestation and the associated carbon emissions. However, in Marakkesh it was decided that only reforestation and afforestation could be accepted land uses under the Kyoto Protocol. However, in ten years on the forests of the world will continue to be deforested and degraded at an alarming rate and there are very few afforestation/reforestation projects producing registered carbon emission reduction credits. This has led to renewed calls for the inclusion of reduced emissions from deforestation and forest degradation (REDD) as part of an international agreement to combat climate change. The Conference of Parties (COP) 13 in Bali in December 2007 elevated this issue center stage and produced a road map to integrate REDD. 1 Australian National University (2008), "Green Carbon, the role of natural forests in carbon storage",

Canberra.

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REDD has sparked considerable interest from a broad range of groups: governments, multilateral development banks, investment banks, research groups and non government organizations. Such groups recognize the possibility of harnessing considerable financial streams from international carbon markets for forest protection and poverty alleviation. Although, it remains unclear how REDD could be integrated into a future climate change framework, REDD projects are already developing around the world. The first chapter of this desk study examines the possible design of a future international REDD mechanism, highlighting and discussing some of the key design issues which will need to be examined and addressed within any future international REDD mechanism.

Although no international REDD mechanism has been agreed, a number of REDD initiatives are already underway or being prepared. Following COP 13 in Bali the World Bank established a Forest Carbon Partnership Facility (FCPF) to pilot REDD in a number of selected countries; the Norwegian Climate and Forest Initiative was established with similar aims. The lessons from these pilots will inform discussions in Copenhagen in 2009. Chapter two provides information and lessons learnt from the pioneer REDD projects around the world and describes some REDD initiatives in the pipeline. In chapter three information on the different methodologies, which currently exist or which are being developed in order to gain carbon credits from REDD are described.

For an organisation such as SNV, improving forest management as way to enhance the lives of the poorest and to protect the environment are core to its mission. SNV recognizes that there could be great opportunities from REDD, to provide additional income from forest protection and hence arrest forest conversion. However, this will only happen so long as the schemes are designed in a way where those depending on the forests have sufficient incentives to protect them. Chapter four of this desk study examines the critical issue of REDD and poverty and distills some of the key considerations which must be taken on board to ensure REDD works for and not against the poor. Such considerations can be taken forward in future designs of REDD schemes.

Learning from the first four chapters, chapter five of this desk study looks at the current situation of the forestry sector in a number of SNV Asia priority countries and explores their ability to introduce REDD schemes. Summarising SNV activities in each country helps to build a foundation to provide recommendations. A profile and recommendations on REDD engagement are provided for Lao PDR, Nepal and Vietnam. This information should provide a platform for SNV to move forward on REDD in those countries.

Finally, in order to properly engage in the REDD debate it is necessary to see which other groups are working in this realm. There are also a myriad of others groups interested or engaged in the REDD discussions. Chapter six maps out the key players in the REDD debate and for each group a summary of their interests and activities are provided.

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Chapter 1: DESIGN OF A FUTURE INTERNATIONAL REDD MECHANISMIn this chapter the possible design of an international REDD mechanism will be examined. There have been ongoing discussions on how REDD would work and different proposals from a number of countries have been tabled. These will be examined and a discussion of some of the key design principles which will need to be ironed out and agreed as part of any international REDD mechanism will be explored.

1.1 BACKGROUND

At the 11th Conference of Parties of the UN Framework Convention on Climate Change (UNFCCC), Papua New Guinea and Costa Rica, supported by a number of other developing countries submitted a proposal for including reduced emissions from avoided deforestation. It is believed that these payments could shift the balance away from the economic incentives currently favoring deforestation, thus making sustainable forest management a more profitable alternative. The issue had been discussed previously but due to methodological constraints, concerns over issues such as leakage and a general lack of political support from some countries, activities to reduce emissions were not accepted for generating credible emissions reductions under the Kyoto Protocol.

However, in the past few years there has been renewed interest in REDD and the need to protect forests for their carbon sequestration value. At COP 11 in 2005 and subsequent country submissions on REDD advocated that methodologies and tools were now available for estimating emissions form deforestation with an accepted level of certainty. The stern report further highlighted the importance of forests as a carbon sink and the fact that protecting existing forest areas is a highly cost-effective mechanism for reducing emissions into the global atmosphere.

Despite its simple theoretical foundations, REDD is not that simple to put into practice and many different proposals have emerged due to various technical and political barriers in design. The submission by Costa Rica and Papua New Guinea to COP 11 left open, whether REDD should happen under a separate forest protocol or as a part of an overall post-2012 protocol under the Convention. The mechanism how it would work would be through “compensated reductions” (CR), as proposed by a group of Brazilian authors.2 Under this model emission reduction certificates from REDD would be allowed to help industrialized countries in fulfilling their emission targets. This would be different to the project-based CDM, as implementation would take place at the country level. A baseline against which reductions would be established and the country would commit to reduce these emissions below the baseline.3

COP 11 called on Parties to the Climate Convention to submit their views and invited interested Parties to a workshop on the issue held in Rome in August 2006. COP 13 in Bali at the end of 2007 was requested to decide on the treatment of REDD after 2012. It was decided as part of the ‘Bali roadmap’ that some of the design issues would be further explored by testing in a number of pilot countries. A number of 2 Santelli, M and Moutinho, P et al, (2005), ‘Tropical deforestation and the Kyoto Protocol, Climate

Change 71(3): 267-276. 3 Dutschke, M and Wolf, R (2007), Reducing emissions from deforestation in developing countries: the

way forward, GTZ, Eschborn.

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REDD initiatives like the World Bank Forest Carbon Partnership Fund were established to this end. The findings are meant to feed into the critical climate conference in Copenhagen in December 2009.

1.2 DESIGN ISSUES IN INTERENATIONAL REDD PROPOSALS

Based on the numerous proposals that have been submitted by Governments, NGOs and research institutes there are a number of critical design issues which have tended to dominate the debate on any future REDD mechanism. These center around how to determine which emissions can be captured under a REDD system and how to achieve this. These can be captured under four key design issues:

Issue 1: Scope of a REDD mechanism

A first important point is the scope of any REDD scheme; whether full or partial carbon accounting is used for quantifying emissions. With full accounting this would take into account the full range of land use activities which have a carbon dimension, so would include forested areas, agro-forestry, peat lands and so forth. Unlike the reporting under the UNFCCC, which covers all emission/removals from Land Use, Land Use Change and Forestry (LULUCF), under the Kyoto Protocol the reporting and accounting of emission/removals is mandatory only for afforestation and reforestation.4 Carrying out full accounting would clearly have the benefit that all carbon sinks are being managed. However, it poses greater methodological challenges and complexities. Hence, it would appear, at least for now that the scope will be on partial accounting of carbon stocks focusing on what are defined as ‘forest areas’ [see table 1 for commonly accepted definitions below].

Terms DefinitionForest land As part of COP7 (Marrakech accords) it was decided that parties could

select a single value of tree height, crown area and area to define forests, subject to certain ranges. The Designated National Authority in each country is responsible for forest definition (see http://cdm.unfccc.int/DNA)

Deforestation

Under decision 11/CP 7, the UNFCCC defined deforestation as ‘… the direct, human induced conversion of forested land to non-forested land’

Degradation The IPCC special report on ‘definitions and methodological options to inventory emissions from direct human induced degradation of forests and de-vegetation of other vegetation types’ (2003) present five different potential definitions of degradation. The following characteristics are common ‘… a direct, human induced, long term loss (persisting for x years or more) or at least Y % of forest carbon stocks [and forest values] since time T and not quantifying as deforestation’

Table 1-1: Definitions of forest, deforestation and degradation

Much of the thinking in terms of the scope of compensated reductions from forest use was, at least initially, on deforestation. The issue of forest degradation was initially viewed as too problematic due to difficulties of monitoring and therefore

4 GOFC-GOLD (2008), Reducing greenhouse gas emissions from deforestation and degradation in developing countries: a sourcebook of methods and procedures for monitoring, measuring and reporting, GOFC-GOLD report version COP 13-2, (GOFC-GOLD Project Office, Natural Resources Canada, Alberta, Canada).

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received less political support. However, the significance of forest degradation was highlighted in a number of the country submissions after COP 11, which could not simply be ignored. For example, forest degradation has been estimated to threaten about 60% of the productive lands in the Congo Basin5 and was found to be significant across both Latin American and Asian forests. Acknowledgement of the role of degradation in emissions was made at the Bali COP.6 In addition there have been great strides made in measuring and monitoring degradation.7 However, as shown in Table 1 there is no clear definition of degradation. Most countries support the broader scope of degradation and deforestation. Though there are some countries such as Brazil which would rather focus on deforestation.

Issue 2: Estimating carbon credits under a REDD mechanism

There are a number of differing opinions on how to determine the quantity of credits a country is entitled to. The first system, based on the idea of compensated reductions, uses a baseline and credit system. Here the baseline [or reference scenario] would set a likely scenario of deforestation and degradation. This scenario may follow historical rates or can be an estimation of likely future rates, or a combination. Credits would then be awarded based on how far below the baseline the country is able to reduce deforestation and degradation. This is represented in figure 2. This approach is currently the most widely supported. However, its critics point out that such a system benefits those countries that have high historical deforestation rates. It also opens up the perverse incentive for countries to deforest at faster rates to acquire larger credits into the future.

Figure 1-1: An example of the baseline to calculate carbon credits8

5 UNFCCC/FCCC/SBSTA/2007/ MISC.14, 2007. UNFCCC website www.unfccc.int.6 UNFCCC/CP/2007/6/Add.2.7 See GOFC-GOLD (2008), Reducing greenhouse gas emissions from deforestation and degradation in

developing countries: a sourcebook of methods and procedures for monitoring, measuring and reporting, GOFC-GOLD report version COP 13-2, (GOFC-GOLD Project Office, Natural Resources Canada, Alberta, Canada).

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Another approach which addresses the issue of benefiting the worst offenders is to base payments on carbon stocks, not on emission reductions. In essence, what this does is open up an international market for carbon and allows groups to buy carbon no matter if it is under threat. It also overcomes the difficulty of estimating historical or future levels of deforestation and degradation. However, this has received less support as it is seen in some quarters as providing payments for some areas which are not under any threat and which they believe will be maintained anyway. The consensus would tend to favour the notion of compensated reductions and only providing payments and credits for those areas which are likely to be deforested or degraded.

Issue 3: Framework and financing under a REDD mechanism

Another outstanding issue is who will buy the credits and how will they be paid for. At present REDD is not accepted under the Clean Development Mechanism so it is not possible to buy Certified Emission Reduction credits (CERs). However, it is possible to buy carbon credits under REDD schemes under voluntary markets – though at a largely lower price and under considerable uncertainty as to future prices. There continues to be an ongoing debate on whether REDD should be financed through international carbon markets or through stand alone funds. Brazil is a strong proponent of such a multilateral fund as it ensures that Annex I countries have to go beyond their commitments under Kyoto to meet their emission targets.9 The concern here is that REDD could produce a large quantity of cheap credits hence allowing Annex I countries to meet their emissions target with minimal structural changes to their own economies.

However, outside Brazil most countries support the idea of linking finance to the international carbon markets; the main reason being that it could generate considerably higher flows of finance and clear incentive structures. The preference would be to bring it under the UNFCCC and hence be subject to the same stringent requirements for CDM of the Kyoto Protocol. However, there is the real concern this could flood the market with cheap carbon credits and disrupt the existing incentive structures to move to lower carbon based economies. The other options are for a new Protocol to be developed under the UNFCCC which deals specifically with REDD and would be more linked to a new fund. However, this has raised its own concerns in terms of the time will take to establish a new protocol.10 Furthermore, some argue that there exists a framework already to buy and sell credits so why establish another. There are clearly central issues which need to be resolved.

As is discussed further in the next section such credits are already being traded in the voluntary market and some of the groups involved in buying the credits are expecting that it will eventually be bought and sold in the CER market. Whatever happens it is likely that trading in the voluntary market will continue in any case.

Issue 4: Acceptability of credits under the REDD mechanism

Currently carbon from afforestation/reforestation is recognized under the Kyoto Protocol CDM mechanism. Credits can be captured for reforestation and afforestation projects in eligible areas. To date there have been few CERs created under the CDM -

8 Taken from a presentation by the Ministry of Forestry by the Republic of Indonesia. http://www.oecd.org/dataoecd/39/12/40633791.pdf.

9 Peskett (2006), How Did Forest Fare In Nairobi? ODI Blog Friday, 15 December 2006.10 Alvarado, L, X,R and Wertz-Kanounnikoff, S (2007), ‘Why are we seeing REDD? An analysis of the

international debate on reducing emissions from deforestation and degradation in developing countries’.

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however with methodological refinements this is gradually changing.11 This lack of forestry CDM projects has been because of some difficulties of allowing projects to be accepted. In particular, due to ensuring permanence [the credits are permanent] and due to the issue of leakage [displacement of negative impacts]. REDD will have to contend with these same issues.

The issue of leakage was a major concern in earlier iteration of REDD; that arresting deforestation and degradation in one area would simply push it to another area. To overcome this, most proponents agree to introduce REDD at the national level and not the project level. This implies establishing national baselines and accounting emission reductions at the national level. The fact that financing would likely go to Government has raised concerns in some quarters, worried about whether the money will be adequately dispersed to the affected areas and communities and hence the proper incentives are in place. However, some of the changes will need to come at the national level in terms of changing policies, such as improving capacity to protect certain areas. Also there is no reason why the money could not be devolved to lower administrative units. However, how this will be achieved in practice and how the money is dispersed will be a critical, although contentious issue. The fact that the issue of national leakage may be addressed through national systems does not address the issue of international leakage – when individuals or groups go into other countries to continue deforestation and degradation.

The issue of permanence and liability continues to be a key issue in relation to forests and carbon. Various suggestions have been advanced to tackle this. These include ex-post payments – payments on the delivery of the credit – which are clearly preferred by the buyers as it reduces their risk. In cases where upfront funding is provided but to appease concerns of delivery by the buyers, mechanisms such as agreements to bring new areas under REDD schemes if current projects don’t deliver have been tabled; or the seller has to agree to repay for lost credits or the introduction of some form of bonds.

Two of the most supported mechanisms include “banking’’ some of the credits. Here a percentage of the credits are withheld from sale and used as insurance against possible failure of project activities to deliver emission reductions. These credits can then be provided to the buyer to compensate for the emission reductions which have not been achieved and delivered. A number of countries have stood by the current mechanism which exists for A/R forest projects under the CDM. These basically introduce the idea of ‘temporary credits’, which expire after a certain time period and have to be replaced. For something like a tree this can be around 25-45 years.

Country submissions on REDD

A summary of country submissions on the issues above are presented in the table below.

Papua New Guinea (and Coalition of Rainforest Nations)

Brazil EU Joint Research Center

Latin American countries

Central Africa (COMIFAC)

11 Neeff, T. Eichler, L. Deecke, I and Fehse F (2007), Update on markets for forestry offsets, CATIE, 2007.

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Scope Deforestation and degradation

Deforestation Deforestation and degradation

Deforestation and degradation

Deforestation and degradation

Framework Open (preferably in Kyoto)

New Protocol under UNFCCC

Not considered Kyoto Protocol Open

Financing Market based and tradable for Annex I countries

Voluntary fund by Annex I countries

Not considered Mixed (market and fund) tradable for Annex I countries

Mixed (market and fund) tradable for Annex I countries

Reference level

Historical (adjust for development)

Historical Historical (with reference to global rates)

Historical (adjust for development and past efforts)

Historical (adjust for development)

Liability Banking and borrowing

Temporary crediting

Temporary crediting

Banking and borrowing

Banking and borrowing

In country scope

National National National and local

National and Local

Table 1-2: Country submissions on REDD12

1.3 PROJECT LEVEL REDD: THE NESTED APPROACH

Although the final design of any international REDD mechanism is still to be determined this is unlikely to deter the growing investment in project level REDD initiatives. These REDD projects are being developed by local actors, research groups, international NGOs, and Banks. In Aceh, for example, there is a large REDD project being undertaken through a collaboration of the provincial authorities of Aceh, Fauna and Flora International, Carbon Conservation Ltd. and Merrill Lynch. Projects are currently being prepared in Indonesia, Papua New Guinea, Cambodia, Brazil to name but a few. These developments have spawned the notion of the ‘nested approach’. This approach recognizes that in order to attract the necessary private sector investment ‘project level REDD initiatives’ will be required. As pointed out by Pedoni13 there is a possible scenario where a country does not go below its baseline, even though a specific project has been successful in reducing emissions from deforestation. This is simply too risky to an investor who requires clearly delineated projects to invest in, where they can clearly identify and monitor their returns. The ‘nested approach’ proposes to credit sub-national projects independently from overall national performance and therefore provides a more attractive window for private sector involvement.

12 Adapted from Peskett (2008), Making REDD work for the poor (draft 2 for the poverty and environment partnership, ODI, London and Dutschke, M and Wolf, R (2007), Reducing emissions from deforestation in developing countries: the way forward, GTZ, Eschborn.

13 A presentation by Lucio Pedroni, The “Nested Approach” A flexible mechanism to reduce emissions from deforestation for the International Roundtable on Reducing Emissions from Deforestation and Forest Degradation in Developing Countries Brussels (Belgium), 24-25 Oct, 2007.

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Direct international crediting of project-level activities under the nested approach will only be possible until that time when a country begins claiming credits under a national-level REDD accounting program. The authors of the nested approach also suggest that countries engaging in project-level crediting may do so only with a commitment to progress to national-level accounting within a set timeframe. This approach is thus intended to be transitional and temporary rather than a permanent arrangement.14 Once a national program is in place, projects cannot be credited directly because to do so would risk double-counting credits that were also claimed at the national level - a situation that would render credits meaningless. This is not to say that project-level crediting cannot occur at all; it may play an important role in strategies for within-country payment distribution of credits issued at the national level.15 A transition from direct international crediting to a within-country distribution scheme will alter the body from which a project receives its credits, and - depending on national legislation - may also affect the number of credits a project receives. In order to guarantee security of investment, clear guidelines need to be in place overseeing how these types of transitions will occur.

Until an international REDD mechanism is decided there are inherent risks on moving forward on REDD projects. These risks are both political but also methodological. The fact that new agreed methodologies for REDD are being produced (see chapter 3) will ensure that the risks associated with the fungibility of credits will be diminished. Given the current trends it is highly likely the number of project REDD initiatives will continue to grow even without clear direction on the likely outcome on REDD at Copenhagen.

14 CATIE (2007). The “Nested Approach”: A flexible mechanism to reduce emissions from deforestation. Available from http://www-personal.umich.edu/~thoumi/Research/Carbon/Forests/Forests,%20AD% 20Critiques/Nested%20Approach%20to%20REDD.pdf

15 Ebeling, J., T. Neeff, S. Henders, C. Moore, F. Ascui, L. Peskett, J. Fehse, A. Sari, D. Wolfowitz, D., and Z. Harkin (2008). REDD policy scenarios and carbon markets. Report prepared for the Indonesian Forest Carbon Alliance (IFCA). Ecosecurities: Oxford, UK. 136 pages.

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Chapter 2:REDD Initiatives

Although the issue of REDD is only now receiving much attention and debate, particularly in the wake of COP-13 in Bali, the issue has been under discussed for much longer. Prior to the Kyoto protocol there were expectations that deforestation may be included as part of the Clean Development Mechanism (CDM). However, this never transpired. Nevertheless a number of REDD initiatives and projects have taken root. In this section some of the more prominent REDD initiatives will be discussed and reviewed. These early REDD-like initiatives and percolating REDD actions include:

1. Nöel Kempff Mercado Climate Action Project, Bolivia2. The Pilot Program to Protect the Brazilian Rain Forest (PP-G7) and Amazonian

Protected Areas (ARAP) Program, Brazil3. Congo Forest Partnership and Commission of Forest Ministers of Central African

(COMIFAC)4. Ulu Masen Ecosystem Project, Aceh, Indonesia 5. The Juma Sustainable Development Reserve RED Project, Brazil6. International and project-based initiatives underway

The final section of this chapter distils some of the lessons from the above initiatives and looks to the future in terms of probable trends, enabling factors and constraints of future REDD projects and initiatives.

1. THE NÖEL KEMPFF MERCADO CLIMATE ACTION PROJECT, BOLIVIA: A PROJECT APPROACH

Location: Nöel Kempff Mercado National Park, Bolivia Size: 1,582,000 hectares (3.9 million acres) from an original size of 642,000 ha (1.5 million acres) in 199516 Emissions Reduction: Prevents the release of 5.8 million tons of CO2 over 30 years Conservation Benefit: Preserves a diverse forest ecosystem Community Benefit: Provides alternative, sustainable economic opportunities Partners: Fundación Amigos de la Naturaleza (project manager); Government of Bolivia, American Electric Power Company, BP, PacifiCorp (investors); Winrock International Institute for Agricultural Development (carbon monitoring); Société Générale de Surveillance - SGS (verification)

BACKGROUNDThe Government of Bolivia, Fundación Amigos de la Naturaleza (Friends of Nature – FAN), the Nature Conservancy, American Electric Power System, BP and PacifiCorp created the Nöel Kempff Mercado Climate Action Project to reduce climate change by protecting 642,500 hectares of tropical forest that were threatened by timber logging and deforestation.17 The project, which was conceived under the US Initiative for Joint Implementation in 1995 and began in 1997, used US$1.6 million of its US$9.6 million in initial funding to purchase and terminate four logging concessions on 2.1 million 16 Nöel Kempff Mercado Project Design Document. CDM-A/R-PDD version 1.

http://conserveonline.org/workspaces/climate.change/ClimateActionProjects/NöelKempff/NKPDD.17 Combating Climate Change in Bolivia: Nöel Kempff Climate Action Project. A Nature Conservancy fact sheet.

http://www.nature.org/initiatives/climatechange/work/art4253.html.

19

acres of government-owned land and supporting the management and protection of these lands as part of the national park. The partners also sought to reduce slash-and-burn agriculture and create alternative income programs for surrounding communities. Whilst initiative seed funding for the project comes from the private sector investors, it is anticipated that the sale of voluntary carbon credits generated from the avoided deforestation would be reinvested into the project budget.

AIMS AND OBJECTIVESThe project is designed to simultaneously address climate change, conserve biodiversity and bring sustainable benefits to local communities. According to FAN, the project seeks to address the challenge of reducing commercial logging and slash and burn agriculture whilst creating corridors for the wildlife migration between wet and dry forests.18

The Nature Conservancy19 states the project objectives are to:

1) Prevent the release of up to 5.8 million tons of carbon dioxide over the next 30 years; 2) Double the range for species requiring large tracts of land including the Brazilian tapir and jaguar; 3) Decrease soil erosion and future agricultural runoff into the park’s rivers; 4) Develop a livelihood support program that promotes the sustainable management and use of natural resources to address encroachment within park boundaries; and 5) Assist local indigenous communities to attain legal status and secure land tenure.

According to the SSG project verification report for CCBA standard,20 the project comprises four components, namely:

1) Cessation of logging in the project area through the indemnification of logging concessions;2) Avoidance of deforestation in the project area;3) A sustainable development programme developed for the indigenous communities that live in the vicinity of the project area; and,4) Protection of the park financed through an endowment fund.

METHODOLOGY USEDUnder the UN Framework for Climate Change Convention (UNFCCC), pilot projects called Activities Implemented Jointly (AIJ) were established to test carbon-mitigation projects and gain insight for future mitigation strategies.21 These pilot projects can be divided into afforestation/reforestation (A/R) projects and carbon sequestration 18 Seifert-Granzin, J. The Nöel KempffClimate Action Project: Challenges for project based approaches in

future REDD schemes. An FAN Bolivia presentation at Conservation Finance Workshop. Vilm, 29 Jul – 3 Aug, 2007. www.bfn.de/fileadmin/MDB/documents/ina/vortraege/22_FAN_Nöel_Kempff-Seifert-Grenzin.pdf

19 Combating Climate Change in Bolivia: Nöel Kempff Climate Action Project. A Nature Conservancy fact sheet. http://www.nature.org/initiatives/climatechange/work/art4253.html.

20 SGS. The Nöel Kempff Climate Action Project.: Validation and Verification Report. Summary. Nov 2005. www.fanbo.org/serviciosambientales/proyectos/redd/ SummaryFinalVerificationReportNKCAP27Nov.pdf

21 May, P., Boyd, E., Veiga, F., and Chang, M. Description and analysis of the Nöel Kempff Mercado Climate Action project. In “Local sustainable development effects of forest carbon projects in Brazil and Bolivia: A view from the field.” IIED Environmental Economics Program. Jan 2004, pp. 71-89.

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projects. The project developed a project methodology that modifies a CDM A/R methodology template.22 According to SGS, the project verifier, the project “does not constitute an eligible activity under the CDM – which only allows for afforestation and reforestation – and, therefore, will not generate certified emission reductions (CER) as recognised under the Kyoto Protocol. However, the project has been assessed as were it an eligible activity in order to ensure that it is credible and comparable with CDM project activities. Output will be recognised as Voluntary Emission Reductions (VER), which cannot be used by Annex I Parties to meet their quantified emission limitation and reduction commitments under the Kyoto Protocol, but which may be of interest in the voluntary market and have similar qualities as CERs.”23

Winrock International Institute for Agricultural Development developed the carbon-monitoring program. The methodology, which has been validated by SGS, involves a standard and generally-accepted set of forest inventory and soil survey techniques.. The volumes of carbon sequestered in the park’s expansion areas are monitored and compared with carbon stocks outside the park that are still subject to harvesting; the difference between the baseline and new stocks is the amount of carbon the project assumes will be sequestered.24 Methods were employed to measure the effects of cessation of illegal logging and slash and burn within the project area compared to similar areas outside the project boundaries.25

The Nature Conservancy is proud to say that the Nöel Kempff project was “the first forest emissions reduction project to be verified by a third party, SGS, based on international standards used in the Kyoto Protocol.”26 According to SGS, carbon stocks were determined on the basis of 609 inventory plots that were measured at the start of the project including all carbon pools (e.g., trees, understory, litter, dead wood and soils to 30 cm depth). Furthermore, the methodology assumed in the baseline that no additional gains in carbon stock would occur during the 30-year life of the project, and provides for a more conservative estimate of the actual carbon stored.27 For baseline determination, project developers used GEOMOD, a spatial explicit dynamic model that predicts the size and area distribution of deforestation based on variables for relevant drivers (e.g., proximity of roads). Using thorough field procedures to measure real logging impacts and an advanced dual camera aerial videography technology the monitoring and verification program quantified with a high degree of precision how much carbon existed in the project area prior to commencement of the project, the carbon losses avoided, and how much carbon is captured as a result of the project. For the degradation baseline, an econometric model was applied.28

22 Nöel Kempff project methodology document. http://conserveonline.org/workspaces/climate.change/ ClimateActionProjects/NöelKempff/NKPDD.



25 Seifert-Granzin, J. The Nöel KempffClimate Action Project: Challenges for project based approaches in future REDD schemes. An FAN Bolivia presentation at Conservation Finance Workshop. Vilm, 29 Jul – 3 Aug, 2007. www.bfn.de/fileadmin/MDB/documents/ina/vortraege/22_FAN_Nöel_Kempff-Seifert-Grenzin.pdf



28 Carbon Monitoring. Nöel Kempff Mercado Climate Action Project. Website. http://www.Nöelkempff.com/ English/CarbonMonitoring.htm.

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The SGS project validation report (2005) states that “the project currently meets the relevant criteria for voluntary and potentially CDM-compliant project activities… The project is a voluntary project and is not eligible under the CDM. Accordingly, it was assessed against the current UNFCCC and CDM criteria for Land Use, Land Use Change and Forestry projects, and where these could not be applied (for example the use of an approved methodology), the principles of completeness, consistency, accuracy, transparency and scientific appropriateness were used.29

THE RESULTSFrom 1997-2005 (phase I), the project succeeded in expanding the park to a total of 1.58 million hectares, which includes the original project area of 642,458 hectares and an additional 830,000 hectares that was acquired.30 As a result, the project prevented a total of 1,034,107 metric tons of CO2 equivalent from being released into the atmosphere.31 The project’s carbon benefits are expected to last in perpetuity as the acquired lands were gazetted into the newly expanded national park, and a permanent endowment has been established to fund protection activities throughout the 30-year life of the project and beyond. The project is expected to avoid 5.8 megatons of CO2e net of baseline re-growth and leakage over its 30-year lifetime (ending 2027).32

Nöel Kempff Mercado Climate Action Project is one of the first REDD projects to mobilised non-governmental and corporate financing. Of the US$10.85 million initial funds, The Nature Conservancy contributed US$2.6 million and the private investors (AEP, BP, Pacificorp) contributed US$8.25 million.33 The Government of Bolivia is authorized to take possession of 49 percent of the certified offsets.

Table 2-1: Nöel Kempff Mercado Project: Contributions and Offsets Assigned34

According to Dutschke and Wolf (2007), a project that costs US$10.85 million and produces 5.8 megatons over a 30 year lifespan would equate to a price of US$1.87 per CO2 equivalent. Considering profit sharing with the Bolivian government, the 29 SGS. The Nöel Kempff Climate Action Project.: Validation and Verification Report. Summary. Nov

2005. www.fanbo.org/serviciosambientales/proyectos/redd/ SummaryFinalVerificationReportNKCAP27Nov.pdf




33 Peterson, A., Gallagher L., Huberman D., and Mulder, I. “Seeing REDD: The Opportunity for a Climate-Conservation Double Dividend Through Avoiding Deforestation. A UNEP/IUCN presentation. www.unep.ch/etb/events/pdf/Presentation1_WRGI2%20event.ppt.

34 Ibid.

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Investors Contribution(Million US$)

Offsets to be Assigned (tCO2e)

The Nature Conservancy

2.6 0

Private Investors (AEP, BP, Pacificorp)

8.25 527,427

Government of Bolivia

0 506,743

price of generating these GHG reductions is less than US$4 per ton CO2e.35 Offset credits awarded to the Bolivian Government will be sold on Chicago Climate Exchange with revenues earned going back into park protection, community development and climate change capacity building.

Benefit sharing has been one of the leading criticisms of REDD and is a cause that has so-called environmental justice advocates have taken up on behalf of indigenous communities. The project has been criticized for not having local community representatives on the project’s board of directors. According to FAN, the community still has not received payment from the 2005 verification process: a one-time payment of US$400,000, based on the price of carbon offsets sold on the voluntary market, and about US$150,000 annually from 2006 onward. A recent Christian Science Monitor report postulates that this situation may be arisen due to the Bolivian Government tardy efforts to monetize their share of carbon credits.36

LESSONSThe Nöel Kemp Mercado Climate Action Project has been very successful, particularly in achieving its biodiversity and carbon objectives through the acquisition of 830,000 ha of forests.37 There are many lessons from this REDD initiative, including measurement impediments, the role of indigenous communities and the need to generate sufficient political support from national governments. The park succeeded in more than doubling its size in less than five years by purchasing state-owned lands, but efforts to build consensus among local communities living on these lands posed significant challenges.38 Whilst considered a well executed project-based REDD, there are ongoing concerns as to the level of direct community involvement and benefits shared with the local groups.

Regarding social benefits and project design, May et. al. (2004) provide the following lessons learnt:39

1) The project reflects a new type of partnership that is legitimised by the international community, but requires legitimation among multiple stakeholders;2) The project design was not sufficiently clear and inclusive of local partners and, further, should assess the social impacts of carbon projects within the local political context; 3) The project design attempted to assume responsibility for too many activities not directly related to project objectives – i.e., lacking clear carbon, social and conservation benefits;4) The project had unclear links among carbon, conservation, and development objectives; and 5) The rights and responsibilities of communities and their leaders in relation to the rules for usufruct, management and protection established by park authorities and by the project were not clear.

35 Dutschke, M., and Wolf, R. “Reducing Emissions from Deforestation in Developing Countries: The way forward.” GTZ. April 2007. www.gtz.de/de/dokumente/en-climate-reducing-emissions.pdf.

36 Llana, S.M. “Bolivia gets clean by staying green: Project pays Bolivia for the forests it does not cut - a potential model in the battle against climate change.” Christian Science Monitor. June 5, 2008. editionhttp://features.csmonitor.com/environment/ 2008/06/05/bolivia-gets-clean-by-staying-green/.

37 Peterson, A., Gallagher L., Huberman D., and Mulder, I. “Seeing REDD: The Opportunity for a Climate-Conservation Double Dividend Through Avoiding Deforestation. A UNEP/IUCN presentation. www.unep.ch/etb/events/pdf/Presentation1_WRGI2%20event.ppt.


39 Ibid.

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2. The Pilot Program to Protect the Brazilian Rain Forest (PP-G7) and the Amazon Region Protected Areas (ARPA) Program, Brazil: A programmatic approach

Location: Legal Amazon, BrazilSize: 500 million hectares of the Legal Amazon – the single largest area of contiguous moist tropical forest in the worldEmissions Reduction: Unknown (12 projects without carbon accounting)Conservation Benefit: Protecting and conserving forest resources through policy, science & civil societyCommunity Benefit: Strengthening civil society and public institutions in environmental protection & governancePartners: Government of Brazil, World Bank and donors including Germany, the European Union, the United Kingdom and the United StatesBudget: US$428 million

BACKGROUNDThe Pilot Program to Protect the Brazilian Rain Forest (PP-G7) is a multilateral initiative of the Brazilian government, civil society and the international community aimed at developing innovative tools and methodologies for conserving Brazil’s rain forests. The PP-G7 aims to implement pioneering projects that contribute to the ongoing reduction of the deforestation rate in Brazil.

Planned in the late 1980s and launched at the Rio Conference on Environment and Sustainable Development in 1992, the initial funding for the PP-G7 was US$250 million. Program support has since grown to US$428 million, including Brazilian contributions, with Germany, the European Union, the United Kingdom and the United States as its largest donors. The PP-G7 comprised 12 programs that are supported by direct bilateral assistance and the Rain Forest Trust Fund managed by the World Bank. The PP-G7 consists of no fewer than 14 projects. Specific activities have been designed to promote indigenous land tenure, community empowerment and livelihood support.

The Amazonian Protected Areas Project (ARPA) is executed outside the PP-G7 framework, but it builds upon its experiences. From 2000 to 2013, ARPA aims to expand the amount of protected areas in the region and to sustain this forest protection in the long-term. The Government of Brazil, German Development Bank (KfW), the World Bank Global Environment Facility and WWF Brazil established a US$82 million trust fund to support the establishment of new parks and reserves and strengthen protected areas management. The ARPA is operated by FUNBIO, an NGO, with technical assistance from GTZ.40

AIMS AND OBJECTIVESThe World Bank41 describes the PP-G7 objectives as follows:

1) Experimenting with and demonstrating ways of protecting Brazil’s rainforests and using them in a sustainable fashion; 2) Protecting and conserving forest resources;

40 Dutschke, M., and Wolf, R. “Reducing Emissions from Deforestation in Developing Countries: The way forward.” GTZ. April 2007. www.gtz.de/de/dokumente/en-climate-reducing-emissions.pdf.

41 World Bank. Pilot Program to Conserve the Brazilian Rain Forest (PPG7). News updated Dec 2005. http://web.worldbank.org/WBSITE/EXTERNAL/NEWS/0,,contentMDK:20757004~pagePK:64257043~piPK:437376~theSitePK:4607,00.html.

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3) Strengthening civil society and public institutions involved in environmental protection of Brazil’s forests; and 4) Supporting scientific research and disseminating findings to conserve Brazil’s rainforests.

The ARPA focuses on strengthening, establishing and expanding new protected areas. With its US$82 million trust fund, it seeks to put 50 million hectares, roughly 10 percent of the Amazon, under improved forest protection in by 2012.42

METHODOLOGY USEDThe projects were not initially established with to sequester CO2 and mobilize carbon financing, and hence no forest carbon accounting methodology was specifically used. However, the project did help mobilize the necessary financial support and technical capacity in remote sensing, forest inventories and assessing levels of deforestation. Such information systems no doubt support ongoing and planned REDD initiatives in the Amazon.

THE RESULTSA mid-term review conducted by the World Bank in 1999 was critical of PP-G7 implementation, which had been underway for four years.43 The review team noted that program complexity and lack of guidance from the program steering committee guidance were contributing factors to the slow disbursement of funds. Since 1995 PP-G7 has garnered US$428 million, of which Germany provided US$360 million. Results have been mixed as critics point to tardy disbursement of funds, weak coordination among the various projects in the program, and long delays in executing key elements of the program. Successes include the demarcation and registration of indigenous lands; the development of public-private partnerships between forest communities and private corporations; and the empowerment of 200 community-based resource management projects.

Of particular note is the Natural Resources Policy Project (NRPP) of the PP-G7, which strengthened the forest policy framework in seven of the nine states of the Legal Amazon to reform and decentralize forest management regimes from federal to state and local. The project streamlined the forestland licensing process, used remote sensing monitoring to bolster strict enforcement, and strengthened ecological-economic zoning. The project was extremely successful. In the federal state of Mato Grosso, which accounted for 40 percent of all Amazonian deforestation in the baseline year 1998-1999, 319,393 ha of forest were spared from deforestation during the years 2000-2001. In sum, 156 million tons of CO2 from deforestation was avoided annually, which is equivalent to half of Brazil’s emissions from fossil fuels. The NRPP implementation costs during 1999 to 2002 were US$6 million per year, with USD 5 million provided by PP-G7.44 Researchers estimate that each ton of CO2 emission reduction cost below US$0.20 per year – not including Brazilian staff and infrastructure budget. Due to the initial success of NRPP, the Ministry of the Environment decided to scale up the program throughout the Legal Amazon.

The ARPA, an early programmatic REDD that was not specifically designed to monitor carbon sequestration, has been successful. Covering 50 million ha, or 10% of the land area of the Legal Amazon, it has already achieved several targets before the 42 Dutschke M., and Wolf, R. Lessons Learned on Avoided Deforestation. A Presentation at UNFCCC

Workshop on reducing emissions from deforestation in developing countries. Cairns, Mar 2007. GTZ.43 World Bank. Pilot Program to Conserve the Brazilian Rain Forest Report: Mid-Term Review of

Institutional Arrangements. Summary. http://www.worldbank.org/rfpp/docs/ir/c1.htm.44 Dutschke M., and Wolf, R. “Reducing Emissions from Deforestation in Developing Countries: The way

forward.” GTZ. April 2007. www.gtz.de/de/dokumente/en-climate-reducing-emissions.pdf.

26

end of its first implementation phase. By the end of 2007, 18 million ha of new conservation units have already been established and 7 million ha consolidated within the existing protected areas system.45 There is increasing evidence that this expansion of the national protected area system, bolstered by ARPA, contributed to the over 50 percent drop in deforestation rates between 2004 and 2006 in Brazil. With its transparency and flexibility, ARPA is not only prepared to efficiently receive and administer future carbon receipts for protected areas. Its institutional setup can also serve as a model for national financing mechanisms to implement REDD in a broader context.46

LESSONSThe PP-G7 was a much grander, programmatic approach to avoiding deforestation. With its US$428 million budget, PP-G7 is the donor community’s attempt to counter deforestation by developing a comprehensive, integrated suite of policy measures. The activities in the program’s framework are regionally overlapping, even though they do not cover the Amazon as a whole.47 The PP-G7 has been criticized for not achieving its goal of reducing deforestation, though this is in part due to the slow implementation of the project. There is a high likelihood that the combination of increased institutional capacities, better forest conservation enforcement, raised environmental awareness, increased productivity among smallholders, and financial incentives for sustainable forestry, will lead to lower deforestation pressure in the pilot areas. Still a variety of disincentives remain. A prioritization of infrastructure, energy supply or productivity in the agrarian sector has the potential to increase deforestation pressure.

It lacks any financial mechanism to link reduced deforestation with future payments – as would happen under a REDD scheme. Currently, it lacks the proper baseline and carbon monitoring methodology to link actions into the carbon markets. When combined with the associated ARPA program, Brazil does have a transparent and flexible financing mechanism that can serve as a model for channeling future carbon revenues. With a project end-date of 2013, there remains the opportunity to redesign and possibly fund a follow-on, carbon-oriented REDD project given the ARPA’s success at countering deforestation in the Amazon context.

3. The Congo Basin Forest Partnership (CBFP) and Central African Forest Commission (COMIFAC): A supranational approach

Location: The Congo Basin of Central AfricaSize: Over 180 million hectares – the second largest area of contiguous moist tropical forest remaining in the world, or approximately one fifth of the world’s remaining closed canopy tropical forestEmissions Reduction: Unknown Conservation Benefit: Protecting and conserving forest resourcesCommunity Benefit: Strengthening civil society and public institutions in environmental protection & governancePartners: Governments of Burundi, Cameroon, Chad, Central African Republic, Congo, Democratic Republic of Congo, Equatorial Guinea, Gabon, Sao Tome and

45 Dutschke M., and Wolf, R. Lessons Learned on Avoided Deforestation. A Presentation at UNFCCC Workshop on reducing emissions UNFCCC Workshop on reducing emissions from deforestation in developing countries from deforestation in developing countries. Cairns, Mar 2007. GTZ.

46 Dutschke M., and Wolf, R. “Reducing Emissions from Deforestation in Developing Countries: The way forward.” GTZ. April 2007. www.gtz.de/de/dokumente/en-climate-reducing-emissions.pdf.

47 Ibid.

27

Principe, and Rwanda, as well as World Bank and bilateral donors including Germany, the European Union, Norway, the United Kingdom and the United StatesBudget: Multiple donors including World Bank’s US$814 million and British Government US$100 million

BACKGROUNDThe Congo Basin forest is the second largest intact tropical forest in the world. Each week, an area the size of 25,000 football pitches is cut down in the Congo Basin rainforest. According to the UN, if action is not taken now, more than 66% of the rainforest will be lost by 2040. The Congo Basin Forest Partnership (CBFP) aims to promote the sustainable management of the Congo Basins’ forests and wildlife by improving communication, cooperation, and collaboration among all the partners. It does not intend to create new institutions, but through the partnership forum and transparency and information sharing to assist partners and their associates to work better.

The CFPB, launched in 2002, is a non-binding partnership of more than 40 governments, international organizations, NGOs and the private sector. Examples of support include community-based sustainable forest and wildlife management, better timber harvesting and processing technologies, ecotourism, increasing capacity in public and private sectors, and strengthening law enforcement infrastructures. Over US$814 million has been mobilized.48

The Central African Forest Commission (COMIFAC) is the primary authority for decision-making and coordination of sub-regional actions and initiatives pertaining to the conservation and sustainable management of the Congo Basin forests. The Commission was founded in 1999 and comprises the Minister of Forestry of the Republic of the Congo, Chad, Equatorial Guinea, Sao Tome/Principe, Gabon, and the Central African Republic. The Central African Heads of State signed the Yaoundé Declaration as a framework that aims to protect forests through the harmonization of forest policies, protected areas, regulations against poaching and the adoption of practices for sustainable forest use.

AIMS AND OBJECTIVESThe CBFP works in close cooperation with the COMIFAC, the regional body in charge of forest and environmental policy, coordination and harmonisation, with the objective to promote the conservation and sustainable management of the Congo basin's forest ecosystems. CBFP members support the implementation of COMIFAC's regional Convergence Plan and the 1999 Yaoundé Declaration to:49

1) Protect the region’s biological diversity, which is of global significance; 2) Ensure better governance of biodiversity; and 3) Improve the living standard of the region’s inhabitants.

METHODOLOGY USEDThere are currently no REDD projects under the COMIFAC. However, the group recognizes great potential in harnessing carbon finance for forest protection in the region. To this end COMIFAC has submitted three views on REDD to the UNFCCC Secretariat in 2006 and 2007. These positions include: 1) establishing a market facility based on commitments of countries of the North to finance the opportunity costs of forest conservation; 2) establishing an equalization fund to support the

48 Congo Basin Forest Partnership. A Partners for Sustainable Development website, updated Apr 2004. http://webapps01.un.org/dsd/partnerships/public/partnerships/14.html.

49 Congo Basin Forest Partnership. Objectives. http://www.cbfp.org/.

28

efforts of countries of the Congo Basin to safeguard carbon stocks; and 3) consensus on a number of core principles that include real benefits to the global climate, a common but differentiated responsibility, and sovereignty of states to embark on sustainable economic development path. The COMIFAC member states are committed to the development of REDD pilot projects to refine methodologies on emissions from deforestation and degradation; increased mobilization of sub-regional stakeholders (political and technical) in REDD negotiations; and sharing science-based guidance to COMIFAC countries during international negotiations and policy development.

RESULTSSince its formation, COMIFAC has met regularly to discuss its agenda and develop an official Plan de Convergence, an action plan that identifies COMIFAC priorities. Based on COMIFAC’s Plan de Convergence (2003-2010), the plan identifies its major themes as: harmonization of forest policy and taxation, inventory of flora and fauna, ecosystem management, conservation of biodiversity, sustainable use of natural resources, capacity building and community participation, research, and innovative financing mechanisms. Donors include France, Germany, UN FAO, USAID, World Bank and WWF. The CBFP has planned a network of new and expanded national parks, which will cover 40 percent of the entire Congo Basin.

Actual activities on the ground have been severely hampered by the civil wars ravaging the neighbouring countries. However, with greater peace there are greater financial commitments by donors to the area, most notably the United States. Despite low levels of forest management capacity, net deforestation is low (0.19% p.a.). The civil wars in the area have led to a decrease of land-use conversion activities. As peace and economic prosperity spread, so too does the agricultural frontier as a key driver of forest loss.50 This scenario will need to be considered when determining the deforestation reference levels. These will need to be based on a solid foundation of reliable forest inventory, strict law enforcement and improved environment governance.

A REDD initiative is reportedly “up for auction” to conservationists since 2001 in the Ngoyla-Mintom Forest of Cameroon. According to The Economist, the Government of Cameroon is seeking to lease 830,000 hectares of tropical forest to conservationists for an annual sum of US$1.6 million. The Ngoyla-Mintom forest, as the concession is known, serves as a corridor of habitat between three national parks in Cameroon, Gabon and Republic of Congo. According to Monagobay news, the 830,000 hectares of Ngoyla-Mintom forest may conservatively store upwards of 200 million tons of carbon dioxide (assuming 250 tons of carbon dioxide per hectare — actual values may exceed 700). Should Ngoyla-Mintom qualify for REDD, the forest protection scheme would seem likely to offer competitive returns relative to logging. It has been estimated that at a price point of US$1.21, REDD credits would break-even with revenue from logging concessions.51 WWF, in a rebuttal to the Economist report, stated that the forest is very much worth saving but that any deal would need to ensure that proceeds from the REDD would benefit local communities.52

LESSONSThe COMIFAC is a supranational, regional forum to integrate policies and measures for sustainable forest management for the Central African forest basin. The COMIFAC 50 The Economist. The unkindest cut. Feb 14 2008. http://www.economist.com/opinion/ displaystory.cfm?

story_id=10688618.51 Butler, J. “Carbon traders, not conservationists, could save Cameroon rainforest.” Mongabay online

journal. Feb 15 2008. http://news.mongabay.com/2008/0215-cameroon.html.52 Leape, J. Forest harmony. Letter to the editor. Economist. Mar 6 2008.

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nations as a whole hare a limited capacity to tackle corruption, logging and agricultural conversion, but they do have the support of donors to strengthen forest protection policies, build capacity for forest monitoring systems and procedures, and perhaps most importantly, to develop a regional platform for dialogue to support forest protection and the development of carbon markets linked to REDD.

Given the lethal threats of peacetime prosperity, agricultural conversion, logging and corruption, the Congo Basin forests are likely to be prime targets of deforestation, and hence offers good potential for a REDD initiative. The COMIFAC provides a good example of the need and usefulness of establishing regional science-based bodies to mobilise support for avoiding deforestation.

4. The Ulu Masen Project, Aceh, Indonesia

Location: Aceh, IndonesiaSize: 750,000 ha (1.9 million acre) – the last large unprotected fragment of rainforest on the island of SumatraEmissions Reduction: 100 million tons CO2 over 30 years (3.37 million tons CO2 per year)Conservation Benefit: 85% reduction in deforestation through land-use planning and reclassification, increased monitoring and law enforcement, reforestation, restoration, and sustainable community logging Community Benefit: Strengthening civil society and public institutions in environmental protection & governancePartners: Government of Aceh Province, Indonesia; World Bank (donor); Carbon Conservation (project developer); Fauna & Flora International (project implementer); Merrill Lynch (investor); Rainforest Alliance (verifier)Budget: Estimated US$48.4 million in 2007-2012, of which US$17.5 million (World Bank) and US$9 million (Merrill Lynch guaranteed purchase of VERs) and US$7.7 million (FFI) have been raised – a fraction of the 30-year project duration

BACKGROUNDIndonesia has some of the highest deforestation rates in the world today. The Ulu Masen forest Aceh province is the last large unprotected fragment of rainforest on Sumatra, an island ravaged by decades of rampant deforestation. Aceh Governor Irwandi Yusuf is reputed to say that only about 35 percent of the forest cover in the whole island of Sumatra is intact — and 65 percent of that is in Aceh. Conservation International estimates that the average annual deforestation rate in Sumatra was 2.54 percent between 1990 and 2000. Deforestation rates in Aceh Province, however, were much lower due to three decades of war and socio-economic effects of the devastating tsunami of 2005 – perhaps as low as 0.86 percent between 1990 and 2000.53 A peace agreement reached in 2005 opens the door for industrial-scale logging and clear-cutting for oil palm plantations to proliferate. Carbon Conservation, the project developer, estimates future deforestation in the Ulu Maten forest at 9,000 ha per year.

In 2007, the Government of Aceh, Indonesia, Carbon Conservation, Fauna & Flora International (FFI), Merrill Lynch, and the World Bank formed the first large-scale public-private partnership to develop a REDD initiative. The Ulu Masen project is

53 Bowan-Jones, E. Reducing Carbon Emissions from Deforestation in the Ulu Masen Ecosystem, Aceh, Indonesia. FFI presentation, undated.

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recognized as the first REDD project to be independently certified to the Climate, Community & Biodiversity Alliance (CCBA) standard. The project could potentially generate an estimated USD 26 million in carbon credits in the first five years, with a first tranche of credits to be sold in 2009. Whilst the World Bank Forest Carbon Partnership Facility (FCPF) provides funds for project design, monitoring and initial pilot implementation, the generation and sale of voluntary carbon credits is essential to ensure the financial sustainability of the forest protection and community development interventions over the life of the project.

AIMS AND OBJECTIVESThe Ulu Masen project aims to protect the 750,000 ha of biologically rich rainforest, decrease projected deforestation rates (under a “business-as-usual” scenario) by 85 percent, and thereby reduce carbon dioxide emissions by 101,095,427 tons over 30 years. As designed, the project will use land-use planning and reclassification, increased monitoring and law enforcement, reforestation, restoration, and sustainable community logging to reduce deforestation threats, thereby enabling the avoidance of 3,369,848 tons of CO2 emissions each year. (Roughly estimated, this equals the annual greenhouse gas emissions of Mexico.)54 At a projected price of $US5 per ton, offset VER credits could generate US$16.85 million per year, with the first tranche due in 2009.

METHODOLOGYThe Ulu Masen project is the first REDD project to be independently approved as conforming to the CCBA Standards.55 In February 2008, the project received a Gold CCBA standard accreditation from the SmartWood/Rainforest Alliance, a third-party verification body.56 As stated in the project design document, the methods and analysis of this project are based on a few premises. Firstly, methodological uncertainties in general, as well as specific gaps in data, exist. Due to civil war in this region, there is a lack of information on the forest estate and past levels of deforestation. However, the conflict in essence has allowed significant areas of forests to flourish compared to other parts of the island. The project assumes that since the war has ceased, then this area will be subject to similar levels of deforestation. Hence the baseline for this REDD project was not calculated against past trends, but rather on assumptions of increased exploitation of forests during peacetime extrapolated from other deforested parts of the island.

The project was designed prior to the development of commonly accepted methodologies such as the bio-carbon RED methodology. The project developers have attempted to establish a conservative estimate in terms of benefits generated, as well as to be open in the provision of information so it can be revisited at any time. For example, the project’s carbon accounting baseline values were calculated conservatively using the “biome-average approach” with Tier 1 IPCC’s National Greenhouse Gas Inventory figures. It is expected that the methodology for estimating carbon emissions from reduced deforestation and degradation will be refined over time.57

RESULTS54 FFI & Carbon Conservation Reducing Carbon Emissions from Deforestation in the Ulu Masen

Ecosystem, Aceh, Indonesia. A project design note for CCBA Audit. Dec 2007. 55 Butler, R. First rainforest-for-carbon-credits deal becomes a reality. Mongabay online journal. Feb 7

2008. http://news.mongabay.com/2008/0207-carbon_conservation.html.56 SmartWood/Rainforest Alliance. Validation Audit Report for Climate, Community and Biodiversity

Project Design Standards for Ulu Masen Ecosystem, Aceh Indonesia. Jan 17 2008.57 FFI & Carbon Conservation Reducing Carbon Emissions from Deforestation in the Ulu Masen

Ecosystem, Aceh, Indonesia. A project design note for CCBA Audit. FFI & Carbon Conservation. Dec 2007, p8.

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Whilst the US$7.7 million FFI Aceh Forest & Environment Project, a forest conservation project funded by the Multi-Donor Fund for Tsunami Relief, has been underway since 2006, the project is still in its early stages. A monitoring and evaluation program has been established and will soon begin to track project results. The project tracks 10 key performance indicators, including community participation, forest guard training and field-level monitoring.58

With Merrill Lynch’s guarantee to purchase US$9 million worth of voluntary emission reduction credits (VERs) generated by the project, the project builds confidence in the voluntary carbon markets’ ability to play a significant role in reducing deforestation and related greenhouse gas emissions. For Merrill Lynch, the investment bank is hedging the market with assumptions that demand for VERs will increase and the price will be higher than what they paid. The Ulu Masen project demonstrates that private investment is already creating a market for REDD – in the voluntary markets – independent of both the UN negotiations and donor efforts to mobilize international compliance markets.

LESSONSThe project has benefited from the highest levels of political support by the Governor of Aceh, a former elephant veterinarian and rebel leader of the Free Aceh Movement, as well as the project development and biodiversity conservation support of Carbon Conservation and FFI. Sourcing funding for the project was not easy, but Merrill Lynch and the World Bank made early commitments to lock in the necessary upfront costs to ramp up strict forest protection and monitoring measures (e.g., forest aerial patrols) and hence to provide the project the needed momentum.59 The potential for “leakage” from protected to unprotected land is present.

Although viewed as a pioneer project, it is unclear how the lack of a forest carbon methodology will impact its ability to sell future additional (i.e., non-Merrill Lynch guarenteed) credits into the market, as well as what price those VERs will sell at. Experts who are familiar with the design of forest carbon methodologies view the CCBA as an “add-on” standard, not rigorous enough to pass future VCS and World Bank criteria for forest carbon monitoring and accounting. Moreover, challenges remain for how this unarguably unique, project-based REDD will be integrated into national-level policy frameworks currently under development by the Government of Indonesia in partnership with the World Bank and bilateral donor community. The Ulu Masen project will no doubt continue to receive much attention and interest as it continues to be the project to follow in the ongoing international discussions on REDD.

5. The Juma Sustainable Development Reserve RED Project, Brazil

Location: Novo Aripuanã, Amazonas, BrazilSize: 590,000 hectares (1.4 million acres)Emissions Reduction: 190 million tons by 2050 Conservation Benefit: Forest protection and monitoring deforestation in the reserveCommunity Benefit: Community livelihood enhancement, education and health services as well as the establishment of direct payment for environmental services

58 FFI. Aceh Forest & Environment Project. Annual Progress Report 2007. 59 Niles, J. It's Not Easy Being Green in Aceh, Indonesia. An opinion published by The Katoomba

Group’s Ecosystem Marketplace online journal. Oct 25 2007. http://ecosystemmarketplace.com/pages/ article.opinion.php?component_id=5358&component_version_id=7777&language_id=12.

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Partners: Government of State of Amazonas, Brazil; Sustainable Amazonas Foundation (project developer); Institute for Conservation and Sustainable Development of Amazonas and Conservation International (project partners); Marriott International (investor)Budget: Estimated US$2.8 million, of which Marriott International has contributed US$2.0 million

BACKGROUNDThe Juma Sustainable Development Reserve RED Project, announced in April 2008, encompasses 589,612 hectares in Novo Aripuanã municipality, located in the southeastern region of the Amazonas state of Brazil.60 Whilst deforestation in Amazonas was 0.4% from 2000 to 2007, the historic trend in neighboring, more developed states is agriculture and cattle production encroachment into sparsely populated forests of the Amazon, transforming large tracts of tropical rainforest wilderness into large areas of pasture and croplands.61 According to Conservation International, the project seeks to protect 589,000 ha of endangered rainforest through public private partnership in which Marriott International funds US$2 million to fund environmental planning administered by the newly created Amazonas Sustainable Foundation.62

The Juma Reserve RED Project involves the establishment of a protected area for sustainable use in an region that would be almost completely deforested under the “business as usual” scenario if the current land use practices in the Amazon region continues. The forest is both adjacent to and transected by two highways. If concrete measures to prevent deforestation are not taken, deforestation from protected areas in the State of Amazonas could emit close to 3.5 billion tons of CO2 into the atmosphere. (This amount of CO2 emissions is equivalent to the volume of GHG emissions that is released annually by the European Union, or China. These emissions are four times as much as Germany releases in a single year.)63

The Juma Reserve RED Project partners include the Sustainable Amazonas Foundation, Secretariat of Environment and Sustainable Development of the Government of the State of Amazonas, the State Protected Areas System of the Secretariat of Environment and Sustainable Development of the Government of the State of Amazonas, the Institute for Conservation and Sustainable Development of Amazonas, and Marriott International, Inc. With a total budget of $2.8 million, the project will only be financially feasible with the generation and sale of forest carbon credits.64

60 Balch, O. Forests: A carbon trader's gold mine? ClimateChangeCorp online news. 7 May, 2008.61 The Juma Sustainable Development Reserve Project: Reducing Greenhouse Gas Emissions from

Deforestation in the State of Amazonas, Brazil. A project design document (PDD) for the Climate, Community & Biodiversity Alliance (CCBA) Standard. May 2008, p. 5.

62 Global Lodging Leader Announces Integrated Strategy to Address Climate Change. A Conservation International press release dated 7 Apr 2008. http://www.conservation.org/newsroom/pressreleases/Pages/ CI_Marriott_green_hotels_announcment.aspx.

63 The Juma Sustainable Development Reserve Project: Reducing Greenhouse Gas Emissions from Deforestation in the State of Amazonas, Brazil. A project design document (PDD) for the Climate, Community & Biodiversity Alliance (CCBA) Standard. May 2008, p. 5.

64 The Juma Sustainable Development Reserve Project: Reducing Greenhouse Gas Emissions from Deforestation in the State of Amazonas, Brazil. A project design document (PDD) for the Climate, Community & Biodiversity Alliance (CCBA) Standard. May 2008, p. 3-4.

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AIMS AND OBJECTIVESIn addition to the climate change benefits, the project will develop several programs with social and environmental benefits, including:65

1) Strengthening of environmental monitoring and control, remote sensing mapping and land use planning;

2) Community livelihood enhancement and income generation schemes; 3) Education, research and community development; and 4) Direct payment for environmental services.

METHODOLOGYAdvanced computer simulation models carried out under this project indicate that there will be a strong deforestation trend in the near future, which could result in a loss of up to 30 percent of Amazonas’ forest cover by 2050. The project design document for Climate, Community and Biodiversity Alliance verification states that the project expects to prevent the deforestation of around 330,000 hectares of tropical forests that would release 190 million tons of CO2 into the atmosphere.66

According to the CCBA project design document, the project’s climate impact monitoring of CO2 will employ data and images from INPE/PRODES to conduct an analysis of the real deforestation rate. A SimAmazonia I model will establish the “the business-as-usual” scenario, which will be compared to on-the-ground, community-based monitoring and verification of the data. Future carbon and deforestation dynamics will be monitored by satellite and in loco monitoring involving both local communities and researchers. The overall monitoring strategy is comprised of the following four components:67

1) Monitoring by satellite by the National Institute for Space Studies, which provides free images to the public with a resolution of 812 m2); 2) Monitoring of the carbon dynamic and forest carbon stocks, which includes analytical studies to quantify the carbon flux and carbon stocks of the different reservoirs of biomass in the forest, including aboveground and belowground biomass, leaf litter, fine woody debris, coarse wood debris, and soil carbon;3) Participatory Monitoring that will engage local communities in monitoring as well as serve to increase local awareness of the forest values; and4) Participatory Surveillance that seeks to support communities in mapping the threatened areas, identifying the key threats and priority rank these threats.

Although using a baseline project from historical trends using advanced modeling techniques, this project does not follow a currently accepted methodology. As with the Aceh project, it currently has applied for and is seeking to attain CCBA “add-on” standard. With this standard, the project has a fairly rigorous community-impact monitoring program, which seeks to overcome any potential negative impacts of the 65 The Juma Sustainable Development Reserve Project: Reducing Greenhouse Gas Emissions from

Deforestation in the State of Amazonas, Brazil. A project design document (PDD) for the Climate, Community & Biodiversity Alliance (CCBA) Standard. May 2008, p. 6-7.



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project.

RESULTSThis project is in fairly early stages. A project design note has been submitted to the CCBA and is awaiting verification. It is expected to start generating credits by the end of 2008. Unique to this project, Marriott International committed US$2 million to offset its corporate carbon footprint, which is calculated at 3 million metric tons of CO2 emissions annually. By the end of 2008, Marriott guests and group customers will be able to offset the GHG emissions generated from their hotel stays and meetings by contributing to this fund. Marriott International has already elected to go “carbon neutral” by offsetting the calculated GHG emissions associated with the operations of its headquarters, regional offices, over 1,000 hotels and resorts, and employee travel.68

6. International and Project-based Initiatives Underway

In addition to the early REDD initiatives highlighted above, there are a number of international and project-based REDD initiatives that are currently being explored, developed and negotiated (details of multilateral and bilateral efforts are highlighted in Chapter 6). This new wave of support, which in many ways represents a tipping point that occurred at the COP-13 in Bali in December 2007, are briefly outlined below. They represent a culmination of peaked international donor interest to fund and field-test REDD enabling efforts before the Copenhagen summit in December 2009, as well as the voluntary carbon markets’ appetite for large-sized forest VERs in anticipation of future cap-and-trade systems in Australia and the United States.

INTERNATIONAL

The World Bank launched the Forest Carbon Partnership Facility (FCPF) at COP 13 in Bali.69 By July 2008, Australia, Finland, France, Japan, Norway, Spain, Switzerland, the United Kingdom and the United States had contributed US$82 million to the FCPF. More contributions from the public and private sector are expected in the coming months so the fund can reach its target of $250 million raised.70 The FCPF was established to support the enabling framework for key countries (competitively selected) to engage and test pilot rigorous REDD methodologies that are currently under development. In July 2008, 14 nations were selected to receive support from the FCPF, including six in Africa (the Democratic Republic of Congo, Gabon, Ghana, Kenya, Liberia, Madagascar); five in Latin America (Bolivia, Costa Rica, Guyana, Mexico, Panama) and three in Asia (Nepal, Lao PDR, and Vietnam). Each country selected is expected to provide findings that will help inform the discussions in Copenhagen 2009 and any future REDD scheme within the UNFCC framework.

In September 2008, the United Nations launched UN-REDD in partnership with the Government of Norway’s US$35 million support to nine countries, including: Bolivia, the Democratic Republic of Congo, Indonesia, Panama, Papua New Guinea, Paraguay, Tanzania, Vietnam and Zambia.71 This initiative, implemented through the UN Food 68 Marriott and Brazilian State of Amazonas Partner to Protect Rainforest. A Marriott press release dated 7

Apr 2008. http://www.marriott.com/news/detail.mi?marrArticle=312511.69 World Bank Forest Carbon Partnership Facility. www.carbonfinance.org.70 First Countries Named to Benefit from Forest Carbon Partnership Facility. A World Bank press release.

http://web.worldbank.org/WBSITE/EXTERNAL/NEWS/0,,contentMDK:21846447~menuPK:34463~pagePK:34370~piPK:34424~theSitePK:4607,00.html.

71 Gardner, T. “U.N. launches program to cut deforestation emissions” Reuters online. http://www.reuters.com/article/environmentNews/idUSTRE48N91C20080924.

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and Agriculture Organisation (FAO), the UN Development Program (UNDP) and the UN Environment Program (UNEP), overlaps significantly with the main objectives of the World Bank’s FCPF as both funds are geared towards enabling national forest carbon accounting systems, testing REDD and informing UNFCCC negotiations in Copenhagen in 2009. The Norwegian Climate and Forest Initiative72 was designed to support the conservation and sustainable use of tropical forests by promoting large-scale forest protection and the development of forest-based carbon management. The focus of this initiative will be the Congo Basin, the Amazon Basin and South East Asia. UN-REDD is funded initially by the Government of Norway.

In 2007, the Forests Now Declaration was signed by over 200 governmental leaders, NGOs, business leaders, scientists and conservationists, including Papua New Guinea Prime Minister Sir Michael Somare, Nobel Peace Laureate and Goodwill Ambassador for the Congo Basin Forest Ecosystem, Wangari Maathai, Costa Rica President and Nobel Prize winner Oscar Arias Sanchez. During the UNFCCC Conference in Bali in December 2007, the Provincial Governors of Aceh and Papua, Indonesia and the Amazonas, Brazil also signed the Declaration and furthermore, announced logging moratoriums in their provinces until forests can be assessed for their carbon value.

The Forest Now Declaration73 calls on governments to: 1) Ensure that carbon credits for reduced emissions from deforestation and the protection of standing forests are included in all national and international carbon markets; 2) Simplify and expand carbon market rules, including CDM, to encourage reforestation, afforestation and sustainable forest management; 3) Include tropical forest and land use carbon credits in the European Union Trading Scheme, while maintaining strong incentives to reduce industrial emissions;4) Encourage early action and new market mechanisms that recognize the value of carbon stocks and forest ecosystem services and support appropriate voluntary carbon market standards; 5) Provide assistance for developing nations to build capacity to fully participate in the carbon markets and to evaluate the ecosystem services their forests provide; and6) Create incentives for the sustainable use of degraded land and ecosystems, and remove incentives that encourage forest destruction.

PROJECT-BASED INITIATIVES

In addition to the growing number of international and national REDD initiatives, there is also a rapid growth in project-based REDD initiatives. Most are in the design stage and it is unclear how they will develop. Details of such projects before they are officially launched are scarce. One example comes from the Indonesian province of Papua, which entered into an agreement with New Forests, an Australian financial firm, and Emerald Planet, an implementing partner, in May 2008 to establish a forest carbon project. The parties are assessing three project areas ranging in size from 300,000 hectares to 1 million hectares that seeks to deliver high-quality carbon credits to the voluntary market, based on the provincial government’s decision to rescind the logging and agribusiness development status of the land.74 Papuan 72 http://www.regjeringen.no/en/dep/md/Selected-topics/klima/why-a-climate-and-forest-initiative.html?id

=52648973 Forests Now Declaration. http://www.forestsnow.org/.74 New Forests Signs Agreement to Establish REDD Project in Papua, Indonesia. A New Forest press release. May

2008. http://www.newforests-us.com/index.html.

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Provincial Governor Barnabas Suebu imposed a province-wide moratorium on logging in the hope that the emerging carbon market would offer better returns for the people of Papua. Logging and forest conversion for agriculture — especially oil palm and rubber plantations — are an important source of revenue for the province, but the government is interested in REDD if the revenues are at least comparable to those gained from these extractive forest resource uses.

Other projects currently in the design phase in Southeast Asia include are being pioneered by FFI, WWF and TNC. It is likely this will be the start of many project based REDD initiatives in the region.

LESSONS LEARNT FROM REDD: SUMMING UP

What is clear is that there is currently tremendous momentum on REDD and this is happening at every level. At the international stage since COP 13, a raft of initiatives to pilot REDD is underway and heading to inform UNFCCC discussions at Copenhagen in December 2009. There is the expectation that a REDD mechanism will be decided at this meeting. The up-swell of governmental, non-governmental and financial sector support to the Forests Now Declaration represents a “tipping point” in the minds of skeptics, critics and cautious investors on REDD. As people place an increasingly higher value on intact forest ecosystems – and the biological, climate and livelihood co-benefits they provide – poorer nations that are dependent on forests will have the option to preserve and protect forests rather than seeking rents from timber, palm oil and minerals. The leaders of Papua New Guinea and the Indonesian Province of New Guinea are among the governmental leaders who are dealing-up REDD schemes with private, non-governmental and governmental partners.

As the parties to UNFCCC and the international and non-governmental organizations and institutes debate how REDD will be incorporated into the regulated, compliance market, a voluntary carbon market for REDD is quickly being established with pioneering projects in Brazil, Bolivia and Indonesia. In 2007, the growth of the voluntary carbon market tripled with 65 million tons traded compared to 24.6 million tons traded in 2006. The increased volumes, combined with higher average prices, meant the value of the market hit US$331 million in 2007, up from US$96.7 million in 2006. Experts forecast the voluntary carbon market to double in size in 2008.75

Presently a myriad of projects are being developed with interest from governments, NGOs, donors and development banks. These projects utilise different models and methodologies. Several groups are seeking “first mover advantage” to explore projects in remaining large areas of forest under pressure from deforestation.

A few lessons can be distilled from these early REDD initiatives, including the following:

Firstly there is the need to have strong political support to introduce REDD initiatives. This goes without saying as some of the measures to combat deforestation will be policy measures that need to be introduced by sovereign governments.

There is also a paucity of detail, reliable forest data, forest inventories and deforestation rates. However, as highlighted in the case of Aceh, a lack of such information need not stop projects from moving forward.

Given the scale of some of the proposed REDD projects, there is a need for multiple partners with a range of skills. There is the need for experts in forestry and carbon monitoring, assessment and reporting; understanding of

75 Voluntary Carbon Market Tripled in 2007. Carbon Finance. Print version. May 2008. Vol 5, Issue 5, Pg 5.

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carbon markets; biodiversity protection and other skills set depending on the REDD measures introduced. Any project will therefore need to bring together a host of strategic partners that are skilled in forest policy, conservation planning, carbon offset project development, carbon accounting and monitoring, and community development.

To develop REDD, significant up-front costs create additional challenges to the technical barriers inherent in designing and implementing forest protection projects. REDD budgets tend to be much larger than conventional forest management projects. In the project-based examples outlined in this chapter, investors such as Marriott, Merrill Lynch and New Forest had to be “brought to the table” early-on and before the rest of the project partners could design the REDD project. Whilst multilateral and bilateral donor facilities will soon be ready to dispense over $200 million to countries harboring large tropical rainforests, it is likely that most of these funds will address national-level capacity building and policy framework activities. For project-based REDD, it is likely a range of donors will be needed to develop each project, including overseas development assistance to help in project design and private sector financing for long-term project sustainability through 2030 and beyond.

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Chapter 3: REDD Methodology

As with all activities which wish to link to the carbon markets there need to be standard methodologies, steps and criteria which must be met in order for the carbon to be fungible on the international market. As REDD is a fairly recent idea in the context of linking forests to international carbon markets and it has only recently received such high level political support there is currently a lack of methodologies to estimate reductions of GHG emissions from deforestation and degradation. As outlined in chapter two there have been a number of REDD like schemes, each with mechanisms to estimate the reduced emissions. Based on these pioneer projects and much of the early literature on the topic a standard methodology was produced by the World Bank BioCarbon Fund in July 2008.76 The conceptual approach of the methodology is based on guidelines on Agriculture, Forestry and Land Use (AFOLU) for the Voluntary Carbon Standard. The Voluntary Carbon Standard will produce further guidance on REDD methodology in due course. These basic guidelines are briefly outlined in this chapter in the discussion of the Voluntary Carbon Standard.

Although the WB BioCarbon Fund methodology is still in draft form and will likely evolve, this document represents a good example of what steps are required to carry out a RED project. It should be stated that this methodology has been accepted by the World Bank BioCarbon Fund, through which individuals, groups or governments can claim voluntary credits. It has not yet been approved as a methodology under the CDM Executive Board. This is unlikely to happen until there is greater clarity on the modalities of an international REDD mechanism. This methodology is explored in more detail below and in Appendix 1.

Although this methodology has only recently come into operation REDD projects have been ongoing for the past few years, as outlined in chapter two. Most of these have had private sector buyers/investors interested in purchasing the credits. Though in the case of the Noell Kempff project, these were sold onto the Chicago Climate Exchange. It is also worth noting that REDD projects have generally tried to follow the Climate, Community and Biodiversity (CCB) standard. This is a design standard, rather than a carbon verification standard but is meant to ensure any carbon project brings high co-benefits, in terms of benefits to local people and biodiversity. Given the likelihood that REDD projects will look to attain CCB standards this is briefly outlined below.

3.1 THE VOLUNTARY CARBON STANDARD: GUIDANCE FOR AGRICULTURE, FORESTRY AND OTHER LAND USE PROJECTS

The Voluntary Carbon Standard was developed by the climate group, the International Emissions Trading Association and the World Economic Forum in late 2005. A first version of the standard was produced in 2006 (the VCS version 1) which was subject to some criticism as being too weak and vague. A second version was produced (the VCS 2007) which tried to address some of the earlier criticism.77 The VCS 2007 was launched in November 2007 following a 19 member steering committee review. The World Business Council for Sustainable Development joined in 2007 as founding member. The VCS has high level support from the carbon offset industry and is very likely to become one of the defining standards in the voluntary

76 http://carbonfinance.org/Router.cfm?Page=BioCF77 See http://www.v-c-s.org/docs/VCS%202007.pdf

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market.78

The standard covers relevant sections for carbon mitigation projects, namely: project description, baseline, additionality, monitoring, validation and verification, request for issuance.79 The VCS is designed to try to maintain good quality standards but with less strict requirement and costs than with CDM approved projects. Also other standards approved by the VCS, their credits are fungible with VCS credits - the Voluntary Carbon Unit (VCU).

The VCS is a non profit organization and is made up of an association, secretariat, board as well as technical advisory groups on specific issues. The VCS accepts projects using methodologies which have been approved under the VCS program of other GHG programs and also approves new methodologies. As of November 2008 all CDM baseline and monitoring methodologies have been approved while the California Climate Action Registry is under consideration. No new methodologies have been approved by the VCS board. To date it is unclear how many projects have actually been validated and verified under this standard as the project database and registries are still under development. According to a report the VCS expects that around 50-150 projects, emitting 10-20 million tones of CO2e will have been approved by the end of 2008.80

Another important dimension of the VCS is that it also has specific guidance on Agriculture, Forestry and Lands Use (AFOLU).81 The four types of AFOLU activities eligible under the VCS Program are:

Afforestation, Reforestation and Revegetation (ARR) Agricultural Land Management (ALM) Improved Forest Management (IFM) Reducing Emissions from Deforestation (RED)

Leading thinkers in the above areas were brought together to produce these guidelines. The VCS AFOLU rules are thorough and address some of the key issues of permanence and additionality. It is also the first carbon standard to cover all the major land use activities under a single framework.82

The AFOLU represents commonly agreed guidance on how to account for reduced emissions from deforestation (RED). Interested parties can use this guidance document to assist in the development of VCS-compliant AFOLU projects and methodologies. Additional requirements for AFOLU projects will be available in future versions of the VCS.83 Until these requirements have been published AFOLU projects shall only generate VCUs if their project methodology is part of a GHG Program that has been approved by the VCS Board. Currently no new methodologies have been approved. Interested parties can use this guidance document to commence development of AFOLU projects and methodologies for validation and verification

78 Kollmuss, A, Zink, H and Polycarp, C (2008), Making sense of the voluntary carbon market: a comparison of carbon offset standards, WWF Germany

79 See http://www.v-c-s.org/docs/VCS%202007.pdf80 Kollmuss, A, Zink, H and Polycarp, C (2008), Making sense of the voluntary carbon market: a

comparison of carbon offset standards, WWF Germany81 See http://www.v-c-s.org/docs/AFOLU%20Guidance%20Document.pdf82 Kollmuss, A, Zink, H and Polycarp, C (2008), Making sense of the voluntary carbon market: a

comparison of carbon offset standards, WWF Germany

83 See http://www.v-c-s.org/docs/VCS%202007.pdf

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http://www.v-c-s.org/docs/AFOLU%20Guidance%20Document.pdf

against the next version of the VCS.84

It is highly likely that the VCS will continue to be a focal point for the development of standards in RED. The first methodology produced which was based on these guidelines was the World Bank BioCarbon Fund RED methodology.

84 See http://www.v-c-s.org/docs/VCS%202007.pdf

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3.2 THE WORLD BANK BIOCARBON FUND RED METHODOLOGY

A draft of the World Bank BioCarbon Fund RED approach was made public for comments in July 2008.85 The methodology is specifically for estimating and monitoring greenhouse gas emissions (GHGs) of project activities that reduce mosaic deforestation. Carbon stock enhancement of degraded and secondary forests that would be deforested in the absence of the RED project activity is also included. The focus of this methodology is on on mosaic deforestation, which is confined to areas where forests are in the most part practically accessible. This is classified as different to frontier deforestation – in areas relatively undisturbed by human activities and planned deforestation. More simplified versions could be developed for smaller scale deforestation.

There are nine steps, as shown in figure 4 which progress towards validation of the project. These steps should be followed within the project design document (PDD).

A summary and explanation of all the steps are provided in Appendix 1.

3.3 THE CLIMATE, COMMUNITY AND BIODIVERSITY STANDARDs

The Climate, Community and Biodiversity Alliance (CCBA) is a partnership between leading companies, NGOs and research groups that produce standards for carbon mitigation projects in terms of their impacts on the climate, the benefits it brings to local communities and its delivery of biodiversity conservation. The standards provide a stamp of approval for those groups wanting to invest in land based carbon mitigation projects which bring high social benefits and biodiversity conservation. The introduction of these standards helps to catalyse a global carbon market for land based activities which attain carbon reductions as well as bring high co-benefits to people and to the environment.86 These standards clearly go beyond what is required in terms of co-benefits, as compared to CDM verified projects.

However, it must be stressed that the CCB standard is used during the design stage to primarily address social and environmental impact criteria, as well as guaranteeing that proper carbon accounting methods are being employed. It is not a carbon verification standard, and so is complementary rather than repetitive of certified or voluntary carbon standards.

The CCB standards are to be applied during the project design stage and any project looking to attain CCB standards must write a project design note. In order to attain the standard independent 3rd party auditors must determine whether the project meets the criteria as shown in Figure 5. There are mandatory and optional criteria. All projects must meet the 13 mandatory criteria but can attain higher ratings – gold or silver – if they also meet some or all of the optional criteria.87

The CCB Standards, allows companies to screen carbon projects for a variety of climate, community and biodiversity benefits prior to supporting them. They also ensure that companies do not run the risk of being associated with projects which are deemed to have negative impacts. With REDD this is particularly important given the concerns over the impact of REDD schemes on indigenous groups.

85 Goto http://carbonfinance.org/docs/REDD_Mosaic_Methodology.pdf86 http://www.climate-standards.org/pdf/2007_11_02_CCBS_factsheet_Web.pdf87 http://www.climate-standards.org/pdf/2007_11_02_CCBS_factsheet_Web.pdf

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Figure 3-1: The steps towards validation of REDD projects

There are currently around 60 projects using this standard.88 A number of the REDD projects are looking to obtain CCB standards. The Aceh project, in Indonesia is the first to be verified to meet CCB standards. It is likely that this trend will continue and that REDD projects will look to attain the CCB standard as some social dimensions in particular can be addressed through adhering to this standard. The CCBA has recently released the second version of the standard for review.89

88 http://www.climate-standards.org/pdf/2007_11_02_CCBS_factsheet_Web.pdf89 http://www.climate-standards.org/images/pdf/CCBStandards.pdf

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Figure 3-2: CCB standards

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Chapter 4:Remote Sensing and REDDRemote sensing (RS) is of central importance to the development of REDD at both the project level and the national level. It allows regular and standardized monitoring of deforestation and to a lesser degree of forest degradation.

It should be kept in mind that RS technology is generally not capable of direct measurements of biomass or carbon, which is what is ultimately required for REDD. There are some emerging technologies that are beginning to address this; however, for the time being remotely sensed data needs to be supported by ground-based fieldwork in order to generate estimates of biomass and carbon.

The standing trees that are generally the target of remote sensing are not the only stock of carbon in a forest system; carbon accounting requires that other stocks also be incorporated. The other relevant carbon pools are below-ground biomass (i.e. root systems), dead organic matter on the forest floor (i.e., leaves and litter), and soil carbon. Below-ground biomass and surface organic matter can often be estimated due to close variation with above-ground biomass (e.g. root systems tend to have about 20% as much biomass as the standing vegetation, while surface organic matter tends to be between 10% and 20%90). Soil carbon cannot be estimated as easily from the standing vegetation, and so must be surveyed on the ground.

From an accounting point of view, projects are able to ignore carbon pools if they can demonstrate that doing so will only reduce their estimates of carbon reductions.91

However, more complete carbon accounting will lead to more credits, meaning that greater accuracy may be worth the investment for projects. The “conservativeness” principle suggests that emissions reduction credits will be reduced relative to the degree of imprecision on project measurement. Projects with greater measurement precision will therefore be able to generate more credits (Figure 1).92

90 Gibbs, Brown, and Niles 2007. Monitoring and estimating tropical forest carbon stocks: making REDD a reality. Environmental Research Letters. DOI:10.1088/1748-9326/2/4/045023.

91 GOFC-GOLD 2008. Reducing greenhouse gas emissions from deforestation and degradation in developing countries: A sourcebook of methods and procedures for monitoring, measuring, and reporting. Available at http://www.gofc-gold.uni-jena.de/redd/.

92 In order to be sufficiently conservative, The World Bank Biocarbon Fund RED methodology suggests that the emissions reduction credits claimed by a project should be reduced by an amount that is equal to the sum of the magnitudes of the 95% confidence intervals of the emissions estimates of both the baseline and project scenarios. Methodology available from Error! Hyperlink reference not valid.Error! Hyperlink reference not valid.

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Figure 4-1: Two project scenarios – high uncertainty and low uncertainty – show the same absolute reduction in carbon emissions; however the project on the right with lower measurement uncertainty is able to claim far more emissions reductions.

4.1 RS products available

There is a great variety of remotely sensed data available to assist the monitoring of above-ground carbon stocks. One of the most important distinctions between the many products is spatial resolution. Higher resolution enables the detection of more subtle changes in forest cover, such as small clearings or forest degradation. Products also vary in their spectral resolution; that is the number of frequency bands they are able to detect and record information on. Spatial and spectral resolution can be independent of each other. For example, the Landsat ETM+ sensor has coarser spatial resolution (30m x 30m pixels) than does SPOT-5 (10m x 10m); however, Landsat ETM+ records information from 7 different spectral bands, while SPOT-5 only records 4. This difference in spectral resolution can have important consequences for the ability to process the data further; for example, the suite of Landsat spectral bands can be used together to generate a useful indicator of forest degradation that will be discussed below.93

All satellite images are produced by one of three broad categories of RS sensors: optical, radar, and laser. Optical sensors are referred to as ‘passive’ because they form their images based on light naturally reflecting from the earth’s surface in the same way a photograph might. Radar and laser sensors, on the other hand, are

93 Souza, Roberts, and Cochrane 2005. Combining spectral and spatial information to map canopy damage from selective logging and forest fires. Remote Sensing of Environment 98: 329-343; GOFC-GOLD 2008.

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‘active’ in that they send microwaves, radio signals, or laser light to the surface of the earth and measure the reflection of those emitted signals.

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Type Examples Resolution Benefits and limitations CostOptical MODIS 250m

(coarse) Useful for large-scale frequent

sampling (e.g. is used for Brazil’s near real-time deforestation monitoring program DETER).

Often used for monitoring fire frequency.

Resolution too coarse for monitoring small and medium-sized deforestation.

Low or free

Landsat; SPOT;DMC

30m (medium)

Widely-used. Landsat has continuous data since 1970s.

– Capable of detecting degradation to a limited degree.

Landsat ETM+ developed problem in 2003 meaning all subsequent data requires image correction.

Archived Landsat data will be free from 2009. Otherwise <$0.001 / km2

for older data, or $0.5 / km2 for recent.

Quickbird; IKONOS

<5m (high)

Accurate picture, degradation can be assessed.

Can be used to train other images.

Expensive. Demanding to process

$2-$30 per km2

Radar ALOS PALSAR

~30m Can generate images through cloud and haze.

Demanding to process.

Wide range.

Laser GLAS LiDAR

Potential to measure biomass and forest structure directly.

Difficult to implement in areas with steep slope.

Very expensive.

Table 4-1: Summary of selected sensors 94

94 Ibid. For reference, a complete list and description of the many sensors in use can be found at the following web address: http://geo.arc.nasa.gov/sge/health/sensor/cfsensor.html.

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4.1.1 Optical sensors

To date, optical sensors have been used for almost all land cover analysis. The most common sensor used is Landsat, various generations of which have been in operation since 1972. There is a wide range of optical sensors available from high to low resolution (Table 2). They have the advantage over radar and laser sensors of having a longer historical record and of being more straightforward to process.95

4.1.2 Radar and laser sensors

Because they rely on the transmission of radio waves, radar sensors have the great advantage of being able to penetrate smoke and cloud cover. This avoids the complicated image corrections and the need to collect multiple images that occurs when optical sensors encounter cloud cover. Radar is thus a very promising option for future forest monitoring. At this point, the main downside is that it is more complicated to use than optical imaging, and does not have the historical record that Landsat does.96

Laser, or lidar, sensors are still very much an emerging technology as far as forest monitoring is concerned; however they may play a more significant role in the future. They are able to determine more about the structure of a forest than other sensors, and as such have great potential for being able to measure biomass directly. This would make them the ideal technology for REDD; however, at present lidar is too expensive to be practical in a general sense. To date, lidar has not been used for any large-scale deforestation monitoring.97

4.2 Forest cover, biomass, and degradation

Much traditional forest monitoring – both remote sensing-based and otherwise – has focused on the total extent of forest cover, with many forest statistics given in terms of percentage area under forest cover, number of hectares deforested, or similar measures. Total cover is perhaps the most fundamental element in the accounting of above-ground carbon, but by itself it is insufficient. Different areas of forest can have greatly differing carbon densities, so by extension the emissions produced by deforestation will vary greatly depending on the initial forest conditions. In addition to the natural variety in emissions between areas, there is a spectrum of forest degrading activities from minor degradation to outright clearing. The necessities of carbon accounting therefore sets two challenges for the monitoring of above-ground carbon that are above and beyond a simple measurement of deforestation rates: 1) quantifying the carbon content per unit area of forest, and 2) measuring degradation of standing forests.

4.2.1 Measuring biomass

Attempts have been made to quantify biomass directly using medium resolution remotely sensed data. However, no general statistical relationships have been developed that can describe this relationship consistently.98 Any biomass estimation needs to therefore be supported by ground level data that relates to a given region or project locality. The IPCC has described three tiers of accuracy that can be achieved in this estimation.99 Tier 1 uses very general data on the carbon content of different biomes that the IPCC has compiled and provided. This level would estimate 95 Gibbs et al. 2007. 96 GOFC-GOLD 2008. 97 Ibid.98 Gibbs et al. 2007.

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carbon released from deforestation by calculating the area of forest, and then multiplying that by an IPCC emissions factor for the relevant biome, for example Southeast Asian tropical forests. A tier 2 estimate would incorporate more nationally-specific data. So instead of using a general value for an entire biome as would have been done in tier 1, it would base its estimate on some previous work in the country on the carbon content of specific forest types. These two levels of accuracy may both be insufficient for REDD, as it has been suggested that REDD will need to operate at the tier 3 level of accuracy in order to be viable.100 Tier 3 estimates involve locally specific forest inventories and measurement. In the case of REDD, this would likely involve measurements of canopy height, tree diameter, tree density, and species composition in a series of plots in the project area. In the future, images from laser sensors may be able to provide some of these measurements remotely. However, for the time being, direct fieldwork is the only viable option. Allometric equations are used to relate the measurements of tree density and dimensions to carbon content.

4.2.2. Assessing degradation

The ability to assess forest degradation101 is of central importance to the development of REDD. This is especially true in Vietnam, where degradation outstrips deforestation as the primary source of forest carbon emissions.102 However, assessing degradation is a major challenge for most remote sensing analysis. Medium-resolution remotely sensed imagery such as SPOT or Landsat can detect variation within forested areas; however, as was mentioned above, no general statistical relationships exist that can relate this variation with changes in biomass. There is potential to develop relationships of this type specifically for a given region or project area, although the accuracy and reliability of estimations generated in this way would likely vary among forest types. This approach would involve stratifying forest areas into different levels of growth or degradation (e.g. mature, logged, burnt, young secondary, and older secondary) and doing ground surveys within each of these groups.103 It may then be possible to generate relationships between these different categories of forest and their spectral characteristics on satellite images, thus enabling detection of transition between the categories and an estimation of associated emissions.

One method that may provide more straightforward detection of degradation in satellite images is Spectral Mixture Analysis.104 This combines multiple spectral bands of Landsat images together into a single band called the Normalized Difference Fraction Index (NDFI). In many situations, the NDFI has been shown to be effective at detecting degrees of degradation (Figure 2). However, use of this method does not replace the need for ground measurements to determine the relationship between NDFI and carbon content in the project area.

These methods, although promising, will likely be associated with significant measurement uncertainty. Forest degradation will thus remain one of the most 99 IPCC 2006. Guidelines for national greenhouse gas inventories. Volume 4: Agriculture, forestry and

other land use. Available at http://www.ipcc-nggip.iges.or.jp/public/2006gl/vol4.html.100 GOFC-GOLD 2008.101 For a discussion on the debate on how to best define ‘degradation’ see GOFC-GOLD 2008. In this

document, we use the general definition that degradation is any reduction in the carbon content of a forest area that does not qualify as deforestation.

102 Vietnam R-PIN to the Forest Carbon Partnership Facility 2008. Available at http://wbcarbonfinance.org/ Router.cfm?Page=FCPF&FID=34267&ItemID=34267&ft=DocLib&ht=42503&dl=1

103 Gibbs et al. 2007. 104 Souza et al. 2005.

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difficult aspects of accurate carbon accounting in any REDD project. Current REDD activities address this issue in a variety of ways, with some use of Spectral Mixture Analysis (COMIFAC in Cameroon) and some relatively intensive ground survey work (particularly NK-CAP). Specific project methodologies will be discussed further in the next section.

Figure 4-2: NDFI values (shown in color bar below each image) and their illustration of varying degrees of degradation in a scene from the Brazilian Amazon.105

4.3 Project methodologies

Although discussion of REDD at the international level is moving towards a focus on national-level REDD programs, most REDD activity to date has been initiated by smaller projects. These projects – and the verification standards they have been held to – have driven much of the development of REDD methodology.

4.3.1 Noel Kempff Mercado Climate Action Project – Santa Cruz, Bolivia

The Noel Kempff Mercado Climate Action Project (NK-CAP) was the first avoided deforestation project to have emissions reductions verified by a third party. In 2005, Société Générale de Surveillance (SGS) validated emissions reductions from NK-CAP totaling 5.8 million tonnes of CO2 between 1997 and 2026, of which 989,000 tonnes

105 Souza et al. 2005.

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had already been reduced by 2005. These reductions and the baseline against which they were established were determined through a combination of ground-based monitoring and remote sensing.106 The baseline was calculated from three related sets of information that will be discussed in the following paragraphs:

A linear extrapolation from historical data of deforestation rates in the project area;

The location of future deforestation as predicted by GEOMOD land use change modeling; and,

The ratio between the deforestation rate in the project area and the rate in a reference area.

The rate of historical deforestation in the project area was calculated from forest cover data at three time points: 1986, 1992, and 1996/97. Forest cover at these times was generated from images produced by the Landsat TM sensor using bands 3, 4 and 5. Measurements were taken in terms of total hectares of deforestation within the project area. By extrapolating linearly – that is, projecting deforestation into the future on the assumption that it will occur at an unchanging rate – the NK-CAP established a future deforestation rate to serve as a baseline.107

The NK-CAP then used this projected deforestation rate and the maps of forest cover change that were used to generate it as input into land use modeling package GEOMOD, which is part of remote sensing software IDRISI Kilimanjaro. GEOMOD takes a set of inputs (e.g., the location of roads and rivers) and can estimate areas of probable deforestation, given the deforestation rate that was used as input. It is important to realize that GEOMOD is not used to estimate the extent of deforestation; rather, it takes a fixed total amount of deforestation and then approximates where that deforestation will occur on a landscape. This has important implications for carbon balance, as parts of the landscape will be more carbon dense than others. Estimates of carbon in the project area are made using a locally specific 1996 forest carbon inventory.

106 SGS United Kingdom Ltd. 2005. Validation and verification report: Noel Kempff Climate Action Project.

107 Noel Kempff Mercado Climate Action Project 2006. Project Design Document. Available at http:// conserveonline.org/workspaces/climate.change/ClimateActionProjects/NoelKempff/NKPDD/PDDZip/

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Figure 4-3: Map of Noel Kempff Mercado Climate Action Project area, buffer zone, and reference area.

An innovative aspect of the NK-CAP carbon balance monitoring methodology is their use of a reference area as a correction factor for the project baseline. Using a simple linear extrapolation of historical data, as many projects do, is problematic as it does not account for the potential for changing contexts to have an effect on deforestation rates. Using a reference area provides a mechanism whereby changes in local deforestation rates can be observed independently of project activities. The reference area is monitored using the same remote sensing techniques as the project area. One potential danger of this technique is that any leakage of forest degrading activities from the project area to the reference area may artificially inflate the project’s estimated emission reductions by exaggerating the difference between the project area and the ‘business as usual’ reference area. The NK-CAP addresses this by having a 15km-wide buffer zone where they monitor leakage. However, it is possible that leakage will occur at a greater distance from the project area than 15km.

4.3.2 Juma Sustainable Development Reserve – Amazonas, Brazil

The Juma Reserve Project does not process any independent remotely sensed data that is unique to the project. However, it draws heavily on PRODES, the Brazilian government’s extensive forest monitoring program.108 PRODES has conducted a complete assessment of forest cover in the Brazilian Amazon – and the associated mapping of deforestation – every year since 1988, and has made all of the data publicly available.109 PRODES – and the Juma Reserve Project by extension – uses Landsat TM and ETM+ imagery.

The Juma Reserve Project has established its baseline level of deforestation using PRODES maps and a land-use change modeling program called ‘SimAmazonia’.110

Project proponents using SimAmazonia predict that up to 62% of forest area in the Juma Reserve Project area would be deforested by 2050 under the ‘business as usual’ scenario, so any improvement on that steep baseline may be eligible for crediting. Carbon flux will be monitored by a continued use of PRODES for forest cover, as well as more involved measurements of biomass. According to the most recent project design document (PDD), the latter methodology is still being developed.111

4.3.3 Ulu Masen – Aceh, Indonesia

The Ulu Masen project has not produced a baseline deforestation rate from historic data as most other REDD projects do. The project developers argue that Aceh has been so unstable in recent years that a historic rate would not be representative. Instead, the baseline was presented to auditors in a narrative form with a worksheet identifying which areas would likely be the most at threat from various pressures. The scenario thus developed was spatially explicit, with areas being mapped as low, medium, or high risk of deforestation. This approach led to a projected annual deforestation rate of 1.3%, which is fairly conservative when compared to rates on other Indonesian islands. Remote sensing was not used to establish the baseline, but Landsat imagery in 2000, 2002, and 2006, as well as SPOT 5 imagery from 2006 will be used to assist future monitoring. 108 Juma Sustainable Development Reserve Project 2008. Project Design Document Version 5.0.

Available at http://www.climate-standards.org/projects/.109 GOFC-GOLD 2008. 110 Juma Reserve Project 2008. 111 Ibid.

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Carbon stocks were determined using general values from the IPCC regarding average carbon volumes for the appropriate forest type. This is a very low-accuracy approach (tier 1) when compared with projects that develop more locally specific information. However, Ulu Masen project developers argue that with such a large-scale endevour, a rough estimation is the most appropriate approach at the project development stage. The methodology described in the PDD allows for measurement accuracy to gradually increase (to tier 2 and 3) as capacity builds and the project progresses.

4.3.4 Central African Forests Commission (COMIFAC) Pilot Project - Cameroon

This initiative is not a REDD project itself, but rather an experiment in methodologies that intends to lay a groundwork for future activities. It has been orchestrated by the Global Monitoring for Environment and Security (GMES) initiative, a program established jointly between the EU and the European Space Agency (ESA). The COMIFAC initiative also operates at a national scale, so its goal is less to support private sector projects as it is to support future national-level REDD programs.

This initiative used Landsat data from 1990 and 2000 followed by DMC data from 2005. The switch in sensors for the final monitoring year may be a result of the breakdown of the scan line corrector (SLC) on the Landsat ETM after 2003. Images were used to create a forest change map for all of Cameroon. After initial processing to try and remove cloud cover, two different approaches were used to train the classification of the images. In some cases, sample areas were selected for field study to verify land cover type, while in others Quickbird satellite imagery was used to fulfill the same role.112

One of the most useful contributions of the COMIFAC pilot project is its provision in a REDD context a technique that can monitor forest degradation with standard optical remote sensing techniques. This is the ‘Spectral Mixture Analysis’ 113 technique, which was discussed earlier in this chapter. In the case of Cameroon, this technique was useful in detecting areas of degraded forests.

4.3.5 ARBCP Lam Dong, Vietnam

The Asia Regional Biodiversity Conseration Program is the most advanced REDD project in any of the three focus countries of this report.114 In 2008, it completed field surveys for its carbon accounting and developed a projection for business-as-usual emissions from deforestation over the next 30 years. This indicated that the expected area of deforestation in the project area would be greater than 14 000 ha (140 km2 ) over 30 years, and would result in emissions of 8 million tonnes of CO2.

This baseline was developed using Quickbird imagery from 2001 and 2008. The location of future deforestation is predicted using a GEOMOD model that also

112 Haeusler and Gomez 2008. REDD Pilot Project COMIFAC: Cameroon. Presentation to REDD-COMIFAC meeting, Paris, March 2008. Available at www.cbfp.org/docs/redd-paris032008/12%20-%20Haeusler %20REDD%20Pilot%20Cameroon.pdf

113 Souza et al. 2005.114 Presentation by James Peters of Winrock International given to workshop “Managing Forests in

Mekong Countries for Carbon Sequestration and REDD” in Hanoi, October 28, 2008. Available from Error! Hyperlink reference not valid.Error! Hyperlink reference not valid._MARD_Uniquest.pdf.

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incorporates data on distance from population centres and from waterways, slope, forest protection status, and forest type.

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4.3.6 General lessons

It is clear from an examination of project methodologies that there is no single best practice; all methods need to be appropriate to the context of a given project. For example, the absence of a historical baseline for the Ulu Masen project – although completely at odds with most approaches – may be appropriate in that situation given the long-term armed conflict (and lack of commercial development of palm oil to date) in Aceh. However, there are general lessons that can be taken from these projects.

Project Project area (km2)

Sensors used

Years of historical data

Ground plots

Baseline determination and monitoring

Bolivia: NK-CAP

6400 Landsat ETM+ (bands 3,4,5); MODIS to estimate fire risk.

1986, 1992, and 1996/97

609 plots first assessed in 1997

GEOMOD modeling. Correction introduced by monitoring deforestation rate in reference area.

Brazil: Juma

5900 Landsat TM and ETM+ data from Brazilian PRODIS program.

Multi-year trends.

Ground plots monitored by local communities. Number not given in PDD.

Multi-year PRODES data incorporated into SimAmazonia model to determine baseline. Monitoring with PRODES data and other methodologies still in development.

Indonesia: Ulu Massen

7500 None to date. Have acquired Landsat images for future use.

N/A Will be used in future to improve accuracy.

Qualitative analysis decided on baseline of 1.3% deforestation rate. Only rough monitoring in place now, but carbon inventories will become more accurate as project progresses.

Cameroon: COMIFAC

475 000 (Entire country area)

Landsat and DMC for wall-to-wall survey; Quickbird for image training.

1990 and 2000 (Landsat) 2005 (DMC)

Ground plots used for image training (in conjunction with VHR imagery).

GEOMOD modeling; not yet completed. Uses Spectral Mixture Analysis115 to measure forest degradation.

Vietnam: ARBCO in Lam Dong

Quickbird 2001 and 2008

Ground plots measured in June 2008.

GEOMOD modeling used to generate a 30-year business-as-usual emissions scenario.

Table 4-2: Summary of remote sensing use by projects.

115 Souza et al. 2005.

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The best approach is one that contains internal checks and balances. A land cover change model such as GEOMOD is useful for locating deforestation. However – like all models – it is only as good as the parameter estimates it is calibrated with, and may become problematic if it is tuned too closely to historical pattern.116 A good methodology should therefore have a method to provide a crosscheck to the land cover model. In the case of NK-CAP, monitoring of the reference area provides this crosscheck to ensure that the deforestation rate used to calibrate the model remains realistic. Similarly, this reference area approach is not problem-free. It can also provide misleading estimates of emissions reductions if significant leakage is occurring. The reference area approach should in turn be crosschecked with qualitative research in the area to monitor leakage directly.

From the point of view of the imagery itself, certain characteristics are common among projects. Landsat, for example, is used almost universally because of its low cost and its good historical coverage. As a result of its universality, expertise with Landsat images is further developed than with other sensors; this has led to the development of useful techniques such as spectral mixture analysis, which was discussed above. The limited use of the very high-resolution optical sensors such as IKONOS and Quickbird, as well as the limited use of radar and laser sensors, indicates that the most technologically advanced approach is not always the most appropriate. In most cases this is simply an indicator that the extra expense of these technologies does not generate sufficient returns in terms of carbon crediting. The higher-resolution sensors do have their place, however – e.g., IKONOS and Quickbird can be used to ground-truth lower-resolution images in cases where fieldwork would be costly or impractical. Given its potential to pierce clouds and smoke, radar may become more common in coming years as individuals gain more experience with its use.

4.4 Operational recommendations for remote sensing in REDD projects

As illustrated by the projects above, remote sensing has a central role to play in the development of REDD. Analysis of satellite imagery is integral to both baseline setting and to the monitoring of changes in standing carbon stocks. The World Bank Biocarbon Fund RED Methodology117, which gives a general template for avoided deforestation projects to follow, requires the use of RS for all but a few of its nine steps. However, it gives few specific recommendations on which RS technologies projects should use, other than the recommendation that “medium resolution” technologies such as Landsat or SPOT should be the minimum.

The Biocarbon Fund methodology addresses deforestation exclusively. However, that does not preclude the application of its general structure to measure degradation as well. Addressing degradation can be done with more detailed classifications of land cover. The Biocarbon Fund methodology requires at a minimum that land cover be classified into 6 broad categories (forest, cropland, grassland, wetland, settled area, and other); however, a more detailed classification – of forests in particular – is also possible. Distinguishing between different forest types makes it possible to measure degradation if areas of forest change from a more carbon dense forest type to a less-dense one. The general method of 116 This is the concept of “model over-fitting.” An in-depth discussion of this statistical issue would be out

of place in this document. As a general caution, a model can always be made to fit historical data well if a sufficient number of parameters are included. However, a good fit of historical data does not necessarily mean good predictive ability in the future. Models, although useful, should therefore always be used with caution and cross-checked with other methods.

117 Discussed in Chapter 3 of this document and described in detail in Appendix 1. Full methodology available from Error! Hyperlink reference not valid.

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measuring degradation is thus quite similar to the method for measuring deforestation. In both cases, maps are generated of forest and non-forest land cover classes, and changes between classes are monitored. Estimates of deforestation will look at the area of land that changed from a forest class to a non-forest class, while estimates of degradation will look at the area of land that is changing between forest classes.

Distinguishing between forest classes of different carbon densities is the greatest challenge for monitoring degradation. The spectral mixture analysis approach as described above may prove effective for many projects. This gives a single value (NDFI) that correlates well with forest degradation and that may be used to define forest classes based on areas that have NDFI values with certain ranges. Ground plots can then be used to generate statistical relationships between carbon content and area within each forest class. This technique can be used with Landsat imagery, although the precision using Landsat may not be sufficient to generate reliable descriptions of forest types.

All steps in the measurement and monitoring process involve a tradeoff between increasing cost – either by using higher-resolution imagery or more extensive ground plots - and increasing accuracy. One approach that has been taken in some project methodologies to address this tradeoff is to use inexpensive lower resolution imagery, generally Landsat, for most of the historical sampling years, but higher resolution imagery such as SPOT for the sampling year that is closest to the project start date. An alternate - or additional – strategy for reducing cost is to restrict the use of higher resolution data to specific project areas which are known to be changing more rapidly, or which have more variability in the data. The target areas for higher resolution sampling can be selected based on the lower resolution sampling and on project staff knowledge.

The combination in which medium resolution imagery and high resolution imagery is used will depend on the characteristics of a particular project. Two of the most important considerations in this regard are the scale of the project and the relative importance of degradation vs. deforestation in the area. These will both influence how cost-effective a given use of imagery is. Regarding project scale, it may be worthwhile for smaller projects to use higher-resolution imagery such as Quickbird or IKONOS. Although this is more expensive, it will allow the project to capture more carbon credits per unit area, which may be important for projects operating at small spatial scale. The usefulness of higher-resolution imagery will also depend to some degree on the relative importance of degradation as compared to deforestation in the project area. The larger typical forest clearings in an area are, the easier they are to detect with technology such as Landsat. In such cases, high resolution imagery may not be worth the investment. However, in projects where forest degradation is responsible for more of the forest carbon emissions than outright deforestation – this may often be the case in Vietnam, for example – there will have to be greater use of high resolution imagery.

At present, remote sensing in REDD projects is only used to measure area directly. Estimates of carbon stocks are established from carbon density estimates for particular forest types. Carbon density – that is, the average tonnage of carbon per area of a given forest type – needs to be established using ground plots, and its estimation will vary in precision depending on the number of plots and the overall variability of the forest type being sampled. As technology develops, it may become possible to directly measure biomass using images from laser sensors. For the time being, however, the only approach which if feasible at a broad scale is the area-based approach as described above.

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4.5 National forest monitoring schemes

4.5.1 Lao PDR

Laos has twice completed a national inventory of forest cover – once in 1992 and again in 2002. The Department of Forests (DoF) in the Ministry of Agriculture and Forestry (MAF) has the responsibility of carrying out this inventory once every ten years. Both inventories to date used SPOT imagery for the assessment. In 2002, the DoF quantified forest cover change by comparing the two sets of SPOT images. This was done by a two-stage sampling approach whereby 999 10km x 10km primary sampling units (PSU) were randomly chosen over the surface of the country, and 81 secondary sampling units of 7ha each were chosen within each PSU. This process sampled 2.3% of the surface area of the country, and generated a statistically sound estimate of forest cover change.118

The DoF is in the process of establishing a set of permanent sample plots in forest areas across the country. There are already 200 plots established in each of three provinces, with 100-200 plots planned to be established in each of the remaining 14 provinces. These plots are the focus of ongoing national stand inventories, and allow long-term measurement of tree volume, height, and survival. This will be useful data for future evaluation of carbon stocks in Lao forests.119

Remote sensing has been used in Laos to successfully target and reduce illegal logging. The catchment area around the Nam Theun 2 hydroelectric development was identified at high risk for these activities, and so a survey regime was instituted in the area by GTZ with the support of the Lao government. This program used a combination of Landsat and SPOT images together with aerial photos to survey the area in both 2000 and 2002. Landsat was chosen because of its good resolution and low price, while SPOT was used as a backup in situations where cloud-free Landsat images could not be obtained. Aerial photos were used instead of high-resolution satellite images such as IKONOS because the latter was deemed too expensive for the required use.120

4.5.2 Nepal

Of the three countries discussed here, Nepal has the most limited national forest monitoring program. Nepal’s national proposal, or R-PIN, to the World Bank’s FCPF identifies the improvement and extension of forest cover databases as a central priority for the development of REDD in the country.121 The Department of Forest 118 Land use and forest cover in Lao PDR. Presentation by Lao delegation at ‘Managing forests in Mekong

countries for carbon sequestration and REDD’ workshop in Hanoi, Vietnam, November 2008. 119 Lao PDR R-PIN to the Forest Carbon Partnership Facility 2008. Available from

http://wbcarbonfinance.org/ Router.cfm?Page=FCPF&FID=34267&ItemID=34267&ft=DocLib&ht=42503&dl=1

120 Feldkotter (GTZ). Use of remote sensing for monitoring of logging in the Mekong region – the Nam Theun logging surveys.

121 Nepal R-PIN to the Forest Carbon Partnership Facility 2008. Available at http://wbcarbonfinance.org/ Router.cfm?Page=FCPF&FID=34267&ItemID=34267&ft=DocLib&ht=42503&dl=1

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Research and Survey (DFRS) is responsible for forest monitoring in Nepal. Although forest assessments have been completed, Nepal lacks the regular system of forest monitoring that Lao PDR and Vietnam subscribes.

To date, much of the remote sensing work in Nepal mapping forest cover has been done using aerial photos. Forest assessments based on aerial photos were released in 1964 and 1979; however neither of these covered the entire country. The first assessment with complete coverage was not finished until 1998, and included a mix of data from 1990, 1991, 1992, and 1996. The data assembled for this assessment was from different sources. Most of the country was still mapped using aerial photos at a 1:50,000 scale. The only region of the country where satellite imagery was used was in the Terai districts, relatively flat areas below the Himalayan foothills. In the case of the Terai, Landsat TM images were used from 1990 and 1991. An analysis of forest cover change was undertaken in 2005 as a partnership between the government of Nepal, SNV, WWF, DFID, and SDC. This compared Landsat images between 1991 and 2001; however, the focus was again only on the Terai.

Nepal faces one major challenge in its forest monitoring: the shadows cast by its mountains. Many satellites fly over Nepal in the morning, meaning mountain shadows are often long.122 Although in some cases this may be correctable with image processing, in most cases this means a significant loss of data. This fact may mean that in some areas the use of aerial photographs for forest monitoring will remain more practical than traditional optical sensors such as Landsat.

4.5.3 Vietnam

Remote sensing techniques have been used to monitor forest cover in northern Vietnam since the 1970s. This early work was completed using 1:25,000 aerial photos, with forest cover maps created at the same scale. Following the launch of Soviet satellites and the American Landsat series, Vietnam began using satellite imagery to create forest cover maps. As of December 2007, Vietnam uses a ground receiving station that receives images from French and ESA satellites. This station has the capability to both receive and process images. The GoV provides the first five years of this project, after which point it is planned that the station will be self-sufficient.

The GoV has mandated that the National Forest Inventory, Monitoring and Assessment Program (NFIMAP) take place every five years. This inventory was initiated in 1991 and is presently in the fourth cycle: 2006-2010. In all cases, the inventory has involved ‘wall-to-wall’ sampling; that is, the entire forested area of Vietnam has been sampled. Each round of Vietnam’s NFIMAP has used a different remote sensing product with later cycles using products with progressively better spatial and/or spectral resolution.123

Years Sensor Resolution Data Number of ground plots

1991-1995 Landsat TM 30m Hard copy only 42001996-2000 SPOT 20m Digital 42002001-2005 Landsat ETM 30m Digital 42002006-2010 SPOT 5 10m Digital 2100

122 Sharma 2003. Monitoring forest resources using remote sensing data. Nepal Department of Forest Research and Survey. Available at www.aars-acrs.org/acrs/proceeding/ACRS2002/Papers/FR02-8.pdf.

123 Vietnam R-PIN 2008.

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Table 4-3: Vietnam’s four rounds of forest inventory.

The MARD Forest Inventory and Planning Institute (FIPI) is responsible for NFIMAP. FIPI manages a set of permanent sampling plots that are measured every five years. Different ecological zones are sampled in different years to make efficient use of labour; however, a particular zone will always be sampled in a single year, and sampling events for the zone will be five years apart. A permanent set of 4,200 plots was sampled for the first three cycles of NFIMAP; however, with the higher resolution SPOT 5 imagery being used in the current cycle, FIPI decided to scale down the number of ground plots by half.

Donors such as the World Bank, the ADB and GTZ have undertaken some forest monitoring projects in Vietnam. Some of these have used higher resolution data than the NFIMAP (e.g. IKONOS or Quickbird). These ODA projects support various Vietnamese governmental counterparts, which unfortunately are not under the same ministry/department; hence efficiencies are lost whilst redundancies and data hoarding occur.

In Vietnam, the Governments of Japan, Finland and United States have established forest monitoring projects that aim to boost the capacity of the GVN to engage in REDD initiatives. The Forest Agency of Japan has funded a research project on testing the potential applications of the Japanese Advanced Land Observing Satellite (ALOS)/PALSAR data to establish forest cover maps and to estimate forest carbon stock in two provinces; this activity is currently being implemented by a Japan-based consulting firm. The Finnish-funded Forest Management Information System (FOMIS) project (€4 million) is planned to begin in May 2009 to develop a more reliable forest inventory information platform and establish a more accurate forest stock baseline. In southern Vietnam, USAID Asia Regional Biodiversity Conservation Program supports Winrock International to develop a forest protection project ($6 million from 2005-2009), includes a project-based REDD initiative that uses Quickbird technology to estimate the forest carbon modeling of a 80,000 ha watershed forest in the Da Nhim basin of Lam Dong province; it is anticipated that this project will be the first operational REDD project in Vietnam.

Although monitoring of forest cover is quite advanced in Vietnam, monitoring of carbon stocks (as in many countries) is at a fairly basic stage. The national government has no spatially explicit information on carbon stocks. The only emissions data regarding land cover change comes from the scaling up of gross deforestation values by standard IPCC values estimating tonnes of CO2 per hectare of forest. These values are generalized across many landscapes and types of forest, and so for any given area they are very approximate. The uncertainty in these estimates is very high.

4.6 Future priorities for remote sensing and REDD

The international community is generally in agreement that REDD should move in the direction of national-level accounting in order for it to more credibly address the leakage issue. The great majority of proposals presently under discussion for the design of an international REDD framework support the use of national reference levels.124 However, as has been established previously in this document, project-level initiatives are essential for maintaining private sector investment. The relationship between these two tiers of activity will potentially be challenging, especially the 124 For a useful overview and comparison of the various REDD proposals currently being discussed, see

Global Canopy Programme 2008. The Little REDD Book. Available at http://www.globalcanopy.org/ main.php? m=5& sm=24&ssm=65&sssm=147.

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avoidance of double counting of reductions between the two.125 However, there is also great potential for collaboration, especially in terms of remote sensing and carbon monitoring.

The relative strengths of the two scales of remote sensing are the potential for national government efforts to achieve universal (or ‘wall-to-wall’) coverage, while project-level activities are more likely to be able to afford targeted higher-resolution imagery. For project developers, using pre-processed government data may be a lower cost alternative for establishing historical deforestation rates in a project area than would be gathering and processing remote sensing data from scratch. For governments, lower-uncertainty estimates of carbon balance in certain areas will reduce the overall uncertainty of national estimates, with the associated increase in carbon offset revenue that was discussed earlier in this chapter. This beneficial impact on uncertainty will be particularly pronounced if project-level activities focus on areas with highly variable forest cover data, as might be expected if projects target deforestation hotspots.

Of the three countries discussed in this section, this approach has the most potential in Vietnam, where authorities have used wall-to-wall sampling of its forest cover since the early 1990s. In Vietnam, existing structures to coordinate between government and private sector actors already exists. Government agencies are willing to sell data from their forest monitoring to project developers, whilst all privately developed projects are required by law to share data with government partners. What is lacking, however, is a central repository of data that can be maintained by the GoV for use by all project developers. REDD projects are not required to partner with any one particular ministry (e.g, some may partner with MARD who is charged with forest inventories while others may work with MONRE who is charged with environmental monitoring, environmental policy and representation at the UNFCCC), and there is no central government clearing house where data is shared between ministries. Consolidation of this data would be a useful and cost-effective step to take for the continued development of REDD in Vietnam – and is a useful goal that Lao PDR and Nepal may share.

125 EcoSecurities 2008. REDD Policy Scenarios and Carbon Markets. Final draft February 2008. Document prepared for Indonesian Forest Carbon Alliance (IFCA).

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Chapter 5: Understanding the impacts of REDD on the poor

A major concern from numerous non government organisations is the possible detrimental impact of REDD on the poor. This culminated in a statement by a number of groups, voicing concerns as to the possible impact of REDD on the millions of indigenous peoples. In order to better understand the likely impacts of REDD on the poor it is necessary to draw on literature on forests and livelihood projects. On the design of any mechanism to deliver financing to the poor, the work around PES mechanisms provides good insights. Some critical issues which throw light on the impacts of REDD on the poor are discussed below:

Issue 1: How the REDD mechanism is designed

How REDD will affect the poor will depend on the design of any international REDD framework. Different designs will have different implications for the poorest. It is worth examining these in order to help advocate for a REDD mechanism which brings greatest benefits for the poor.

An important design is whether or not the funds are linked to international carbon markets. If so this is likely to mobilize much needed sources of funds and provide much needed income for good forest management. This carbon market already exists, is secure and is expected to grow in size and also in price paid for carbon. This would offer a potentially vast pool of funds through a well defined marketplace. A major impediment of current PES schemes, for example for watershed protection, is that the market place is not clearly defined and the levels of payment are often not sufficient to change behaviour. Also, through the international carbon market local communities are likely to receive steady and stable income streams with will help hedge them against the ecological and economic instability which many are used to living with. If the quantities of income are sufficient, which they potentially could be, especially if linked to the carbon market place, and the money reaches the right individuals and groups, then REDD could be a powerful mechanism to improve livelihoods. Off course that is a big ‘if’, getting the money to the right people to provide the right incentive will be key.

However, with the larger quantities of money could come greater interest from individuals and the state for claims on lands and to engage in rent seeking behaviour.126 This could have serious implications for the poor if they are pushed of the land they traditional view as theirs [this is further discussed under issue 2]. There is also the concern that the market based approach will have less consideration for the needs of local groups, as buyers will want carbon at least costs. This could be overcome by designing projects which have high co-benefits such as the Climate, Community and Biodiversity (CCB) standard. If the money is not put through the carbon markets this opens up more possibilities to ensure the needs of the poor are addressed, but it may reduce the overall amount available to invest in such groups.

Linked to the markets is the issue of when the payments are made. Lessons from projects under CDM mechanism are insightful in this respect. If payments will only be made on delivery of the credits this will act as a major barrier to the introduction of REDD and will mean that the countries and more importantly the communities are required to shoulder the initial costs. Like in many of the CDM projects the issue of upfront funding can be a major impediment to project development. Without upfront 126 Peskett, L. Huberman, D, Bowen Jones, E, Edwards, G and Brown, J (2008), Making REDD work for

the poor Draft 2 on behalf of the poverty and environment partnership, ODI, London

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funding many of the poorest countries will be unwilling to invest in REDD schemes; and the poorest communities who have the highest discount rate, simply will be unable to change their practices based on the future promise of credits. It is therefore important that any scheme has a built in mechanism for upfront funding. Also that this upfront funding does not imply that a very low price will be paid for the carbon. Some may argue that this is currently the case with World Bank schemes which provide early funding but get the credits at a highly discounted price.

Finally, there is the issue of the scope of the overall REDD mechanism. Clearly if it just covers deforestation and not degradation this would open up or close opportunities depending on different countries and communities within them. In areas such as Congo where degradation has shown to be particularly pronounced then they would clearly not benefit from a mechanism solely focused on deforestation. Also those countries, where the forests are not under threat and those communities who are not exerting such pressures on the forests will not receive the benefits from a REDD approach. A stock approach based on the actual forest, rather than the likely threat to the forest would benefit them. However, as discussed above this approach has many detractors. The fact that degradation tends to be associated with smaller scale impacts carried out by individuals or communities, would tend to support the argument that a REDD mechanism which includes degradation and deforestation would provide more financial flows which could potentially be used for local communities. Therefore efforts should be made to address degradation.

Issue 2: Who owns the credits?

A fundamental issue concerning REDD and the poor is the issue of who actually owns and has the right to own [and trade if under a market system] the carbon. Carbon is in essence a new commodity which has a value. However, the carbon is linked to the forest as is the carbon sequestration service it provides, and therefore the owner of the forest is likely to have the right to any of the carbon (credit). Without clear tenure this is likely to create serious problems as there will be uncertainty with regards to who has the right to benefit from providing the service. A major concern, which has led to concerted efforts and negative sentiment, particularly from groups from the south is that this could worsen poverty and violate rights to land and resources where local communities and indigenous peoples' rights have weak or non-existent status under national laws - as is the case in Indonesia.

If REDD is able to mobilize the large amounts of funds expected, this could lead to many more commercially minded individuals or groups to engage in land speculation and in-migration. With larger flows of finance there may be a greater opportunities and tendency for corruption as government interference in order to acquire some of these financial benefits.127

Ultimately those groups who do not have clear tenure, often the poorest, will be pushed out and their access to the forests diminished. A Bali statement signed by civil society organisations highlighted the potential social impacts for the 1.6 billion people who depend on forests for their home and living.128 If the carbon rights are sold, it will restrict local communities access and use over the long term as such agreements need to last a considerable amount of time. However, if local communities are prevented from accessing areas they have traditionally used for various purposes, such as harvesting timber or using non timber forest products, then this could lead to future conflict. Also it is highly likely to undermine the 127 Peskett, L. Huberman, D, Bowen Jones, E, Edwards, G and Brown, J (2008), Making REDD work for

the poor Draft 2 on behalf of the poverty and environment partnership, ODI, London128 Bali Declaration: Protecting the world's forests needs more than just money, 10/Dec/07

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permanence of any carbon credits. What is clear is the issue of how local communities, many of who have unclear tenure, but who depend on the forests are brought into the REDD schemes will be critical to the success of REDD and its impacts on poverty alleviation.

This also reinforces the need for REDD measures to help strengthen local, provincial and national legislation around issues such as tenure and enforcement. Measures can be introduced such as only allowing those individuals or groups who traditionally used the land to be able to sell the carbon rights. Or that people who have acquired the land after a certain date are no longer eligible. However, whatever scheme is chosen there is likely to be certain national and local level conflict over tenure and the possible carbon bonanza, if it materializes. What is clear is that if there are disputes or un-clarity over land ownership for the poorest groups, REDD is unlikely to deliver benefits to the poor.

Issue 3: Estimating compensation under REDD

The success of REDD schemes will partly depend on the correct estimation of the opportunity costs of the stakeholders involved.129 For the REDD schemes to work the individuals or groups that are affected must receive more benefits under the REDD scheme than what they currently receive in order for them to change their behaviour. However, it is no simple task to estimate their opportunity costs/foregone benefits.

There is a wealth of literature looking at this issue, which includes the work by Conservation International, where such costs were estimated as part of their conservation concession agreements. An important aspect of this is to realize that the potential foregone benefits which local communities may have, with respect to the forest are not simply confined to the more tangible marketed goods. That local communities use and rely on the forest for a myriad of goods and services which include non marketed goods and more intangible aspects, such as the historical and cultural importance of an area. Given the difficulty in estimating the more intangible aspects they are often neglected from any calculations. However, these values are often important to the poorest. In order to provide the right options to change behaviour local groups need to be fully compensated for any changes in forest uses, otherwise it is likely to simply lead to conflicts later on. The literature on economic valuation of forest has increased in sophistication and can certainly provide help in this respect.

Related to this is whether the opportunity costs should be based on current practices or also take into account the development potential of the land. The land could be worth considerably more but has not been tapped for its potential. The poorest countries and poorest populations, which have the fewest resources to exploit the potential opportunities, are likely to be the ones giving away potentially most valuable areas; for example, in places like Papua New Guinea. Therefore there is a need to ensure that the potential of an area is accounted for or at least there is some flexibility built into the mechanisms to allow for revisiting the opportunity costs, at some later date.

However even if these opportunity costs are adequately estimated there is still the issue of ensuring these groups actually receive this compensation.

Issue 4: The benefit sharing mechanism under REDD

129 Peskett, L. Huberman, D, Bowen Jones, E, Edwards, G and Brown, J (2008), Making REDD work for the poor Draft 2 on behalf of the poverty and environment partnership, ODI, London

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One of the most challenging issues in successfully delivering payment for ecological services (PES) has been in establishing the actual payment mechanism and ensuring the money is transferred to the affected groups. The scale at which the REDD mechanism is introduced – either at a national level or at a project level - is likely to have implications for how the benefits are distributed.

As discussed in chapter two the inclination is to introduce REDD schemes at the national level in order to avoid leakage. One would expect that if REDD is introduced at the national level, then it would be less likely for the money to filter down to the field sites, than if it was introduced directly at the project site. That there will be a tendency for the authorities to prioritise REDD activities at the national level and even if the money is transferred to the field level, at every level of administration there is likely to be some capture of funds. Critical to this issue is the design of the benefits transfer mechanism and how much the national authorities are willing to devolve power and include those groups affected by the REDD activities in the decision making process. If they are able to establish such mechanisms with an adequate and transparent flows of funds to the people affected then the chance of success of REDD mechanism is likely to be much higher; and so too will its ability to alleviate poverty.

This also raises the issue of what is the most appropriate mechanism for transferring the funds. Choices include using existing government structures or creating new funds in the country or do it project by project, as is the case with CDM currently, which reduces government involvement. It is likely that a mix of such approaches will be introduced. Each scheme has its pros and cons. The impact on the poorest will ultimately depend on whether decision making power and ultimately the funds feed down to the groups who need to make the behavioural changes and the right incentives are in place.

In terms of how payments are provided experience has shown the difficulty and high transaction costs of providing contracts with each individual. In examination of PES projects it would appear that a system where some of the money flows directly to the individuals and some of the money goes to local development projects is one possible solution. If local institutional arrangements exist, which are able to administer and distribute local development funds then the money should flow through such groups; for example, local forestry units and/or village development committees. Such existing groups should be aware of and understand local development needs. There are off course concerns that such local bodies are not immune from corruption. New groups could be established however, but this could also cause difficulties within the local communities. One suggestion is to have basic guidelines on the use, the make up of the local community groups and transparency of spending could be attached to any flow of funds. Efforts should be made to assess the best local groups for channelling at least part of the funds. There also needs to be some mechanism to decide who receives the payments. This will be affected by the fundamental issue which affects PES schemes, that is who owns the actual ecological services and should therefore be compensated, as discussed earlier.

Issue 5: The REDD measures introduced

It is still unclear which measures can and will be introduced as part of REDD measures. This will depend on a number of factors including the scope of any REDD mechanism and the accepted definitions of key concepts, such as forest, degradation and so forth. As already discussed above if RED does not factor in degradation this will have major implications on which groups are eligible to receive benefits. Also how a forest is defined will similarly have implications. Depending on this could

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determine for example, whether agro-forestry and/or community forestry are included. What is clear is that the different interpretations will have far reaching implications for different groups and ultimately on the lives of the poorest. A number of authors have presented a likely suite of possible measures which could be introduced as part of a REDD scheme. Common measures are highlighted in Box 1.

1. Removal of subsidies for deforestation and forest degradation2. Fiscal changes to reduce land clearance 3. Strategic planning of road improvements to avoid unplanned logging or

agricultural expansion4. Improve forest law enforcement5. Improve land tenure security for forest-dwelling peoples 6. Devolve forest management to local communities7. Conservation concessions8. Strengthen the protected area network9. Paying communities directly for reduced deforestation, based on the model of

existing Payments for Ecosystem Services 10. Funding fire prevention programmes11. Sustainable forest management/ forest certification/ improved forest planning12. Sustainable agriculture/ agro-forestry13. Alternative livelihood programmes14. Agricultural intensification in favorable areas to relieve pressure on remaining

forest lands15. Support community forestry16. Improve off-farm employmentAdapted from Chomitz et al., (2007); Peskett, L (2008)

Figure 5-1: Possible measures under a REDD mechanism

As can be seen from this table there is considerable variation in risks and benefits of different measures to achieve REDD objectives.130 They will likely have varying levels of impact on the poorest groups. For example, improving land security for forest dwelling communities and/or establishing community forestry should bring pro-poor benefits. However, ultimately how such schemes are introduced will determine if the poorest do benefit. If they are designed in such a way that understands and takes on board the needs of these groups they can bring considerable improvement to their lives. However, it would be beneficial to the poor if pro poor REDD measures where encouraged in all projects and at all stages of the project.

Summing up

From the above discussion it is difficult to say whether REDD is pro-poor or not. If there is insecurity or un-clarity in tenure then this is likely to have negative ramifications for those millions of forest dwelling communities who depend on the forest but have no clear title.

However REDD and the financing it could provide needed opportunities to alleviate poverty. Literature from environmental economist have often shown through application of cost benefits analysis that forests in the ground cannot compete with conversion to other land uses, such as agriculture. The additional income from forest carbon, if sufficient, could provide a much needed financial incentive for individuals and groups to procure a greater income from better forest management practices. 130 Peskett, L. Huberman, D, Bowen Jones, E, Edwards, G and Brown, J (2008), Making REDD work for

the poor Draft 2 on behalf of the poverty and environment partnership, ODI, London

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The possible additional income from payments for carbon could be critical for forest dwelling groups.

As with any scheme there will be winners and losers. Ultimately how the REDD mechanism is designed, how the benefits transfer mechanism is established and functions; how the stakeholders are compensated; and the REDD measures which are prioritised will ultimately determine if REDD can work for the poor. Some of these issues can be partially influenced in the design of an international mechanism, but many will depend on commitment from national and provincial governments.

With careful design, high level political support and consideration of the needs of the poorest REDD could work for the interests of the poor. In the most comprehensive work on the impacts of REDD on the poor, Peskett et al (2008)131 provided a list of what they deem are the critical issues which anyone involved in REDD and concerned about impacts on the poor, must look out for. This list is shown in Appendix II.

131 ibid

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Chapter 6:Country case studies

6.1 Lao PDR

(i) BACKGROUND ON FORESTRY IN LAO PDR

State of the forestsAccording to the most recent national survey carried out in 2002 the forest area in Lao PDR decreased to 9.7 million ha (41% of land area) from 11.2 million ha in 1992 (47% of land area).132 This equates to a loss of 134,000 ha per year or 0.6% of land area. Extrapolating from this would imply a further reduction of forest cover to 7.4 million ha by 2020, which represents 31.2% of land area. This is even more alarming given the fact that the forest cover was estimated to be around 70 percent in the mid-sixties.133 Deforestation is pervasive across the country, occurring in the highlands to the North, stretching down to the lower lands in the Central and South. However, as can be seen from the Map below the most affected areas are in the North [the green dots show rates of deforestation and the orange the levels of poverty]. To halt this trend and to try and meet the Government targets for forest cover, will require deep rooted changes in policies and practices. These are set out in the Government of Lao PDR forest strategy till 2020. The situation for degradation paints a similar picture. Forest fragmentation has increased considerably with forest areas of 10ha or less now accounting for 6.7% of total forest area, compared to 0.9% in 1992. Forest density has fallen steeply with dense forests declining from 29% in 1992 to 8.2%. Also the areas represented by large trees have fallen significantly.134

Policies and InstitutionsThe guiding document for the development of the forestry sector in Lao PDR is the National Forest Strategy 2020. It is the basis for annual and medium term forestry related plans. The overarching objective of the forest strategy 2020 is to reduce levels of poverty in the country. Key sector targets include: expand forest areas to around 70% of the total land area, primarily through natural regeneration; enhancing the domestic wood processing opportunities; preserve endangered species and habitats; and conserve the myriad of environmental services that trees provide the wider community.135 The Ministry of Agriculture and Forestry has overall responsibility for the forest sector and within this Ministry the Department of Forestry is in charge of forest policy, planning and monitoring

In Lao PDR, all land and natural forests is owned by the state. Tenure rights to trees, natural forest and forest land can be granted to individuals and organisations when permission is received from the responsible agencies.136 Different management rights and responsibilities are granted depending on the forest category. Five different types of forestry category are recognized: production forest, protection forest,

132 The Government of Lao PDR (2005),The Forest Strategy 2020, The Government of Lao PDR, Vientiane

133 Ibid134 The Government of Lao PDR (2005),The Forest Strategy 2020, The Government of Lao PDR,

Vientiane135 ibid136 The Forestry Law Art. 5

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conservation forests, regeneration forests and degraded forests. For production forests these can owned with the participation of village forest organizations.137

Map 6-1: Deforestation and poverty in Lao PDR

The Land Law (Art. 12) stipulates that the Government holds national responsibility for zoning and demarcation of boundaries for each land category. However, owing to the lack of a coordinated system and unclear responsibilities, land-use plans have not been adequately developed. A major issue in Lao PDR is the unclear land and resource tenure rights and responsibilities of past land and forest allocation processes. This uncertainty provides a vacuum for different groups to exploit and to deforest.

The drivers of change There are four key factors driving deforestation and degradation within the country:

(i) Shifting cultivation by local farmers for subsistence and to sell to the market; this is most pervasive in the mountainous areas in the North of Lao PDR which is home to many of the countries poorest people (see map 1)

(ii) Conversion to plantations for export crops, such as rubber. This is being mainly driven by investors outside of Lao PDR, such as China, Vietnam and


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Thailand and is more widespread in the lower lands in the Central and South of the country;

(iii) Illegal logging, which is particularly pervasive along Lao PDR borders, for example with Vietnam; and

(iv) Infrastructure development, from building roads, dams and connecting infrastructure, which is most advanced in Southern parts of the country.

The underlying causes are often cited as: population increase, high levels of poverty, unclear laws and regulations in particular around tenure, incomplete land demarcation and lack off and weak institutional capacity.138 In addition there is the growing demand for raw materials in the region (from China, Vietnam, India in particular) which is set to intensify.

The pressures for land are intensifying, both internally from a growing population and externally from outside investors eyeing Lao PDR as a cheap source of raw materials and food-crops. All of the above factors show few signs of abating, if anything these pressures are intensifying and likely to put growing pressure on the country’s forests. REDD may offer one solution to try and stem this tide.

Poverty and Forestry:Forests are important for the economy of Lao PDR. In 2001 forests accounted for 3.5% of GDP and 25% of the countries export value; raising 15% of total fiscal revenues.139 Although the country continues to try and diversify its economy forests will continue to be important for the economic development.

Forests also play a critical role for the poorest communities. Lao PDR has a low level of GDP with many of its population living below the poverty line. For example, in the Northern mountainous areas around half the population is estimated to live below the poverty line. Many of them are dependent on the forests for subsistence and to generate an small income (see Map 1). In response to the increasing deterioration of forests, forestlands and the needs of local communities, the government has introduced programs and projects to help with forest land allocation to community, community forestry and NTFPs, as well efforts to stabilize shifting cultivation.140

Although for each of these there has been some improvements, generally there continues to be a lack of understanding of who owns the forests, who can use them and for what purposes. The continued lack of clarity will continue to plague the forestry sector and means it is not developed in a way to maximize economics benefits to the country and the poorest. This issue which is discussed further below will have profound implications for the introduction of REDD in Lao PDR and its impact on the poorest.

Forest mapping and monitoringIn Lao PDR there is a paucity of data on forest cover. Forest cover has been assessed three times in 1982, 1992 and 2002. The department of forestry is preparing to carry out this task again. There are also a number of internationally supported projects which will assist with emission assessment and monitoring. These include: the Sustainable Forestry and Upland Management Project [SUFORD] supported by the World Bank and Government of Finland; the European Space Agency in Southern Lao 138 The Forest Carbon Partnership Facility: Readiness Plan Idea Note (R-PIN) for Lao PDR (see

http://carbonfinance.org/Router.cfm?Page=FCPF&FID=34267&ItemID=34267&ft=DocLib&ht= 42503& dl=1


140 ibid

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PDR; GTZ in Northern Lao PDR; and JICA as part of their overall assistance to the Department of Forestry. Most of these are in discussion or preparation stage.141

However, currently there is a lack of information on forest stands and overall biomass and a lack of institutional capacity to carry out data collection and monitoring of forest trends and carbon stocks. Clearly, these international projects can help Lao PDR to vastly improve this situation.

(ii) REDD readiness of Lao PDR

The REDD mechanismLao PDR ratified the Kyoto protocol on 6th February 2003 and is listed as an Annex II country. It is therefore eligible to receive financing from those individuals or countries seeking carbon credits from Annex I countries. If a market mechanism was established were credits could be bought and sold under REDD, then Lao PDR could take advantage of this mechanism to receive carbon finance for forest protection and sustainable management. The Designated National Authority is established and receiving support from a number of international organistions, including SNV. However, few projects have been developed so far. Lao PDR has been selected as one of the REDD pilot sites under the World Bank Forest Carbon Partnership Facility.

Under the Lao PDR R-PIN the government identified a number of challenges to implementing REDD. These were:142

Lack of alternative livelihood or production systems to replace shifting cultivation in remote areas and access to market together with lack of social services such as education and health care;

Lack of means (capital and knowledge) to intensify existing agriculture systems for self sufficiency;

Incomplete land use planning including forest zoning and village level land use planning and land titling and insufficient resources for management of each land or forest zone;

Unclear resource and land tenure; Weak coordination between sectors Weak law enforcement and governance; Insufficient understanding or ignorance of existing laws and regulations by

business people and local people; Limited human and financial resources to implement activities.

Given the paucity of data and lack of capacity clearly a more simplified REDD framework building on existing structures would be preferable. A system based on deforestation would certainly be more straightforward. However, as identified forest degradation is also a major problem in Lao PDR and should be included. In order to be ready the country would need to have sufficient information on forest cover, deforestation (and preferably degradation). However, given the amount of detailed information required, the technical capacity to interpret it as well as to establish a proper and regularly updated monitoring system, it is clear that there are a number of steps before the Government of Lao PDR could successfully introduce such a system. A critical step, which should be carried out as part of the international support projects is to map out the forest cover and change and to improve and update the national forest and carbon stock inventory. It is important that the governments co-ordinates these international support projects in order to develop 141 The Forest Carbon Partnership Facility: Readiness Plan Idea Note (R-PIN) for Lao PDR (see


142 ibid

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such systems. Support is also needed to raise general awareness within the Government on what is REDD and to understand the opportunities and potential pitfalls with such schemes. Lao PDR will receive support through the World Bank FCPF and identified the following priority areas: 143

1) Raise awareness and understanding of REDD at all levels of Government; as well as with local communities;

2) Identifying information/capacity gap to be able to introduce REDD in Lao PDR;3) Establishment of a reference scenario;4) Put in place a system to assess and monitor changes in forest carbon

(expected to be by 2012);5) Develop a plan to implement REDD and establish efficient, equitable and

transparent REDD “infrastructures”.

There is also the need to fill the considerable gap in local capacity to understand and undertake some of the technical aspects related to REDD. For example, for carbon stock monitoring, developing baselines and introducing some of the REDD measures. Technical assistance is therefore critical in order for Lao PDR to become REDD ready.

If Lao PDR is willing to adopt a nested approach, which is common place now in many countries then project level REDD schemes could be introduced. Priority should be given to those areas known which have high deforestation rates and preferably where some information already exists, for example on levels of deforestation and forest cover. Given the fact that there are a number of international projects in the pipeline that would provide that information these could be priority areas for a project based REDD scheme. However, it is likely that the Government of Lao PDR will have priority areas and any interventions, should as much as possible be aligned to the Governments needs.

Likely impacts on the poorestWhen assessing the likely impacts of REDD on the poor it is necessary to revisit the key issues identified in chapter 4. In particular relating to payment transfer mechanisms, local land ownership, opportunity costs and proposed REDD measures and their likelihood of success.

In Lao PDR there is some experience with payment transfer mechanisms. Various funds have been established, for example the Lao PDR Forest Development Fund. However, this is at an early stage and few lessons can be drawn. One fund, which is operational are the environmental and social funds established as part of the Nam Theun 2 Hydropower project. The World Bank works with the Lao government to improve public financial management practices and increase transparency in order to increase the likelihood that revenues will be used to benefit the poor. Various sub funds have been established which are initially sourced from International Development Association funds, and then from the Government's taxes, royalties and dividend revenues once the project commences operation. Developments have been closely monitored by such groups as the International River Network. From their most recent trip report they have been highly outspoken on their condemnation citing that “World Bank and Asian Development Bank resettlement and disclosure policies have been violated, along with provisions of the Concession Agreement. Compensation payments and replacement land for villagers affected by construction activities have been inadequate, unfair or in some cases, non-existent’’.144 However, others have 143 The Forest Carbon Partnership Facility: Readiness Plan Idea Note (R-PIN) for Lao PDR (see


144 See http://www.internationalrivers.org/en/southeast-asia/laos

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viewed Nam Theun 2 as an example of good mechanism. Clearly, further assessment of such financing schemes can assist in developing benefit transfer mechanism under any REDD scheme so that funds reach the poorest. Those aspects which have been successful should be kept while some of the drawbacks of the current systems should be addressed. The fact that Lao PDR ranks very low in the Transparency Index highlights the challenge in order to make this happen.

The well developed work from funds established under Nam Theun can also provide insights on the estimation of opportunity costs.

A key issue in terms of likely impacts on the poor is the issue of tenure. Already in Lao PDR the unclear land and resource tenure is leading to misunderstandings, conflicts and helping with the acceleration of forest loss throughout the country. Plans and programs have been introduced to give greater ownership to local villagers, but a lack of understanding, multiple responsibilities, poor planning and the lure of immediate finance has undermined such efforts. This issue will need to be adequately addressed if benefits are to flow to the poor. Clarifying the issue of ownership, providing land titling and developing local land use plans would need to be an initial and central tenet of any REDD measures.

Other REDD measures which would need to be prioritized in Lao PDR to make the system work and help the poor should include: awareness raising as to the possible benefits of REDD and forest conservation; completion of national forest zoning plans; introduction of alternative livelihood options; control of illegal activities through local groups and vocational training.

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6.2 Country case study: Nepal

(i) Background on forestry in Nepal

The state of the forestsThere are no standard statistics collected over regular intervals providing the changing state of Nepal’s forests. Information since the spread of war in the mid 1990s has clearly hampered such efforts. The official statistics are from the ‘National Forest Inventory’ carried out between 1987 and 1999 show a forest cover of 4.2 million ha representing around 29% of land area.145 There are also an additional 1.6 million ha of shrubs. A land resource mapping project was carried out from 1984 which is one of the most comprehensive assessments carried out in Nepal. From this data and comparing it to earlier data it shows that forest cover in the country decreased by 24% over a period of 15 years (1979-1994) which represents an annual deforestation rate of 1.6%; while the area under shrubs increased by 126%, indicating large scale degradation of the forests.146 It has also been found that the fastest rates of deforestation and degradation have been in those national forests and those areas where the management has been devolved to local forest management units. Such statistics and future studies show a serious problem of both deforestation and degradation. This has been particularly severe in the flatter Terai area as compared to the middle mountainous regions which stretch across the country.

As well as the official Government statistics there are more recent assessments, for example as part of the FAO Global Forest Resources Assessment (2005) and the State of the World’s Forests (2005, 2003, 2001). These statistics show that between 1990 and 2000, Nepal lost on average 91,700 hectares of forest per year which equates to an annual deforestation rate of 1.9%. Between 2000 and 2005 the forest area lost was on average 52,800 ha per year, a deforestation rate of 1.35% per annum. These sources also have information on the rate of change of primary forests. The primary forest cover is estimated to be 349,000 ha, less than 10% of Nepal’s total forest cover.147

Policies and institutionsThe main institution in charge of forestry in Nepal is the Ministry of Forest and Soil Conservation. Within this Ministry there is the Department of Forestry as well as the Department of Forest Research and Surveys whom are responsible for monitoring and forest inventories. There are also district forest offices and community forest user groups which are in charge of those forest units which have been handed over to the community.

The major pieces of legislation which direct the development of the forestry sector in Nepal are the Master Plan for the Forestry sector [which dates back to 1988]; the Forest Act produced in 1993; and more recently the Government five year development plans which are in their 10th iteration (2002-2007). Various programs have been launched to devolve greater management responsibility to the local forest dwellers [e.g. local self governance act 1999]. This is partially in response to earlier policies which brought greater control under the Government, and led to a period of rapid deforestation. Now there is an estimated 14,500 Community Forest User 145 The Forest Carbon Partnership Facility: Readiness Plan Idea Note (R-PIN) for Nepal (see


146 ibid147 http://rainforests.mongabay.com/deforestation/2000/Nepal.htm

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Groups (CFUG) managing an estimated 1.24 million ha of forest [around 25% of the total land area].148 Within these policies there have been concerted efforts to include Non Government Organisations, in particular the groups represented at the grass roots levels.

Map 6-2: Forest cover map of Nepal149

As well as community forests Nepal forests are broken down into Government managed forests, protection forests, leasehold forests, and religious forests. The Government managed forests are applied to large tracts of forests which tend to be further away from settlements and are used to fulfil the country’s demands for timber and fuel wood. Additionally in the Terai Collaborative Forest Management is being piloted, a modality that is quite ideal for piloting REDD as forest area is large and benefit sharing mechanism could be easier to design.

There are also provisions to lease more of the forest to businesses as well as programs on afforestation, medicinal and aromatic plants production etc. Most recently in 2006 the Government convened a task force to propose democratic and sustainable management of Nepal’s forests. A number of recommendations have been put forward which are likely to influence the future direction of forestry policy. These include: helping to develop the forest sector to meet growing demands for forest products; efforts to link poorest groups into market opportunities; examining forest sector contribution to carbon sequestration; equitable benefit sharing to grassroots beneficiaries; and improved governance monitoring and evaluation systems. A number of these have clear links to establishing a system of REDD. Other task forces and informal working groups have been established, most notably the Nepal forest carbon action groups.150

Drivers of ChangeThe main issues which are causing forest degradation and deforestation in Nepal are:148 Department of Forestry (2006), management information system, Department of Forestry, Kathmandu149 See http://www.fao.org/forestry/18308/en/npl/150 The Forest Carbon Partnership Facility: Readiness Plan Idea Note (R-PIN) for Vietnam (see


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(i) Land ownership: history has shown that land tenure has been a critical factor determining the management of Nepal’s forests. Where the forests have been given back to the communities generally deforestation and degradation has been reduced. In large areas in the Terai and the high mountains where there are unclear tenure system, there is greater deforestation and degradation;

(ii) Expansion of agricultural land: particularly in the flatter areas of the Terai, which is more suitable for crop production there is ongoing encroachment to convert forest land to agricultural land;

(iii) Political instability: since 1996 with unrest within the country this has created a vacuum in legislation, policies and concerted efforts within the forestry sector and planning sector more generally;

(iv) Overuse of forests: individuals and communities are highly dependent on the forests for fuel, fodder, foods and timber. In certain areas this is causing a great strain on the surrounding forest areas;

(v) Population pressures: Nepal has a fast growing population particularly in the Terai area; this has been exacerbated by Government resettlement program, migration from across Nepal as well as from over the border.

Poverty and forestryNepal is one of the poorest and least developed countries in the world with 30 percent of its population living below the poverty line. Of these the vast majority live and depend on the forests for their subsistence. Altogether an estimated 70 % of people depend on farming systems which forests are a key element.151 Given the lack of alternatives this has but much pressure on certain forest areas. Poverty alleviation has been a central tenet to the countries strategy for forest development and will likely continue to be so.

In an effort to combat poverty and maintain forest cover government programs have been successfully introduced to devolve forest management responsibilities to the forest dwellers. An estimated 20% of forest land is now under community ownership, where they have a significant degree of tenure security. Evidence supports that this has helped in better forest management and less degradation and deforestation.152 It has also shown to bring greater economic benefits, as well as the empowerment felt through being part of the process.

However, securing a livelihood from the forest, where there are little or no alternatives, which means that many people will continue to live at a level close to or below the poverty line. There is a continual need to look at how more revenue can be procured from the forests they are managing. One such revenue stream which has received growing interest but few actual efforts to explore properly is the revenue stream from carbon sequestration. There is also a need to further replicate the success of the community forestry programs, particularly into the Terai. However, these areas, which were only settled after the eradication of Malaria in the 1950s do not have the same historical local management units, which have been in existence in the middle hills for a long time.

Forest mapping and monitoringDue to the insurgency from the mid 1990s there is a lack of recent national statistics on forest cover and forest cover changes. There are however more up to date estimates from FAO. As discussed previously mapping has been carried out at sporadic times in the past 50 years. Most recently, in the 1990s a national inventory 151 ibid152 ibid

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was carried out using aerial photography and remote sensing. The information from this forest inventory continues to be used as the official national statistics on forest cover. It would also need to account for other carbon biomass, for example below ground biomass and possibly dead wood. On the issue of forest degradation there is little in the way of monitoring.

In Nepal there is a dedicated Department in charge of forest survey and monitoring. This is the Department of Forest Research and Survey (DFRS) which can carry out the task.

(ii) REDD Readiness of Nepal

The REDD mechanismNepal’s ratification of the Kyoto protocol was accepted on 16th September 2005. Nepal is listed as an Annex II country and therefore able to receive financing from those individuals or countries seeking carbon credits from Annex I countries. There have been various internationally supported projects to strengthen the Designated National Authority which currently works under the Ministry of Environment Science and Technology. There are a number of potential areas and projects under consideration. Nepal has been chosen as one of the pilot countries under the World Bank Forest Carbon Partnership Facility, established to test and provide financing for REDD schemes.

Given the political uncertainties and insurgency which has engulfed the country for over a decade a number of building blocks need to be put in place in order for Nepal to be REDD ready. A number of meetings have been held by international support organistions to discuss REDD in Nepal. As cited in the Nepal R PIN, these came up with the following necessary challenges which need to be overcome:153

Updating of forestry plans and bye laws; Lack of co-ordination and cooperation between departments; Low level of awareness on REDD; Lack of capacity in the area of REDD; Technical challenges with regards to methodology of carbon stock monitoring,

assessment and reporting; Development of benefit sharing mechanisms to benefit the poor.

Nepal does have the Department of Forest Research and Survey which can help to undertake these tasks, but they will need help in building their capacity. ICIMOD also has some experience in working on REDD as have a number of international organizations, such as WWF and SNV. There is capacity in the country which needs to be mobilized and built up. An international REDD working group should be established in this respect. However, there also need to be the finance available to carry out the needed surveys and to develop Nepal’s capacity to monitor, assess and report on carbon to an international standard. Assistance can come through the WB Forest Carbon Partnership Facility as Nepal was chosen as a pilot country. However, further assistance must be sought. As part of the WB FCPF Nepal identified priority steps to move towards readiness for REDD activities. These were:154

153 The Forest Carbon Partnership Facility: Readiness Plan Idea Note (R-PIN) for Vietnam (see http://carbonfinance.org/Router.cfm?Page=FCPF&FID=34267&ItemID=34267&ft=DocLib&ht= 42503& dl=1

154 ibid

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1) scoping study to identify REDD potential and key areas of support and stakeholders; produce a road map;

2) develop a REDD plan/strategy in participatory manner though carrying out multi-stakeholder workshops and learning workshops;

3) build capacity for REDD in areas such as: M&E, quality management systems, forest carbon inventory;

4) develop cross-sectoral coordination and cooperation in areas such as micro-macro linkages, financial/ accounting systems, benefit sharing mechanisms;

5) test different grassroot models, for example community forestry, protection/ conservation areas; and

6) documentation and dissemination of best practices, key lessons, key publications.

In terms of introducing project based REDD schemes then the Terai would tend to be the more obvious place to introduce these. The rates of deforestation are higher and there are isolated forest blocks under severe pressures. In addition some of the state forest lands which are also least well protected due to unclear ownership and lack of enforcement, would be an obvious place for a project level REDD.

Impacts on the poorConcerns have been raised by some local groups in Nepal about the possible detrimental impacts of REDD on the poorest people; that their way of life and the forests on which many indigenous people depend, may be under threat from REDD schemes. There is the possibility in those areas were tenure is uncertain and where corruption and land grabbing takes place. In order to surmount these problems requires very careful design of any REDD scheme. The fact that Nepal has strong community based forestry groups should help ensure these exact problems do not occur. It is therefore critical that these local groups, which are well organized, particularly in the middle hills are represented and fully understand REDD. Moreover, a system needs to be designed to ensure that the money from REDD schemes is transferred down to these groups.

In Nepal there are again some good field level examples where funds are distributed to local groups. Around some of the National Parks there are local buffer zone community forest groups. These groups help ensure better forest management around National Parks. In response some of the funds collected from Park entry are redistributed back to these local communities. Unfortunately, since the insurgency the number of tourists has fallen dramatically ultimately affecting the amount of money reinvested back into the communities. However, similar systems could be introduced under REDD schemes. A national level system would need to be introduced which could be implemented at lower administrative units. Under a project based approach those local level payment systems could be set up directly.

Perversely those areas identified as most suitable for REDD, i.e. the ones most threatened with deforestation are also the areas where the local community based institutions are the weakest. Areas in the Terai and areas currently controlled by the state are likely to be those areas prioritized under any nested approach. However, in such areas the local level institutions and clarity of tenure are more problematic. Hence greater care will be needed to ensure there are no detrimental impacts on the poorest. This clearly highlights that one of the REDD measures which needs to be introduced into such area should be to build community based forest management systems. Community level monitoring systems could also be established.

It is also important that the values that indigenous groups attach to the forests are adequately accounted for under any compensation schemes. Local ethnic groups

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attach a range of both tangible and intangible values to the forest which need to be captured in any estimation of opportunity costs.

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6.3 Country case study: Vietnam

(i) Background on forestry in Vietnam

The state of the forestsAccording to government statistics the total forest area in Vietnam has increased to 12.6 million ha in 2006 (37% of land area) from 9.2 million ha in 1992.155 This is viewed partly as a result of Government policies on reforestation [more specifically program 327 and the 661 program] which have a target of 43% of land area covered in forests by 2015. Looking further into this data the picture is less rosy. For one, the definition of what has been included under forests has changed to include previously omitted limestone forests.156 Also much of the increase has been down to plantations, which account for 2.5 million ha and natural regeneration which contained large areas of bamboo [which has a low carbon stock]. Even accounting for these factors the data tends to show a very slight level of deforestation of natural forests. Information collected by World Bank and others in particular project sites would tend to indicate the situation may not be so promising. From the available sources the maps below show the changes in forest cover and locations. As can be seen the Central Highlands has been the main area suffering deforestation.

Map 6-3: Land use cover change in Vietnam; (a) FIPI stats; (b) VCF stats157

It is generally acknowledged that the quality of natural forests continues to be more fragmented and degraded. Forest degradation is a big issue in Vietnam. Over two-thirds of Vietnam’s natural forests are considered poor or regenerating, while rich

155 The Forest Carbon Partnership Facility: Readiness Plan Idea Note (R-PIN) for Vietnam (see http://carbonfinance.org/Router.cfm?Page=FCPF&FID=34267&ItemID=34267&ft=DocLib&ht= 42503& dl=1

156 ibid157 Meyfroidt, P and Lambin, E.F (2008), Forest transition in Vietnam and its environmental impacts,

Global Change Biology 14, 1–18,

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and closed-canopy forest constitutes only 4.6 percent (in 2004) of the total.158

Lowland forests supporting their full natural biodiversity have been almost entirely lost. The chances of full generation are rapidly decreasing with the isolation of the rich natural forest patches. Reports by the National Forest Inventory, Monitoring and Assessment Program (NFIMAP) show that the quality and biodiversity of forest are continually deteriorating. Between 1999 and 2005 the area of natural forest classified as rich decreased by 10.2% and medium forest reduced by 13.4%.159

Policies and institutionsThe Ministry of Agriculture and Rural Development (MARD) has overall responsibility for the forest sector and is the designated focal point for REDD activities. Forests in Vietnam are classified into three categories: production, protection and special use forests, each with its own clear regulations on use and overall management. The Department of Forestry (DoF) takes the lead for overall forest management and development within the Ministry; while the Forest Protection Department (FPD) is responsible for management of the protection and special use forests at the national level, as well as forest law enforcement.

In terms of forest policies, the Forest Protection and Development Strategy 2006-2020 defines the national strategy for the country’s forests. Within the strategy there are a number of operational programs which were put into affect in 2007. Another key piece of legislation is the Forest Protection and Development Law which sets out a legal framework, which includes combating deforestation. Other relevant programs which help to tackle deforestation include: introducing a forest law and governance action plan and a National Forest Development strategy.

The UNFCCC conference in Bali recognized Vietnam as one of the top five most affected countries in the world as a result of climate change. Prior to this, reports by the World Bank brought to the attention of the authorities the potential devastation that could be caused by sea level rise. Climate change has received an increasing political interest and support. This includes a five year action plan and a MARD steering group on climate change and mitigation which will lead the development of a REDD strategy - the starting points of which have already been agreed.

Drivers of changeThe key factors driving change to the forests Vietnam are vast and varied and commonly recognized as:

(i) Vietnam is a world leader in the export of coffee, cashew, pepper and a important global player in other export crops. This drive to export agricultural commodities is putting greater pressure on the scarce land and leading to the conversion of forest lands particularly in the central highlands;

(ii) The rapid economic development is fuelling the need for greater energy demands and improved infrastructure. Vietnam has ambitious plans for hydropower and road development carving up parts of the countryside;

(iii) Vietnam has become an important hub for wood processing and the sale of garden furniture in particular. The current demands for timber far outweigh the current supply in Vietnam. This is placing pressure on the forests in Vietnam and the neighbouring countries in the region;

158 World Bank (2005) Vietnam Environmental Monitor – Biodiversity, World Bank, Washington DC159 The Forest Carbon Partnership Facility: Readiness Plan Idea Note (R-PIN) for Vietnam (see


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(iv) The poorest communities, particularly in the mountainous areas, many of whom are from ethnic communities, continue to practice shifting cultivation and depend heavily on the forests for their needs. This continues to put pressure on the forests in these areas;

(v) There is also the continuing problem of illegal logging. There are an estimated 30-50,000 forest violations per annum, very few of which result in criminal prosecution.160 Lack of capacity to enforce rules, lack of coordination between enforcement agencies, unclear tenure as well as corruption continues to drive this problem.

It is clear that the fast economic growth within the country and the drive to export commodities is an underlying driver of change within Vietnam. There are growing efforts by the authorities to combat these problems but the pressures are intensifying. If the value of the forest is able to compare with that of the alternatives, then this could act as a strong incentive to arrest these trends.

Map 6-4: Poverty and protected areas in Vietnam161

Poverty and ForestsAs can be seen from the map below many of the poorest people are found in and around protected areas which are home to the most important forested areas. Vietnam has experienced some difficulties in successfully engaging local communities in forest dependent poverty alleviation activities. Some of the problems have been due to a lack of communication to the local groups on new laws and programs, the division of responsibilities between local government departments and 160 The Forest Carbon Partnership Facility: Readiness Plan Idea Note (R-PIN) for Vietnam (see


161 World Bank (2005) Vietnam Environmental Monitor – Biodiversity, World Bank, Washington DC

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cultural differences and interpretation of activities.162 However, poverty alleviation continues to be a central tenet within the country’s forest strategies.

Two ongoing initiatives shoud be noted: community based forest management, which is currently being piloted in forty communes in ten provinces. This project is expected to provide sufficient guidance to develop a future legal framework and benefit sharing system for community forest management.163 Also, there are continuing efforts across the country in allocating forest land back to local communities. However, this initiative has been hampered by insufficent funding and the often overlapping mandates of the Ministry of Natural Resources and the Environment and the Ministry of Agriculture and Rural Development. Much of the land remains unallocated despite continuing directives to do so.

Forest mapping and monitoringThe lead agency in charge of forest mapping and monitoring is the Forest Inventory and Planning Institute (FIPI) which sits under MARD. The institute is responsible for carrying out the National Forest Inventory, Monitoring and Assessment Program (NFIMAP) every five years. For each progressive time period more advanced satellite imagery has been employed. FIPI is currently carrying out the 4th cycle using Spot 5 imagery.

The satellite imagery is supplemented by forest inventories carried out in sample plots across representative forest types across the country. This assesses the forest against a wide range of criteria to assess forest quantity and quality.

(ii) REDD Readiness of Vietnam

The REDD mechanismVietnam ratified the Kyoto protocol on 6th February 2003 and is listed as an Annex II country. It is therefore eligible to receive financing from those individuals or countries seeking carbon credits from Annex I countries. The Designated National Authority (DNA) under the Ministry of Natural Resources and the Environment (MoNRE) has been established for a number of years. By the middle of 2008, 98 projects had been put forward to the DNA; however, currently only one project is receiving carbon emission reduction credits. Only one forestry project has moved beyond the stage of DNA approval and it currently in the process of external verification.

Vietnam is increasingly responding to the potential CDM market, with different provinces developing CDM plans of action. Vietnam has also been closely following discussions on REDD and already has in place a strategy to deal with REDD which is outlined in their R-PIN submission to the WB Forest Carbon Partnership Facility. This includes: a) building a foundation of national awareness and capacity on carbon mitigation through REDD; and b) developing a clear national support mechanism for REDD, including guidelines for sub-project developers. For the latter international expertise will be sought to help in designing projects and to find buyers for Voluntary Emission Reductions.164 Vietnam has been selected as one of the pilot countries of the World Bank Forest Carbon Partnership Facility; as well as the UN REDD Programme.

162 ibid163 The Forest Carbon Partnership Facility: Readiness Plan Idea Note (R-PIN) for Vietnam (see


164 ibid

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As part of the Government of Vietnam’s R-PIN they outlined a number of challenges to implementing REDD strategies. The major challenges identified included: 165

effective law enforcement; the lack of capacity and investment in forest monitoring, evaluation and

protection, especially at district and provincial levels; A lack of cooperation and coordination among the law enforcement agencies

and forest management and protection institutions at both national and local levels;

a lack of awareness of the implications of forest loss amongst both communities and local authorities;

reducing the economic marginalization of forest boundary communities; centralized planning targets; weakness of physical planning; and problems with inter-sectoral and inter-provincial planning.

One of the basic structures which needs to be in place for a country to be prepared for REDD is to have sufficient data on forest cover changes – in terms of both deforestation and degradation - and a system in place to adequately monitor, assess and report these changes. NFIMAP is providing this data to ever greater sophistication. However there continues to be a number of problems with the current monitoring system which were picked up in the R-PIN submission. These include ‘poor integration and coordination between different sectors and mapping institutions, lack of systematic approach to update the information from FIPI, poor harmonization with ongoing regional and international initiatives, inadequate staff capacity for mapping programs and no clear data management and data sharing policy among information providers and users’ (pg 14).166 These problems are compounded by changing definitions and classifications making it difficult to assess changes.

Although there exists the basis for forest monitoring there needs to be improvements in monitoring, data assessment and reporting in order to bring it up to international standards and therefore to be able to receive carbon credits. Recognising some of the deficiencies in the current system MARD is in the process of putting together a proposal for strengthening monitoring, assessment and reporting on sustainable forest management. Building on this, one of the critical first steps of the R-PIN activities must be to assess the current forest monitoring system and to put in place the necessary changes to bring it up to a internationally recognized standard. Other priority areas identified by the Government to move towards readiness include:167

1. Set up a transparent stakeholder consultation on REDD (e.g., outreach, workshops, publications, etc.);

2. Developing a reference case of deforestation trends: assessment of historical emissions from deforestation and/or forest degradation and projections into the future;

3. Develop a national REDD Strategy: identification of programs to reduce deforestation and design of a system for providing targeted financial incentives for REDD to land users and organizations (e.g. delivery of payments, governance issues, etc.);

165 ibid166 The Forest Carbon Partnership Facility: Readiness Plan Idea Note (R-PIN) for Vietnam (see


167 ibid

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4. Design of a system to monitor emissions and emission reductions from deforestation and/or forest degradation;

5. Design of a system for providing targeted financial incentives for REDD.

Also, the current NFIMAP system does not adequately cover the issue of forest degradation; nor does it estimate total forest biomass and hence carbon stocks. Given the fact that forest quality, rather then forest quantity is one of the biggest issues facing the forestry sector in Vietnam, implies that degradation should be addressed as part of any scheme in Vietnam. However, the structures in place are more geared up to assess deforestation – or quantities of forest cover. If the REDD mechanism covers both degradation and deforestation then major investments and technical assistance to examine and analyse the current state of degradation are needed.

Following a nested approach there are areas which would be appropriate for projects from reduced emissions for deforestation and degradation. Although Government statistics show that there is a net increase in forest cover, there are clear areas where deforestation is happening. As can be seen from the Map 3 this is particularly the case in the Central Highlands where conversion of land for export agriculture is causing the loss of large tracts of forest land.

Likely impacts on the poorIn Vietnam there are continuing efforts to allocate land back to the local communities as well as to businesses. The land allocation process was meant to be complete but there still remains much land unallocated. Those areas where the allocation process is complete and have been deemed successful, offer better opportunities for local communities to benefit from REDD.

Vietnam has also undertaken major initiatives to provide financing for forest environmental services; in particular the 661 program and pilot policy 380. However, lessons from some of the shortcomings of the 661 program should be built into any future payment mechanism. Firstly, the payments were simply too small to offer a genuine incentive to protect the forests; and secondly there were no robust systems in place to adequately monitor whether or not individuals were abiding by their contracts. The pilot policy 380 [the pilot policy on payment for forest environmental services] will test payment schemes in two locations in Vietnam to help determine the scope and content of a future policy on PES. The buyers will be dam and water companies that are required to set aside money into a fund, most of which will be transferred to community projects upstream. The actual details of how the fund is managed and how the money is disbursed are being finalized but efforts are being made to ensure it reaches local groups. Both these initiatives – 661 program and pilot policy 380 – provide good insights and existing mechanisms to transfer money down to the local communities.

Much of the impact on the poorest will depend on what type of REDD measures are introduced. Clearly there needs to be efforts to introduce those measures which will have the greatest benefit for the poorest groups, who are often the ones with little choice but to undertake illegal activities. There are some interesting initiatives moving forward in Vietnam on community forestry, as well as small scale sustainable forestry. In terms of providing alternatives to local groups there is a serious problem of population pressures and scarcity of land, so sustainable solutions may be limited. This may call for less localized options, like vocational training etc to provide people with the skills to move away from the area.

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Chapter 7Institutional Stakeholder Mapping

ORGANIZATIONS WORKING ON REDD IN LAO PDR, VIETNAM AND NEPAL

Overview

At the UNFCCC COP-13 in December 2007, a historic “tipping point” for REDD occurred. Governments, international organizations and NGOs collectively mobilized in support of developing nations that had announced logging moratoriums and were willing to explore forest carbon “payments” in lieu of seeking rents from logging concessions. Partly due to this political watershed, REDD has quickly become a widely accepted – although still technologically complex and socially criticized – means of halting GHG emissions through improved policies and practices for forest protection. As a result, donor attention is refueling the REDD debate, particularly with regards to ensuring benefits are shared with the poor.

Supporting and documenting REDD at regional, national and site-based levels is the challenge currently. Several organisations are seeking to make sense of the current state of play on REDD, and are attempting to share these lessons at the international level before UNFCCC talks occur in Copenhagen in December 2009. Some initiatives, such as UN-REDD and Japanese satellite forest carbon assessments are currently underway, but most donors are lining up whilst governments dust off old forestry programmes and repackage these as forest adaptation or forest carbon initiatives with a pro-poor twist.

This chapter focuses on three Asian countries – Lao PDR, Nepal and Vietnam – and the international, regional, national-level organisations that are playing a key role in enabling REDD in these countries. These organisations work on policy, technical and field-based levels and can be characterized as multilateral and bilateral donors; international organizations, non-governmental organizations and private-sector project developers. Collectively, these organizations are working to build the capacity of these governments to collect data, undertake forest carbon accounting, and demonstrate policy reform and site-based pilots to protect and enhance forest carbon stocks. In this section we provide a snapshot of the different groups involved in REDD to date and also highlight some of the ongoing REDD initiatives within Lao PDR, Vietnam and Nepal.

Multilateral Donors

The World Bank – The World Bank launched the Forest Carbon Partnership Facility (FCPF) at COP 13 in December 2007.168 By July 2008, Australia, Finland, France, Germany, Japan, Norway, Spain, Switzerland, the United Kingdom and the United States had contributed US$82 million to the FCPF. Other reports indicate that US$165 million has been raised as of July 2008, including US$91 million to the Readiness Fund and US$74 million to the Carbon Fund.169 More contributions from the public and private sector are expected in the coming months so the fund can close at a size of US$250 million.170

168 World Bank Forest Carbon Partnership Facility. www.carbonfinance.org.169 Porter, G., Bird, N., Kaur, N., and Peskett, L. New Finance for Climate Change and the Environment.

WWF and Heinrich Böll Foundation. Jul 2008, p. 34.

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The FCPF was established to support the enabling framework for competitively selected, key countries to engage and test pilot REDD methodologies that are currently under development. Priority was given to countries with substantial forest areas and forest carbon stocks and having forests that are important for the livelihoods of forest dwellers. The FCPF Participants Committee selected countries based on the submission of a Readiness Plan Idea Note, or R-PIN, in accordance with technical criteria. The FCPF gave higher priority to countries that demonstrated in the R-PIN how the system could work, as opposed to simply selecting countries with the largest forest area and forest carbon stocks.171

Fourteen nations were selected in July 2008 to receive FCPF support, including: six in Africa (the Democratic Republic of Congo, Gabon, Ghana, Kenya, Liberia, Madagascar); five in Latin America (Bolivia, Costa Rica, Guyana, Mexico, Panama) and three in Asia (Nepal, Lao PDR, and Vietnam). Each selected country is expected to provide findings that will help inform discussions in Copenhagen 2009 on REDD within the UNFCC framework.172 Participant committee of the FCPF is comprised of Australia, UK, US, Netherlands, France, Japan, Norway, Germany, Switzerland and TNC (The Nature Conservancy) on donor side and Gabon, DR Congo, Ghana, Madagascar, Vietnam, Nepal, Bolivia, Guyana, Panama and Costa Rica.

The FCPF consists of two components, namely: a US$100 million Readiness Fund that will provide grants to help countries set up systems and processes to monitor and credibly govern their forests; and a US$200 million Carbon Fund, which will negotiate contracts with a smaller group of countries and provide payment for the verified reductions in emissions. These funds will be dispensed as grants during 2008-2012.

Figure 7-1: The steps for piloting REDD (adapted from presentation by Dr. Pham Manh Cuong, Department of Forestry, Vietnam)

According to World Bank sources, the FCPF-REDD is engaged in Lao PDR due to the World Bank’s long-term engagement on forestry issues with the GoL. As of October 2008, the GoV is still working to finalise the FCPF grant to begin its R-Plan work. A UN-REDD initiative in Vietnam is already underway and moving forward on similar suite of “readiness” R-Plan activities.

UN-REDD – In September 2008, the United Nations launched UN-REDD in partnership with the Government of Norway’s US$35 million provided support to nine countries, including: Bolivia, the Democratic Republic of Congo, Indonesia, Panama, Papua New Guinea, Paraguay, Tanzania, Vietnam and Zambia.173 This initiative, implemented through the UN Food and Agriculture Organisation (FAO), the UN Development Program (UNDP) and the UN Environment Program (UNEP), overlaps significantly with the main objectives of the World Bank’s FCPF as both funds are geared toward enabling national forest carbon accounting systems, testing REDD and informing UNFCCC negotiations in Copenhagen in 2009. UN-REDD is a response to Bali Decision 2/CP.13 and aims to develop the Coalition for Rainforest Nations and consolidate donor requests for joint UN action, under the umbrella of a One-UN system. UN-REDD seeks to support country-led, integrated 170 First Countries Named to Benefit from Forest Carbon Partnership Facility. A World Bank press release.

http://web.worldbank.org/WBSITE/EXTERNAL/NEWS/0,,contentMDK:21846447~menuPK:34463~pagePK:34370~piPK:34424~theSitePK:4607,00.html.

171 Porter, G., Bird, N., Kaur, N., and Peskett, L. New Finance for Climate Change and the Environment. WWF and Heinrich Böll Foundation. Jul 2008, p. 28.

172 Forest Carbon Partnership Fund. www.carbonfinance.org.

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REDD programmes and to facilitate the informed involvement of national stakeholders, including forest-dependent local communities, and to coordinate with other players including WB FCPF, GEF, etc. on making REDD work for people. More specifically, UN-REDD will assist forested developing countries and help to facilitate international cooperation on various methodologies, risk management formulae, payment structures and support to the UNFCCC process.174

UN-REDD “country actions” will be identified and led by the various governments and will vary from country to country, with an aim to establish cross-sectoral and multi-stakeholder responses. Indicative country actions will include the following elements: scoping and alliance building; REDD readiness for monitoring and assessment; REDD dialogue; developing National REDD strategies; and building support for implementing the REDD measures, REDD data management, REDD payment distribution, and REDD payment structuring.175

For REDD Readiness for Monitoring and Assessment, UN-REDD will support assistance to establish baseline and reference scenarios; implementation of national forest monitoring and reporting systems; development of a verification system; and capacity-building on the application of IPCC and other relevant guidelines. For REDD Dialogue, the UN-REDD will support consultation and awareness with resource owners, groups with traditional rights, and economic agents; participatory REDD payment distribution structures, especially at indigenous peoples and local community level; and building national support and cross-sectoral action. For REDD Payment Distribution, UN-REDD will support the design of pro-poor performance–orientated transfers; direct payments to individuals where rights are clearly established; and indirect payments to improve development of service delivery.176

In Vietnam, the UN (working under the ONE UN system) is supporting the GoV/MARD to develop a “readiness” agenda, which at this time contains similar elements to the R-PLAN process that the World Bank FCPF plans to support. The UNDP Vietnam Programme has mustered US$2.25 million to support the GoV on REDD, including US$1 million from UN-REDD and US$1.25 million from the Global Environment Facility (GEF). UN-REDD coordinators in Hanoi seek to build the capacity of MARD/MoF on REDD methodologies, support MARD/MoF with donor coordination, and generate lessons and recommendations for the COP meeting in Copenhagen in December 2009. The UNDP Vietnam Programme has hired an international consultant to develop a “logframe” of donor resources available and activities needed, and intends for UN-REDD to “bridge” the FCPF US$200,000 grant for R-PLAN drafting and US$1.8 million in capacity building support after the R-PLAN has been submitted.177

Global Environment Facility (GEF) – The GEF is the officially designated funding mechanism of the UNFCCC and three other Rio conventions. Since 1991, the GEF has provided US$7.4 billion in grants and generated over US$28 billion in co-financing from other sources to support over 1,950 projects that produce global environmental benefits in 160 developing countries and countries with economies in transition.178

173 Gardner, T. “UN launches program to cut deforestation emissions” Reuters online. http://www.reuters.com/article/environmentNews/idUSTRE48N91C20080924.

174 UN REDD: A collaborative programme of UN agencies on Reducing Emissions from Deforestation and Forest Degradation to support developing countries. A FAO-UNDP-UNEP Presentation. Jun 2008. http://unfccc.int/files/methods_and_science/lulucf/application/pdf/080627_fao01_japan.pdf.

175 ibid.176 ibid.177 Personal conversation with Tim Boyle, UN-REDD Consultant. 7 Oct 2008.178 About GEF. Global Environment Facility. Website. http://www.gefweb.org/interior.aspx?id=44.

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GEF funds are contributed by donor countries and dispersed through grants administered by 10 multilateral development banks and agencies, including: the World Bank, UN Development Programme (UNDP), UN Environment Program (UNEP), International Fund for Agricultural Development (IFAD), UN Food and Agriculture Organization (FAO), UN Industrial Development Organization (UNIDO), Inter-American Development Bank (IADB), African Development Bank (AfDB), Asian Development Bank (ADB) and European Bank for Reconstruction and Development (EBRD). In 2006, 32 donor countries pledged US$3.13 billion to fund operations between 2006 and 2010.179 As the financial mechanism of the UNFCCC, GEF allocates and disburses about US$250 million dollars per year in projects in energy efficiency, renewable energies, and sustainable transportation. Moreover, it manages two special funds under the UNFCCC — the Least Developed Countries Fund and the Special Climate Change Fund.180

The GEF Tropical Forest Account (TFA) is a US$60 million grant facility (through 2010) to support financial incentive mechanisms aimed at motivating tropical forest countries to invest country resources allocated through the GEF to projects dealing with sustainable forest management. It promotes the concept of payment for ecosystem services to mitigate climate change, protect biodiversity and ensure livelihoods and environmental services for millions who live in and depend on forests. The ultimate aim of the additional funding from the TFA is to focus more investments in three GEF focal areas – climate change, biodiversity and land degradation – on forests in regions where biodiversity and carbon stocks are high and forest conversion is taking place at a high rate.181

The FCPF and the GEF TFA have adopted different approaches to the problem of reducing deforestation rates. The FCPF is clearly oriented toward future compliance markets. The GEF Sustainable Forest Management Program’s TFA, adopted by GEF Council in November 2007, is intended to focus GEF forest investments on the tropical forest regions and countries with the highest carbon stocks and biodiversity. Thus, the GEF is committed to focusing its limited resources on investments in Amazonia, the Congo Basin and Papua New Guinea/Indonesia, which together account for 68 percent of the world’s tropical forest carbon. Presently, however, the TFA is not intending to use carbon markets as a strategy to influence the rate of deforestation.182 Whilst the TFA focuses on the large tropical forest basins, UNDP Vietnam intends to tap the GEF for co-financing to the UN-REDD initiative currently underway to support the GoV/MARD coordinate donor support on REDD and help pilot REDD in the south-central region on Vietnam.

Asian Development Bank (ADB) – The Asia Pacific Carbon Fund (APCF) is a trust fund established and managed by ADB on behalf of fund participants to provide upfront co-financing to CDM projects in ADB’s for the future delivery of CERs. The APCF aims to increase the number of clean energy and energy efficiency projects in eligible countries to assist APCF participants in satisfying their legally binding emission reduction commitments under the Kyoto Protocol, and capitalize increased investments from developed countries to improve energy access in Asia and the Pacific region. APCF seeks to fund priority projects in the renewable energy, energy efficiency, and methane capture and utilisation sectors. CER Pricing is subject to individual negotiations between APCF and project sponsors, and will be determined 179 Ibid.180 Climate Change. Global Environment Facility. Website. http://www.gefweb.org/interior.aspx?id=232.181 Porter G., Bird, N., Kaur N., and Peskett, L. New Finance for Climate Change and the Environment.

WWF and Heinrich Böll Foundation. Jul 2008, p. 29.182 Porter G., Bird, N., Kaur N., and Peskett, L. New Finance for Climate Change and the Environment.

WWF and Heinrich Böll Foundation. Jul 2008, p. 42.

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by reference to a range of criteria including: independent pricing assessments, advanced payment structures, and project-specific risks.183 To our knowledge, the ADB does not have specific funds available for forest carbon initiatives, although it has funded a host of technical assistance projects in the forestry sector throughout the region. This situation may change if and when REDD initiatives can apply for CERs, which presently they cannot.

National Governments & Bilateral Overseas Development Assistance

Government of Australia – Under the leadership of Prime Minister Kevin Rudd, Australia has embarked on a bold, new International Forest Carbon Initiative at global, regional and national levels. A central element is the initiative's focus on developing practical demonstration activities, particularly in Indonesia and Papua New Guinea. Altogether, Australia’s support totals more than AUS$85 million (US$110.5 million), including its AUS$11.7 million (US$ 15.21 million) to the World Bank’s FCPF. The planning and delivery of the International Carbon Fund is to be coordinated by the Departments of Environment, Forestry and Foreign Affairs (and AusAid), including involvement of potential recipient countries though normal bilateral channels.184

Through the International Forest Carbon Initiative, Australia will: 185 1) Increase international forest carbon monitoring and accounting capacity, particularly in Indonesia and Papua New Guinea, and partnering with a consortium led by the Clinton Climate Initiative to use Australia's National Carbon Accounting System as a platform for a global forest carbon monitoring system; 2) Undertake practical demonstration activities to show how reducing emissions from deforestation can be included in a future international climate change framework, which will include: piloting approaches in Indonesia and Papua New Guinea to demonstrate how investment in avoided deforestation can achieve emission reductions while providing forest-dependent communities with livelihoods and promoting sustainable resource management and assisting with the development of necessary underpinnings for sustainable forest management, governance, law enforcement and regulatory frameworks in these countries; and,3) Support international efforts to develop market-based approaches to reducing emissions from deforestation and forest degradation, including taking a lead role in the negotiations under the UNFCCC and the Kyoto Protocol on how REDD can be built into a future international climate change agreement; and supporting the World Bank in the further development and implementation of its FCPF and related initiatives.

The Commonwealth of Australia Department of Agriculture, Fisheries and Forestry will host in fall 2008 three events in Vietnam as part of the Asia Pacific Forestry Skills and Capacity Building Program. These three events include a symposium and workshop entitled Managing Forests in Mekong Countries for Carbon Sequestration and REDD in Hanoi during 27-30 October 2008; a workshop on Preparing for the Technical Aspects of REDD in Hanoi 3-6 November 2008; and a Sustainable Forest Management for Carbon Sequestration and Payment for Environmental Services in

183 Asian Development Bank. Carbon Market Initiative. www.adb.org/clean-energy. 184 Porter G., Bird, N., Kaur N., and Peskett, L. New Finance for Climate Change and the Environment.

WWF and Heinrich Böll Foundation. Jul 2008, p. 27.185 International Forest Carbon Initiative. Government of Australia Department of Climate Change.

http://www.climatechange.gov.au/international/publications/fs-ifci.html.

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Hue in January 2009. All three events were made possible by a grant from the Australian Department of Agriculture, Fisheries and Forestry and will serve to prepare the countries of Cambodia, Lao PDR and Vietnam for participation in a REDD scheme. The first workshop will attempt to set priorities for the activities needed to start a National REDD or related carbon sequestration scheme; coordinate input to the Vietnam and Lao PDR World Bank Forest Carbon Partnership Facility applications and provide stimulus for Cambodia to begin development of a REDD strategy and its application to the FCPF; and address how to coordinate the activities sponsored by different multilateral, bilateral and private funding sources.

Government of Japan – The Japanese Cool Earth Partnership is a US$10 billion fund to be disbursed globally over five years starting from 2008; of this, US$2 billion will address climate adaptation and US$8 billion will address mitigation. In early 2008, the Governments of Japan and Vietnam entered an agreement for JICA to support the development of and access to basic information on forest resources to encourage sustainable forest management. The JICA project, implemented by a Japan-based consulting firm provides Advanced Land Observing Satellite (ALOS)/PALSAR data of Vietnam that can be used for forest management.

Government of Germany – Building off a strong foundation in forest sector support globally, Germany is one of the largest bilateral donors for REDD globally and is the single largest contributor to the World Bank FCPF, with US$60 million divided into the FCPF Readiness and Carbon Funds.

German International Climate Initiative (GICI) provides €400 million per year (US$634 million per year) led by the Ministry of Environment (BMU), in cooperation with the Ministry of International Cooperation, through till 2010. GTZ and KfW are responsible for planning and implementation. Recipient countries will be involved in the development and implementation of projects and through normal bilateral cooperation.186 The GICI funds were collected from proceeds of the German cap-and-trade regulatory system on GHG emissions and that a significant proportion of these funds will be allocated to address forest carbon activities globally.

German Life Web Initiative objective is to support implementation of the UNCBD Program of work on Protected Areas (PAs) by developing partnerships that are enhanced by a clearinghouse mechanism guiding donors about partners’ needs, and matching funds and co-financing to create new PAs and the improved management of existing PAs.187

Both GTZ and KfW have sent missions to explore the potential for developing REDD in Lao PDR and Vietnam. Both German agencies have deep experience and technical expertise working in the forestry sector in these countries. Beginning in 2008, GTZ has begun implementing a payment for environmental services project in Son La Province, which builds on a 2-year pilot payment for forest services (under Prime Minister Decision 380 dated April 2008); Decision 380 could be expanded to include payment for forest environmental services related to carbon sequestration.

Government of Norway – At COP-13 in Bali, the Norwegian Government declared its willingness to provide up to NOK 3 billion (US$ 450m) annually towards REDD efforts in developing countries. Included in this contribution is US$35 million to UN-REDD, US$15 million to the World Bank FCPF, NOK 500 million (US$ 75m) for the Congo Basin Forest Fund (2008-2012), NOK 500 million (US$75m) for Tanzania (NOK 186 Porter, G., Bird, N., Kaur, N., and Peskett, L. New Finance for Climate Change and the Environment.

WWF and Heinrich Böll Foundation. Jul 2008, p. 27.187 ibid

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2008-2012) and NOK 700 million (US$ 105m) for the Amazon Fund in Brazil (2008-2009).188 The Norwegian Climate and Forest Initiative is not a fund as such, but a pledge of earmarked funding to be allocated through Norway’s national budget. It will support the conservation and sustainable management of tropical forests by promoting large-scale forest protection and the development of forest based carbon management. The focus of this initiative will be the Congo Basin, the Amazon Basin and South East Asia.189

The Norwegian Climate and Forest Initiative will work to contribute to early action in the form of pilot projects, demonstrations and development of national strategies for REDD. These efforts will seek to develop national capacity for monitoring, reporting and verification of these emissions. In addition, experience from these early actions will feed into the negotiations on how REDD could become part of a more comprehensive international agreement on climate change after 2012. The Climate and Forest Initiative is a “results-based” initiative that will adaptively reallocate support to successful actions to achieve REDD.190

Government of United Kingdom – The International Window of the Environmental Transformation Fund (ETF-IW) of the United Kingdom is 800 million pounds (US$1.6 billion) from 2008 to 2010. The objective of ETF-IW is to increase support for developing countries in adapting to the impacts of unavoidable climate change; to support mitigation, in particular through helping developing countries shift toward the global low-carbon economy; and to support efforts to halt unsustainable deforestation.191 Details of this joint Department of Environment, Farm and Rural Affairs - Department for International Development initiative of the UK government remain unclear. In Vietnam, DFID is working with the Like-Minded Donor Group to stimulate small-scale, pro-poor carbon market initiatives, which includes commissioning a country-specific study on Making Carbon Work for the Poor – a topic that has also garnered the attention of the Ford Foundation.

Government of The Netherlands - The Netherlands, being one of Vietnam's development partners engaged in supporting sustainable forest management, will consider support of activities related to REDD implementation within the framework of the national climate change agenda. These activities are under consideration and will respond in a complementary way to the demand expressed by the Vietnamese authorities.

188 Dutschke, M. First Steps in REDD CBFORM – Capacity Building for Forestry. Presentation at Seminar on Capitalizing Forestry and Climate Change in Malaysia. 11 Aug 2008.


190 Personal conversation with Ms. Thea Marine Ottman, First Secretary, Norwegian Embassy in Vietnam. 7 Oct 2008.


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International Organisations

Institute for Global Environmental Strategies (IGES), established by an initiative of the Japanese Government in 1998, is a research institute that conducts pragmatic and innovative strategic policy research to support sustainable development in the Asia-Pacific region. IGES seeks to enhance collaborations with a broad range of stakeholders such as national governments, local authorities, businesses, non-governmental organisations, citizens and experts, to carry out strategic policy research from an Asia-Pacific perspective and to disseminate the results around the world, so that it can contribute to the transition towards a sustainable society.192

On 24 March 2008, the Japanese Forestry Agency and the Forest Conservation, Livelihoods and Rights Project hosted the Japan-Asia REDD Seminar at the IGES office in Hayama, Japan. Key personnel in the forest sector of the governments of selected Asian countries were invited and shared information on the current status of their forests and impediments for sustainable forest management (SFM) in order to identify appropriate strategies for active participation in the REDD agenda. Approximately 40 participants attended the seminar, including: Mitsubishi UFJ Research and Consulting, Forestry and Forest Products Research Institute (FFPRI), Japan Aerospace Exploration Agency (JAXA), National Institute for Environmental Studies (NIES), Waseda University, JICA, Vietnamese Ministry of Agriculture and Rural Development, Cambodian Ministry of Agriculture, Forestry and Fisheries, Lao PDR Department of Forestry, and Indonesian Ministry of Forestry.193 After the event, delegates from Lao PDR and Vietnam shared their draft R-PINS for the World Bank FCPF with their new Japanese counterparts, ultimately supporting the successful bid of these countries to receive World Bank FCPF grant support.

International Tropical Timber Organization (ITTO) – The ITTO, based out of its Secretariat in Yokohama, Japan, aims to promote sustainable development through trade, conservation and best-practice forest management. The ITTO comprises 60 members who together represent tropical timber producers and consumers for over 90% of world tropical timber trade, covering over 80% of the world’s tropical forests. ITTO has provided over US$300 million to more than 750 projects, including 150 projects currently underway. These activities support sustainable tropical forest management; including training the forest, industry and conservation workforces; develop conservation reserves; improve trade transparency; and promote a sustainable tropical timber trade.194

ITTO believes it can play an important role in encouraging and assisting member countries to develop and implement forest-based climate change mitigation and adaptation initiatives. By leveraging technical expertise, the ITTO can support efforts to develop REDD, carbon sequestration through CDM A/R and forest restoration as well as reducing emissions by managing existing forests sustainably. In this way, REDD, forest restoration and sustainable forest management are important measures for mitigating climate change. The ITTO also addresses co-benefits (environmental services, positive socio-economic impacts) and believes that bioenergy production from forestry and the substitution of fossil-fuel intensive products by wood products can play an important strategy for mitigation climate change. Several ITTO staff reviewed GoV’s R-PIN successful application to the FCPF and the ITTO has co-

192 Institute for Global Environmental Strategies. Website. http://www.iges.or.jp/en/outline/index.html.193 Japan-Asia REDD Seminar. http://www.iges.or.jp/en/fc/activity_20080324reed.html.194 ITTO Workshop on methodological issues related to REDD - Tokyo, 25-27 June 2008.

unfccc.int/files/methods_and_science/lulucf/application/pdf/080627_itto_japan.pdf.

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sponsored several key regional technical meeting on REDD, including the UNFCCC REDD workshop on methodological issues held June 25-27 2008 in Tokyo, Japan.

International Union for the Conservation of Nature (IUCN) – IUCN has been involved in international dialogues and discussions on REDD for many years. IUCN has a presence in Nepal, Lao PDR and Vietnam, but so far has had limited country-level input on the REDD process.

Non-governmental Organisations

International Centre for Integrated Mountain Development (ICIMOD) – ICIMOD is a regional knowledge development and learning centre serving the eight regional member countries of the Hindu Kush-Himalayas – Afghanistan, Bangladesh, Bhutan, China, India, Myanmar, Nepal, and Pakistan – and based in Kathmandu, Nepal. Globalisation and climate change have an increasing influence on the stability of fragile mountain ecosystems and the livelihoods of mountain people. ICIMOD aims to assist mountain people to understand these changes, adapt to them, and make the most of new opportunities, while addressing upstream-downstream issues.

ICIMOD’s Community and Livelihood Forestry action area (CLF) seeks to research current management practices of mountain communities and to improve and share them for poverty participatory forestry that are prevalent in the Hindu Kush-Himalayas such as community and leasehold forestry (Nepal), social forestry (Bhutan, Bangladesh, and Pakistan), joint forest management (India), and new approaches emerging in Afghanistan. It also includes agroforestry and farm forestry, which together include large numbers of community-managed trees and forests, including the trees in shifting cultivation fallows, local woodlots, home gardens, and shade trees and windbreaks.

Emerging challenges include how to involve communities in new aspects of forest management such as biodiversity monitoring and carbon calculations; how to ensure equitable access and sharing of benefits for all forest users; how to make forest governance inclusive while dealing with great gaps between rich and poor and major gender imbalances; how to protect the customary forest rights of indigenous and tribal peoples; and how to help communities deal with climate change and benefit from payments for environmental services. CLF focuses on monitoring trends in land use, forests, and livelihood impact; studying good practices and technologies; regional-level policy dialogue; and regional sharing and exchange.195

Technical consulting can be, inter alia, provided by ICIMOD, which has been conducting projects to address methodological issues related to REDD. Based on IPCC guidelines, ICIMOD is working with national and local communities to measure forest carbon stocks. Results so far indicate that communities are able to measure carbon growth in a cost-effective manner; community forests are net sequester of carbon; and benefits from community forestry promote sustainable development, biodiversity and climate change.196

Regional Community Forestry Training Center for Asia and the Pacific (RECOFTC) – RECOFTC draws on over 20 years of the experience in community forestry in Asia in the development of local governance, benefit sharing and skills development packages. From its headquarters in Bangkok, RECOFTC seeks to strengthen REDD projects developed for the voluntary carbon markets as well as

195 Forests and Forestry. ICIMOD website. http://www.icimod.org/?page=80.196 Nepal R-PIN. World Bank Forest Carbon Partnership Fund. www.carbonfinance.org.

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national REDD strategies. RECOFTC works to strengthen forest governance and skilled forest carbon administration systems, design efficient benefit sharing, distribution and communications systems to all stakeholders and particularly local communities; build community forestry models for REDD; push private sector investors to support participatory approaches; and strengthen regional networks linking governments, donors, international organizations, the private sector and individuals interested in participatory forest management. In partnership with SNV, RECOFTC aims to provide a location for swift, reliable access to information throughout the region. RECOFTC’s regional focus is a bridge between global and national advocacy networks, enabling them to bring key actors together for constructive dialogue, through in face-to-face meetings, online social networks, policy discussions, training events and conferences.197

SNV – Netherlands Development Organisation – SNV has programs on Forest Products in Vietnam, Laos, Bhutan and Nepal. Over the years it has built up a strong profile on forest governance (LUPLA in Vietnam, CFM and CF in Nepal), resource management (timber in Vietnam and Nepal and NTFPs in Laos and Bhutan) and forest carbon (AR-CDM in Vietnam). SNV’s strategic focus from 2008 onwards is on linking poor forest dependant people to markets through the value chain approach. To be successful, this venture needs a supportive enabling governance environment, allowing poor and/or excluded communities access and user rights to resources and providing for favourable conditions to participate in the market (regulations, quota and taxes), which should promote the sustainable management of forest resources.The key approaches and products of SNV are in the field of:

• Pro-poor value chains for timber and a selected number of NTFPs,• Forest governance to create a supportive enabling environment, including

cross-cutting issues as gender and social inclusion, leadership in change management and multiple stakeholder processes,

• Participative forest resources management, • Forests and carbon mechanisms with a special focus on REDD (support to

governments of Vietnam and Nepal in preparing their FCPF R-PINs).An effective way for increasing the impact potential of SNV’s investments is through partnerships with global and regional organisations. Currently partnerships in the forestry sector are with:

• WWF at a global level on small-holder certification and pro-poor biofuels strategies,

• RECOFTC in Asia on value chain development, forest governance and REDD,• Prosperity Initiative on the bamboo value chain in the Mekong.

Winrock International (Wi) – With US$4 million in phase I support (2005-2008), the USAID/Winrock International Asia Regional Biodiversity Program (ARBCP) Dong Nai River Basin Management Project works in Long Dong Province to support the GoV/MARD to develop payment for ecosystem services for downstream water, electricity and tourism users to compensate upstream forest land owners. The project has successfully established a 2-year pilot policy for payment for forest environmental services, signed by the Prime Minister in April 2008, which is modeled in Dong Nai and Son La Provinces and anticipated to be scaled-up nationwide in 2010. During the US$2 million phase II, which began in September 2008, the ARBCP will focus more on climate change and likely develop a forest carbon component, thereby creating a “layered” payment for forest protection in protection forests managed by communities, but managed, contracted and dispersed by provincial authorities.

197 Forests and Climate Change. RECOTFC website. http://www.recoftc.org/site/index.php?id=682.

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World Wildlife Fund (WWF) – WWF has been working since the early 1990s in Lao PDR, Nepal and Vietnam. Over the past decade, the WWF program focuses on protecting critical ecosystems, such as the Central Annamites of central Vietnam and Lao PDR and dry forests of Cambodia, to address key drivers of biodiversity loss at the policy, provincial planning and site-based levels. In more recent years, climate change and the inter-relationships between forest protection and GHG emissions has taken a more prominent role in program planning, with a strong focus presently on developing REDD in all the major rainforest basins of the world.

In Lao PDR, WWF is interested in developing a forest carbon project in the BCI and XEFOR project area bordering Vietnam. In Champassak Province, where WWF is engaged with Government and communities in the ADB funded Biodiversity Corridor Initiative (BCI), a project-based pilot area for the REDD may potentially be developed. The area has undergone extensive land-use planning and delineated areas of protection forest. Another potential site for project-based REDD is the conservation forest area within the XEFOR II project area in Xekong Province. Here, the creation of a Forest and Trade Network could play a role in REDD by ensuring sustainable forest management of production forests.198 WWF staff have contributed to the development of World Bank FCPF R-PINs in Lao PDR PDR and Nepal.

Below is a snapshot of some of the ongoing REDD initiatives within Lao PDR, Vietnam and Nepal.

Lao PDR

Main organisations involved in Lao PDR REDD process1. Lead REDD Ministry: the Ministry of Agriculture and Forestry (MAF) has overall

responsibility for the forest sector and is lead on REDD2. Lead REDD Department: within the Ministry, the Department of Forestry is in

charge of forest policy, planning and monitoring and is the focal department for REDD

3. Other GOL Offices involved in REDD: (i) Prime Minster Office (Water Resources and Environment Administration, National Land Management Authority); (ii) National Assembly: Committee of Law; (iii) Ministries (Planning and Investment, Industry and Commerce, Finance); (iv) MAF departments (Permanent Secretary Office, Agriculture, Irrigation, Livestock and Fishery, National Agriculture and Forestry extension services, Forestry Inspection)

4. Designated National Authority (DNA): Science Technology and Environment Agency (STEA), Prime Minister's Office

5. Research Institutes: Centre for International Forestry Research, National Agriculture and Forestry Research Institute (NAFRI, MAF), National University of Lao PDR, Faculty of Forestry

6. Donors: World Bank, FAO, Australia, Germany/GTZ, Finland, JICA, Netherlands Sida, Swiss/SDC

7. Non-governmental Organisations: CIDSE, IUCN, SNV, WCS, WWF8. Private Sector: Bilra Lao, Burapha, Indochina Carbon, Oji

Ongoing initiatives in REDD in Lao PDR

198 McWilliam, R. Reducing deforestation: Lao PDR and carbon trading. WWF website. 08 Jun 2008. http://www.panda.org/about_wwf/where_we_work/asia_pacific/where/laos/index.cfm?uNewsID=136381.

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9. The World Bank Forest Carbon Partnership Facility; Lao PDR has been selected for US$200,000 grant support to develop a Readiness Plan for REDD, US$1.2 million to develop capacity building activities within the Readiness Plan, and to develop lessons learn to the COP in Copenhagen by December 2009

10. WB/Finland/MAF Sustainable Forestry and Upland Management Project (SUFORD) 2009-2012 will pilot carbon systems, especially avoided deforestation/REDD, over a 2 million ha area

11. The European Space Agency is exploring a project support emissions assessment and monitoring in Southern Lao PDR

12. Germany/GTZ Carbon mitigation through avoided deforestation in Buffer Zones of Protected Areas in Northern Bokeo, Luang Namtha, Sayabouri

13. JICA/MAF support to the Forest Strategy Implementation Promotion Project; the Forest Research Institute of Japan is also developing a carbon monitoring and assessment in Northern Lao PDR

14. Germany/MAF Sustainable Use and Management of Forest Generation for Rural Population (design phase)

15. Forestry Strategy Implementation Promotion Project(MAF/JICA/Sida)16. Upland Research Capacity Development Program (MAF/Sida) 17. SwedBio sent a mission to Lao PDR to investigate REDD funding opportunities18. SNV has commissioned Indochina Carbon to develop a technical report

entitled: Understanding REDD: implications for Lao PDR, Vietnam and Nepal. This report, which focuses on developing the current state of play for REDD methodologies will be supported by a sister-study analysing forest carbon markets carried out by to Rainforest Alliance / Smartwood

Vietnam

Main organisations involved in Vietnam REDD process1. Lead REDD Ministry: the Ministry of Agriculture and Rural Development

(MARD) has overall responsibility for the forest sector and is the designated focal point for REDD activities

2. Lead REDD Department: within the Ministry the Department of Forestry (DoF) is the focal point and in charge of overall forest management and development

3. Other GoV Offices involved in REDD: (i) Ministries (MoNRE, MPI); (ii) MARD departments (Forest Protection Department, Forestry Inventory and Planning Institute, Department of Legislation, International Cooperation department)

4. Designated National Authority (DNA): National Steering Committee for UNFCCC and Kyoto Protocol, Administration of Meteorology, Hydrology and Climate Change, Ministry of Natural Resources and Environment of Vietnam

5. Research institutions: Institute for Tropical Forest Research and Development, Institute of Forest Management (Germany), Research Institute for Sustainable Forest Management and Forest Certification

6. Donors: World Bank FCPC, UN-REDD (UNDP/FAO/UNEP), Australia, Finland, Japan/JICA, Netherlands, Norway, United States/USAID/USFS

7. International organizations: ITTO, RECOFTC8. Non-governmental organisations: CARE, FFI, IUCN, SNV, WI, WWF9. Private Sector: Indochina Carbon

Ongoing initiatives on REDD in Vietnam10. The World Bank Forest Carbon Partnership Facility; Vietnam has been selected

for US$200,000 grant support to develop a Readiness Plan for REDD, US$1.2 million to develop capacity building activities within the Readiness Plan, and to develop lessons learn to the COP in Copenhagen by December 2009.

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11. The UN-REDD Programme (with US$35 million of initial funding from the Nor-wegian Forest and Climate Initiative) this is another grant facility working to support the GoV/MARD to build capacity and test pilot REDD. UN-REDD Pro-gramme also seeks to develop one or more pilot projects, most likely in the Central Highlands. Under the ONE UN framework in Vietnam, UNDP staff coor-dinates the UN-REDD.

12. USAID/Winrock International has been implementing the Asia Regional Biodiversity Program (ARBCP) in the Dong Nai River Basin of Vietnam since 2005. The project established a pilot policy for payment for forest environmental services, signed by the Prime Minister in April 2008. During Phase II, which began in September 2008, the ARBCP will the focus will address climate change and likely develop a forest carbon element.

13. KfW, the German Development Bank, has invited WWF Germany and the WWF Greater Mekong Program to further develop the concept note “Maintaining Climate Protection Functions in Large-Scale Forest Landscapes in Southern Lao PDR and Central Vietnam.”

14. FFI has been exploring the concept of developing a forest carbon initiative in the buffer zone of a provincial managed nature reserve in Cao Bang Province bordering China.

15. SNV has commissioned two REDD studies (see Lao PDR section).

Nepal

Main organisations involved in Nepal REDD process1. Lead REDD Ministry: Ministry of Forests and Soil Conservation (MFSC)2. Lead REDD department: Department of Forests (DOF) and Department Forest

Research and Survey (DFRS)3. Other GoN agencies involved in REDD: (i) Ministries (Ministry of Environment,

Science and Technology (MoEST) is the focal ministry for climate change); (ii) Department of National Parks and Wildlife Conservation, National Planning Commission

4. Designated National Authority (DNA): Ministry of Environment, Science and Technology

5. Research Institutes: Centre for International Forestry Research6. Donors: World Bank FCPF, Finland, Japan/JICA, Netherlands, Norway, UK/DFID,

United States/USAID7. International organizations: ICIMOD, ITTO, RECOFTC8. Non-governmental organisations: CARE, Federation of Community Forestry

User Group, Forest Action, IUCN, Nepal Trust for Nature Conservation, , WTLCP and BISEP-ST which are both supported by SNV, WWF, Nepal Foresters association

Ongoing initiatives on REDD in Nepal9. The World Bank Forest Carbon Partnership Facility; Nepal has been selected

for US$200,000 grant support to develop a Readiness Plan for REDD, US$1.2 million to develop capacity building activities within the Readiness Plan, and to develop lessons learn to the COP in Copenhagen by December 2009

10. Nepal-Swiss Community Forestry Project11. SNV has commissioned two REDD studies (see Lao PDR section). SNV is also

working on PES and Forest Certification and both these initiatives can complement the methodology for REDD.

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Appendix 1: Methodology for estimating reductions of GHG emissions from Mosaic deforestation

These steps are a summary of the World Bank BioCarbon Fund RED methodology which can be found at Error! Hyperlink reference not valid.

Step 1: Defining the Boundaries

The first step is to define the overall boundaries of the RED project in terms of: (i) spatial boundaries; (ii) temporal boundaries; (iii) carbon pools; and (iv) other sources of emissions.

The spatial boundaries which need to be identified include the reference region, the project area, the leakage belt and the forest.

The reference region should be an area similar to the project area [and may contain it] were information about land use and land cover changes and the factors driving it will be obtained and projected into the future. In order to ensure that the reference region and project area have similar characteristics, in terms of deforestation then certain criteria are put forward. The project area is the area of land where the RED activities will be introduced. A leakage belt exists to monitor land close to the project area to ensure that the RED activities do not simply lead to a transfer of activities there. Finally the area of forest needs to be clearly marked.

The temporal boundaries simply describe the start and end date of the historical reference period, the project activities and crediting period. Finally a monitoring period needs to be set.

In Step 1 it is necessary to define the carbon pools. Discussions are ongoing as to which carbon pools can or cannot be included. This will depend on their significance. In short, above tree biomass should always be included as they form the bulk of the carbon stock. The below ground biomass should be considered if it constitutes between 15-30% of the above ground biomass. The inclusion of other carbon pools (e.g. dead wood, litter, soil organic carbon) should be included based on whether they meet certain criteria put forward. However, there small sizes and difficulty and costs of measurement may preclude their inclusion.

Finally in step 1 it is necessary to identify other sources of GHG emissions (in particular biomass burning (excluding CO2 which is captured above); combustion of fossil fuels by vehicles; use of fertilizers; and livestock emissions. Various suggestion and criteria are provided for the inclusion, or not, of such sources of emissions. One important criteria which is used is “conservativeness’’. Conservativeness means that the exclusion of a source of GHG emissions shall not lead to an overestimation of the net GHG emission reductions.

Step 1 in summary1 Define spatial boundaries (for reference area, project area, leakage belt

and forestry)2 Temporal Boundaries (start/end date for historical reference period, RED

project activtity, crediting period and monitoring period3 Carbon pools4 Source of GHG emissions

Step 2: Analysis of historical land use and land use cover

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In the second step the goal is to collect and analyse spatial data on current land uses and to analyse past land use and cover changes over the historical reference period for the identified areas – the reference area, the project area and the leakage belt. In order to achieve this a number of separate tasks needs to taken.

Firstly, there is the need to collect appropriate data sets over the relevant time period. It is suggested to do this at least 3 times in a space of a 3-5 year periods. At a minimum medium resolution spatial data is suggested (e.g. Landsat or Spot). Sample areas should be checked with high resolution data from remote sensors and/ or direct field observations. A simple table which shows the different data sets collected needs to be produced. Secondly, the different classes of land use and land cover need to be defined in the identified areas. Some guidance is provided: at a minimum the six broad IPCC Land Use/Land Cover (LU/LC) classes used for national GHG inventories should be used, these are:

forest land, crop land, grass land, wetlands, settlements other land.

These can be further divided into sub classes based on carbon densities. These different classes must then be tabulated in order to describe the different land classes and carbon densities in the relevant areas. A decision should have been made in task 1 as to whether all carbon pools should be included (e.g. litter carbon pool).

The next task is to define the different categories of land use and land cover change which has occurred in the project areas within the historical reference period and are likely to occur within the project term. This is done by producing a land use change matrix which highlights what changes have occurred (shown by a movement from LU/LC class to another) and the resulting change in average carbon density and hence emissions.

Once complete, then using the appropriate data sets already collected it is possible to divide up the reference area, project area and leakage belt into relevant polygons which represent the different LU/LC classes and LU/LC change categories. It is urged to try to use already approved or validated studies. Technical experts may be required to carry out the analysis of the LU/LC change which should include pre processing, interpretation and classification and post processing. In post processing GIS may be used to help break down the different classes into sub classes based on carbon densities. As a result of this analysis a number of maps will need to be produced: a forest cover benchmark map (showing only forest and non forest) for each time period; a land use and land cover map for each time period; a land use and land cover change map for each sub period; and a land use and land change matrix showing the changes identified in the maps. This matrix will be used to project historical trends into the future.

Once this information is derived then the accuracy of the maps need to be assessed using the high resolution information and/or field visits collected in task 1. This will

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help derive an error matrix. Various suggestions in terms of benchmark figures are provided on when the level of error is too high; as well as some suggestions to overcome them.

The final task under step 2 is to pull all this information together. As the area has to be assessed over a period of time to understand trends and estimate carbon reductions it is imperative that the same methods are used throughout. All the information and techniques used needs to be clearly documented and provided as an Annex to the project development document (PDD). Step 2 in summary1 Collection of appropriate data sources (medium resolution and high

resolution samples)2 Definition of classes of land use and land cover3 Definition of categories of land use and land cover change4 Mapping of historical land use and land cover change (includes pre-

processing, interpretation and classification and post processing)5 Map accuracy assessment6 Prepare methodology for PDD

Step 3: Analysis of agents, drivers and underlying causes of deforestation

In this next step the issue of who is causing deforestation ‘the agents’ are assessed and what is driving them to do this: ‘drivers’ and ‘underlying causes’ examined. The reason for carrying out this analysis is in order to help identify likely future areas of deforestation and also to help in finding ways to address them.

The first task is to find out which groups are involved (e.g. local communities, ranchers, etc) and their relative importance in terms of deforestation. This information can be obtained through site visits, using secondary studies carried out in the area, conversation with relevant experts etc. Also, the information derived from step 2 will be insightful as it will show land use changes and clearly indicate the likely culprits. For each of the recommended groups a list of information needs to be provided, including likely development of the population size.

Next the immediate deforestation drivers associated with each group need to be identified and examined. These are divided into driver variables explaining the quantity of deforestation (e.g. prices changes, costs of inputs) and driver variables explaining the location of deforestation (e.g. access to forest, proximity to market, slope etc). For each driver the top five key driver variables need to be identified and further explained in terms of how they drive deforestation now as well as likely trends. Project measures to counter such drivers also need to be described.

Once complete a look at the underlying or root causes of deforestation is needed. These are the larger factors which lead to the more proximate drivers. These could include population pressures, property regimes, war and so on. As with the immediate drivers the most important underlying causes should be further examined in terms of how they cause deforestation, their links to the more immediate drivers and there likely impacts on future deforestation. Again project measures to address them should be described.

Finally pulling together all this information a causal analysis which links the different agents, key drivers and underlying causes together and how they affect deforestation should be produced. A summary of this should be provided for the PDD. Also a

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concluding statement is needed which outlines the most likely evolution of deforestation in the reference region, project area and leakage belt.

Summary of step 31 Identify agents of deforestation (and their relative importance)2 Identify deforestation drivers (quantity and location)3 Identify underlying causes of deforestation4 Analysis of chain of events leading to deforestation

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Step 4: Projection of future deforestation

This next step predicts future deforestation. Once complete this step should provide sufficient information to locate baseline deforestation in space and time which occurs within the reference area, the project area and the leakage belt. Advice is given to use existing projections if they are already available and meet certain criteria. As part of this step there are a number of tasks which need to be completed.

First of all the quantity of future deforestation needs to be projected for each future year within the monitoring period. This will be determined by projecting future changes caused by the agents of change, the drivers and underlying causes of deforestation. It must also take into account the quantity of remaining forest areas which can be converted.

To do this a baseline approach must be selected: using either a linear projection or a modeling approach. The former projects future trends based on past trends observed in the reference region. This can continue up to the point that further expansion of deforestation becomes constrained (see next task). The modeling approach is more sophisticated, taking a range of variables causing deforestation which can be updated at subsequent monitoring periods. Advice is provided when one approach is more suitable than the other.

In projecting future trends it is necessary to analyse constraints to the further expansion of deforestation, in particular land use constraints. In cases it is clear that land availability may eventually start to constrain conversion, the reference area should be divided into suitability classes - optimal, sub optimal and marginal - for the different land uses implemented by the main agent groups. As deforestation moves from optimal to marginal it will slow the pace of deforestation to the point it will cease altogether. Under this task a maximum potential deforestation map will be produced.

Once completed a quantitative projection of future deforestation can be carried out. This should determine the average annual deforestation rate (in % of remaining forest land) for different strata for the reference region, project area and leakage belt, taking into account the land use constraints identified above. As stated above the modeling approach brings greater sophistication but is more demanding in terms of information and technical expertise than a linear projection.

In order to add greater detail to this step it is then necessary to project the actual locations of future deforestation. Several models have been developed, one of which is used as the basis for this task. This uses the information from step 3 on spatial driver variables (e.g. distance from road, proximity to market). These can be represented on a map or driver image which is overlaid with a map showing historical deforestation using GIS. From this, risk maps for deforestation can be produced and the most accurate maps are selected. All of this information will furnish a final map showing locations of future deforestation.

Summary of step 41 Selection of baseline approach2 Analysis of constraints to further deforestation3 Quantitative projection of future deforestation4 Projection of location of future deforestation

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Step 5: Definition of the land use and land use cover change component of the baseline

This step is necessary because the various land use/land use change categories will have different levels of emissions. Clearly if the land changes from primary forests to grassland, this will have a considerable higher emission content than from secondary forest to agro-forestry. This step must be carried out to understand the likely forest classes which would be deforested and to estimate what is likely to replace them in the without project scenario. From this information the emission factors can be estimated.

Two methods to carry out this step are suggested. Method one can be used when the same carbon pools are estimated in all LU/LC classes. A further sub step is needed for method two which should be used when different carbon pools are estimated on the LU/LC change categories considered.

The first task under this step is to identify the different forest classes that would be deforested under the baseline scenario. Using the maps of baseline deforestation and maps from step 2 on land use and land cover a new set of maps can be derived showing how different forest classes are deforested each year in the absence of RED activities. This information also needs to be put into a table providing a summary showing the different forest classes and how they would be deforested under the baseline case.

Once this information is procured the next task is to identify what land use and land cover changes will replace the forest areas. This implies that some sort of likely prediction on what deforestation agents will do on this land. A suite of options in order to make this prediction is provided:

(i) A simple conservative approach where a conservative average of carbon density is estimated representative of all post deforestation carbon densities;

(ii) Historical LU/LC change where past LU/LC trends are assumed to represent future trends in the same proportion;

(iii) Suitability ranking: where more assessment is carried out to predict likely future land uses post deforestation. This is particularly important where there is likely to be a scarcity of land so past trends may not be so accurate in predicting the future.

A further task is required if method 2 is followed. From the maps derived above a new set of maps showing polygons of the categories of LU/LC change for future years are produced. From this further information can be derived and tabulated which can be used in future steps to estimate carbon levels.

Summary for step 51 Identification of forest classes that would be deforested under the

baseline2 Identification of non forest classes on deforested land3 Identification of land use and land cover change categories

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Step 6: Estimation of the baseline carbon stock changes and non CO2 emissions from forest fires

In this step the baseline assessment can be finalized by building on the information above to calculate carbon stock changes. In this step the baseline changes in the non CO2 emissions can also be calculated if they are to be included in the overall assessment.

Prior to estimating the baseline carbon stock changes it is necessary to estimate the carbon stocks of different LU/LC classes, listed previously. This information can be collected for existing data sources or where this information is not available it may be collected. Various guidance documents are recommended on how to carry out the samples. If it cannot be collected locally a final option is to use conservative estimates from surveys carried out in other countries – for example IPCC default values. In such cases a conservative approach must be used.

With this information at hand carbon stock changes can be calculated according to whether method one or method two in the above step has been followed. In both cases the numbers are taken from the tables produced from step five and are multiplied by their average carbon density. The sum of the products is calculated for each future year or monitoring period and are reported in a table. This provides the basic information on likely carbon stock changes without any project intervention.

If it is deemed necessary to also estimate non CO2 emissions for the baseline, advice is provided on how to do this from the effect of forest fires. Conversion of forests to other land area as a result of forest fires produces non CO2 emissions. If forest fires are a noticeable aspect in the historical reference period then they may need to be considered as part of the baseline. The effect of fires on CO2 is not considered as this would lead to double counting. Average figures from past on forest fires are used to determine likely future occurrences. A number of steps are provided to calculate these values.

Summary of step 61 Estimation of baseline carbon stocks2 Estimation of non CO2 emissions from forest fires

Step 7: Estimation of actual carbon stock change and non CO2 emissions

In this step the carbon changes under the project scenario are estimated. Although these will be monitored and verified throughout the project life they need to be estimated at the beginning to help decide on what RED measures to introduce and to calculate the possible carbon emission reductions. If non CO2 emissions from forest fires where included in the baseline then they need to be included here.

In order to carry out this step the first task is to estimate actual carbon changes. This involves three tasks:

(i) Firstly, an estimation of the quantity and location of actual deforestation. However, in most cases this will not be necessary as there is expected to be no deforestation;

(ii) Adjust the mosaic of forest polygons and classes to adjust to the new project scenario due to the introduction of RED measures. In cases where carbon stocks may actually decrease under the project scenario (e.g. harvesting of timber) then necessary adjustment must be made as

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recommended. Similarly adjustments can be included for carbon stock enhancement. In each case standard format tables should be produced to capturing the information;

(iii) The final task is to calculate actual carbon changes which can be done by distilling the information gathered in task (ii).

In cases where non CO2 emissions from forest fires are included in the baseline then they should also be included in the project scenario. Step 6 provides the guidance and necessary information to estimate these emissions.

Summary of step 71 Estimation of the quantity and location of actual deforestation2 Adjustment of the mosaic of forest polygons and classes3 Summary of ex ante estimation of actual carbon stock changes4 Estimation of actual non CO2 emissions from forest fires

Step 8: Estimation of decrease in carbon stock and increase in GHG emissions due to leakage

In this step the issue of leakage is addressed by trying to estimate the likely impacts of the project scenario on the defined leakage area. Again it is necessary to do this ex ante in order to help in designing and introducing measures to combat leakage, to identify possible areas where significant leakage will occur and to help in making projections on revenues to be made from carbon emission reductions. Two sources of leakage are considered:

1) Displacement of baseline activities from project area to baseline area2) GHG emissions resulting from leakage prevention measures

As a result of the project activities this may cause agents to simply move their activities to other areas and engage in the same destructive practices. It is therefore critical to monitor this. If the carbon stocks in the identified leakage belt decreases more than expected this is a clear indication of leakage due to displacement of baseline activities. In order to estimate the possible impacts of activity displacement on carbon stocks outside the project boundary the following sources of leakage must be estimated and where potentially significant, monitored:

(i) Displacement of grazing; for this use the CDM EB approved ‘tool for the estimation of GHG emissions related to the displacement of grazing activities in A/R CDM project activities’;

(ii) Displacement of agricultural activities; for this use the CDM EB approved methodology for ‘reforestation or afforestation of land currently under agricultural use (AR – AM0004, section on estimation of leakage due to conversion of land to crop land, based on area of conversion)’;

(iii) Increased use of non-renewable biomass; for this use CDM-EB approved tool for the calculation of GHG emissions due to leakage from increased use of non-renewable woody biomass attributable to an A/R CDM project activity.

If leakage prevention measures are introduced, which includes activities such as agricultural intensification then the GHG emissions associated with these activities need to be estimated ex ante and if significant monitored. The main GHG emissions from leakage prevention measures which are flagged up and which may need to be captured include:

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(i) Nitrous oxide from nitrogen fertilizer which can be estimated using the CDM-EB approved tool ‘estimation of direct nitrous oxide emissions from nitrogen fertiliser’ for A/R CDM project activities;

(ii) Methane and nitrous oxide from livestock intensification. Here various methods are proposed to estimate this;

(iii) Consumption of fossil fuels where the latest CDM-EB approved tool for ‘estimation of GHG emissions related to fossil fuels combustion in A/R CDM project activities’. The information for each of the three possible sources then needs to be tabulated and aggregated.

Finally for those carbon stocks which are deemed significant they should be summed together to produce total decreases in carbon stocks due to activity displacement. These should be put into a table. This information provides an ex ante estimate of leakage due to activity displacement and allows the estimation of total leakage.

In order to monitor ex post activity displacement it is necessary to monitor against the baseline for the leakage belt. This baseline needs to be derived in the same way the baseline was determined for the project area discussed in steps 4 to 6.

Summary of step 81 Estimation of increases in GHG emissions due to leakage

prevention measures2 Estimation of decreases in carbon stocks due to displacement of

baseline activities3 Estimation of total leakage

Step 9: Ex-ante net anthropogenic GHG emission reductions In order to estimate the net GHG emission reduction of a RED project activity, the following equation is used:

Carbon RED = Carbon BASELINE – Carbon ACTUAL – Carbon LEAKAGE

In the absence of regulatory guidance on how to quantify carbon credits based on carbon stock changes and GHG emission reductions in RED project activities no specific methods are provided. Project proponents are encouraged to explore possible approaches.

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Appendix II Key Issues in designing pro-poor REDD agreements

1. Provision of information is required at national and local levels to ensure equitable negotiation of REDD agreements. Information should at a minimum contain basic details of how REDD mechanisms work, realistic expectations of benefits and possible implications. 2. Provision of upfront finance and other mechanisms for reducing costs to help improve the equity of benefit distribution in REDD. This may help bridge the gap between project/programme initiation and payments for the delivery of emission reductions. 3. Use of ‘soft’ enforcement and risk reduction measures: ‘Hard’ enforcement measures such as financial penalties are likely to affect the poor disproportionately. Project investors and/or developing country governments should apply ‘soft’ measures such as non-binding emission reduction commitments where possible. 4. Prioritise ‘pro-poor’ REDD policies and measures: Whilst different REDD options may give rise to similar levels of emissions reductions, impacts on the poor will be varied. To ensure social benefits, a strong ‘pro-poor’ political commitment is required from the outset. 5. Provide technical assistance to national and local governments, NGOs and the private sector: technical assistance will be needed to increase investment and the visibility of the poor. Key areas include: establishing reference scenarios/levels for measuring performance; improved data collection on small-scale enterprise and subsistence values; financial systems and verification services for REDD; and landscape planning approaches. 6. Support to strengthen local institutions and improve access to legality: To ensure ‘voice and choice’ in REDD design and implementation, improved access to appropriate legal support will be crucial for poor people. This is especially the case with REDD, where new and unfamiliar legal structures may be required, and where approaches may be experimental. 7. Maintain flexibility in the design of REDD mechanisms: Flexibility, for example, including the use of nationally specific standards or regular review processes, will be crucial to minimise risks such as communities being locked into damaging long-term commitments. 8. Clear definition and equitable allocation of carbon rights: rights to own and transfer carbon will be essential for REDD emissions trading. As these will govern land management over long timescales, consultation will be needed in their formulation. Where national governments retain carbon rights, equitable benefit sharing agreements will be needed. 9. Development of social standards for REDD and application of existing extra-sectoral standards to REDD systems could improve benefits for the poor by ensuring that processes such as public consultation are thoroughly carried out. Standards should also be developed for ongoing social impact assessment at project and national scales. 10. Balance rigour and simplicity: Mandating complex standards can have perverse effects in market systems, such as reduced access to markets by small producers. REDD-related standards need to be simple and accessible but also robust. 11. Ensure broad participation in the design and implementation of REDD, for example, through improving access to international debates by developing countries and NGOs. It will be important to consider the most appropriate level at

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which to assign decision making powers over REDD to achieve maximum participation of the poor. 12. Measures to improve the equity of benefit distribution: Issues such as risk aversion and cost-effectiveness are likely to lead to highly variable benefit distribution. Use of tools such as taxes to redistribute benefits and strengthening of local institutions may improve equity. 13. Avoid perverse effects of REDD due to limited direct benefits: Incentive schemes where benefits are concentrated can create perverse effects such as in-migration and conflict. Benefits will therefore need to be distributed across wide areas and actors, and combined with strong accountability measures to ensure that beneficiaries are legitimate. 14. Ensure accountability and transparency in REDD processes, for example through third party verification and strengthened democratic processes. This could help reduce perverse effects such as corruption that can adversely affect the poor. 15. Alignment with international and national financial and development strategies, such as Poverty Reduction Strategies. This could help to raise the profile of the poor within REDD and improve sustainability by integrating REDD into wider processes. 16. Ensure longevity in REDD mechanisms: Stable and predictable benefits associated with REDD could provide increased security to the poor. At community and individual levels, benefits need to be distributed over the lifetime of REDD projects and assumptions about the sustainability of alternative livelihood approaches should be critically evaluated. 17. Use of broad definitions for land use types that can be included in REDD systems could help increase overall coverage of REDD, thereby increasing income and growth potential, and could facilitate inclusion of potentially pro-poor activities such as agroforestry.

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