By Climatico Contributor: Nick Oakes

Durban has mixed meanings for REDD+ finance (Source: UNclimatechange)

Durban finished with the now commonplace but contradictory sense of achievement and disappointment. Achievement that something has been agreed, disappointment that because expectations are so low, any agreement seems like an achievement. REDD+, however, has finished COP17 with a less pessimistic sentiment: plenty was agreed in terms of the technicalities, with accord on the measurement of reference levels of emissions, on environmental and social safeguards, and on MRV; but, as discussed last week, the accord between Parties on these issues has caused disquiet among NGOs.

Technicalities aside, it is perhaps more interesting to think about what COP17 means for REDD+ in bigger picture terms – how can it reengage with the discussions of a legal agreement, how will it be financed and what does it mean looking towards next year?

Stranded at sea

REDD+ has for some time been stranded from the mainland of negotiations, with little clarity on how the mechanism relates back to an international agreement. Or in a more literal sense, it sits in the COP texts on its own as a mitigation action separate to NAMAs. Alas, Durban has presented a slightly clearer picture of the direction and merging of the AWG-LCA track of the AWG-KP track over the next few years, and consequently some more clarity on the context in which REDD+ will form part of a future agreement.

Although still abstract, by “context” we mean that REDD+ could, for example, function largely in the same way as the flexible mechanisms do, the CDM and JI, as addendums to a protocol, or it could be a separate, additional mitigation theme, spanning multiple sources of funding or mechanisms. The latter seems to certainly be the case following Durban, but aside from being – quite literally – separate to NAMAs within the texts, a lot more can be gleaned by looking at the dynamics of the finance discussions.

Finance creeping

Finance made a modicum of progress at Durban, although nothing much was to be expected. Various options for sourcing have yet to be formally considered and objections still arise on the inclusion of the private sector as a source of finance.

Nevertheless, there is agreement that finance should be results-based and, more interestingly, there is text referring to both market based and non-market based approaches to finance. It is generally understood that market based approaches would largely entail the sale of rights to carbon stored in or sequestered by the forest and, as we know, the development of these markets outside of the voluntary sector is moving at a sub-glacial pace.

But exactly what non-market based approaches are is less clear. It should be noted here that we talk about market or non-market based approaches largely in the context of delivery of money, not necessarily the sourcing the money, which could come, for example, from a maritime carbon tax in the non-market based approaches or, perhaps more obviously, the sale of carbon credits in the market based approaches.

Attention non-market based approaches

Envisioning non-market based approaches can be a little ambiguous, but clues can be garnered by thinking about the expenditure patterns of major REDD finance programmes, such as the UN-REDD and the FCPF.

These programmes have spent the majority of money on the development of domestic policies for REDD, whilst also providing help on MRV, reference levels and safeguards infrastructure. At the same time, it is taking – and may continue to take – many years to ensure forest countries, donor countries and the mechanisms themselves are on the same page with regard to expectations of results and finance, thus delaying implementation of REDD+ activities.

Nevertheless, based on these experiences, it seems sensible to conclude that REDD+ finance is going to spend some time yet directed towards early stage technical and human infrastructure, and policy development.

In this sense, the ambiguity surrounding non-market based finance becomes a little clearer. It is, at the moment, publicly sourced and grant-based delivery finance towards REDD+ readiness, purely because this is where it seems to be most needed. The assumption, however, that grant-based finance is inexorably channelled towards early stage REDD+ policy and infrastructure development is far from the truth. There could be non-market based mechanisms that focus on the implementation phases of REDD+, such as subsidy and concessional loan programmes, or guarantee and crediting schemes.

Innovating attendant approaches

Indeed this slight untruth about non-market based approaches, and its conflict between non-market and market based finance should guide the discussions of REDD+ over the coming year. Since there is a lack of a compliance market demand for REDD+ carbon, because most forest countries are in the early stages of REDD+ development, and as it takes years to progress through each stage, Durban could mean that non-market remains a synonym for ‘grants going to REDD readiness’. However, Parties could – and should – move it beyond this connotation and consider how non-market based approaches can evolve, financing the later implementation stages in order to keep momentum and avoid stagnation in REDD+, particularly because Parties now plan to spend four years wrangling over emissions targets and their “legal force.”

By Climatico Contributor: Nick Oakes

Baby steps for REDD+ set to take place in Durban. (Image source: Nick Seers)

REDD+ is one of the building blocks for a new international agreement, and like other blocks, such as finance and technology transfer, it is one that many observers are hoping will become operational relatively soon, perhaps even in absence of a post-Kyoto agreement and the merging of the AWG-LCA with the AWG-KP.

There are four forums/themes in which REDD+ will be discussed at Durban. Most of the discussions so far have taken place within the AWG-LCA and the Subsidiary Body for Scientific and Technological Advice (SBSTA), whilst there have also been discussions in the AWG-KP, and the talks across multiple bodies on the common theme of finance. Briefly analysing each of these forums/themes will indicate some benchmarks for success and the likely outcomes at Durban.

Safeguarding the safeguards

In the Cancun agreements the SBSTA was tasked with building the methodological rigour needed to operationalise a REDD+ mechanism. The SBSTA called on Parties to submit guidance on three issues that need to be addressed for COP17: (1) the systems needed to provide guidance on how safeguards are addressed; (2) modalities of forest reference emission levels and forest reference levels; and (3) modalities for monitoring, reporting and verification (MRV).

Turning first to the submissions on protection of safeguards, these are outlined in Annex I to the Cancun Agreements. They cover a range of topics, from national level policy promotion and consistency with the Convention, to ensuring there are results-based approaches and that relevant stakeholders’ needs are addressed.

There seems to be agreement that the systems for monitoring safeguards will be designed nationally. This means that the UNFCCC process will issue only guidelines on how to build the systems, whilst the systems themselves are constructed by each Party. Norway, however – perhaps resonant of broader developed country sentiment – suggests that Parties should submit information on how the systems are designed, as a means of quality control.

MRV still lurking

Turning to the forest reference levels and MRV – the former of which is a subcategory of the latter, and so probably better presented as one topic rather than two – some Parties have pointed to the lack of clarity on the definition of forest reference emission levels and forest reference levels. One suggestion is that the former cover REDD, while the latter cover REDD+. Establishing guidance used for construction of a reference level moves discussion on to baseline measurement, a key component necessary for operationalising a REDD+ mechanism.

A slight sideshow to this discussion is the inclusion of Development Adjustment Factors (DAF) in the reference levels. These are planned activities that cause deforestation or degradation in the future. It seems that many countries will push for their inclusion in reference levels at COP17, but the definitions and terms of usage may be more difficult to define post-COP, given that DAFs will doubtlessly be highly politicised.

On the principles of an MRV regime, these are broadly in agreement, in that it should be separate and independent from systems created to monitor safeguards, whilst reiterating they should be “non-intrusive, non-punitive, and respectful of national sovereignty and legislation.” Some countries have noted that much of the groundwork is in place for MRV principles, given its primacy at Cancun last year.

Some ad-hoc submissions

The AWG-LCA has continued working on a draft text within an informal REDD+ working group. However, given that the content of this text will be largely contingent on the outcome of the SBSTA, the exact nature of the draft text without agreement on the SBSTA’s submissions is somewhat unclear. Nonetheless, it is possible that if the essential elements of a decision are agreed, at the very least a draft decision on REDD+ could emerge.

With the AWG-KP, however, there is far less of a focussed discussion. It has been agreed that land-use, land-use change and forestry will be considered as an emissions source under the Kyoto Protocol (KP), but little has been negotiated on the subject of REDD+ within the KP.

One submission from a variety of forest countries outlines a possible means of including a REDD+ mechanism within the KP. However, given the amount of work going in to REDD+ outside of the KP, and that the continuation of the KP is by far the largest uncertainty at the talks, there is little chance this proposal will receive much attention.

Financing REDD+

Finance will undoubtedly be raised across a number of forums. For example, it seems to be agreed that the Green Climate Fund (GCF) will have a distinct REDD+ facility, whilst the majority of funding to date has come from Norway, via its own bilateral mechanisms.

It’s probable that forest countries will seek funding from a number of sources as a prerequisite to agreement on other issues, but as a theme itself there is little holistic oversight. In this sense finance has been more of a country-by-country approach, each individually seeking sources of funding. As a result, we are likely to see a push by forest countries to solidify funding commitments from multilateral sources, such as the GCF, whilst simultaneously coveting bilateral ties.

COP17 will undoubtedly result in Parties edging closer to approving the technicalities needed to get a REDD+ mechanism up and running, but given the complex, inter-linked nature of the mechanism’s connections to the overarching discussions on targets and legal nature of a successor to Kyoto, agreeing – possibly even formalising – the technicalities of a REDD+ mechanism and focussing discussions on finance is the most that Durban is likely to achieve. 

Authors: Sabrina Chesterman & Nyla Sarwar.

As the climate talks gain pace in Bonn, progress is being made on a new text, designed to resurrect chances of a global agreement in Cancun in December. Many, including outgoing UNFCCC Executive Secretary, Yvo de Boer, are still hesitant about Cancun being able to achieve a deal, which was originally supposed to have been reached at Copenhagen last December. One of the Mexican negotiators, Luis Alfonso de Albo, has used the coverage at Bonn to try and instill confidence in what may be achieved there, stating a climate deal is still ‘positive’.

The Bonn meetings have brought together key negotiating groups, including;

(I)              AWG-KP – to focus on further commitments by Annex I parties, based on text prepared by the Chair

(II)            AWG-LCA – to focus on preparation of an outcome to be presented to at COP 16, based on a new text by the Chair

(III)           Subsidiary Body for Implementation (SBI) – which will consider issues including national communications and reporting, the financial mechanism and capacity building.

(IV)          Subsidiary Body for Scientific and Technological Advice (SBSTA) – which will consider methodological issues, technology transfer and the Nairobi Work Programme on impacts, vulnerability and adaptation to climate change.

The Bonn discussions have entered their second week with many fundamental questions still remaining regarding the legality of the proposed agreement, emission levels and temperature goals.  The big white elephant in Hotel Maritim where the discussions are being held, lingering from Copenhagen, centres on the scale of commitments by developed and developing countries. The new text aims to ameliorate the huge bridge that exist between these groups and integrate the Copenhagen Accord with the 2009 versions of the AWG-LCA and AWG-KP texts.

In regards to finance, the new text states that that all finance will be new, additional, adequate and predictable. Whilst developed countries have committed to a goal of mobilising USD$100bn/pa by 2020, there is still uncertainty about which countries will contribute towards this and how much. Discussions regarding the generation of private funds have seen suggestions of a potential international cap-and-trade system with auctioned permits. There have also been references to the creation of a Finance Board within the UNFCCC to manage the operators of the agency’s financial mechanisms (i.e the GEF and the Climate Fund), including the Copenhagen Green Climate Fund (CGCF). Disillusionment regarding funding is also created due to the texts reference to the Copenhagen Adaptation Framework (CAF), implemented through international collaboration. The CAF aims to undertake 11 activities (e.g. planning, vulnerability assessments, strengthening institutional capacities, building resilience, disaster risk reduction etc.) all of which require extensive funding.  Worryingly the text remains sparse on new market mechanisms, likely to be critical to galvanise funding, especially from private and public sector partnerships.  In addition, as the EU Commissioner for Climate Change, Connie Hedegaard, made clear last week discussing the monetary agreements in lieu of the destabilised Euro does not come at an easy time, especially with money having to be drawn from the public purse.  Therefore funding remains a sensitive yet pivotal topic, especially if alliances are to be bridged between different negotiating groups.

Some aspects of the text being prepared at Bonn remain unchanged from the text prepared at Copenhagen. An example includes the issues surrounding REDD and REDD+, which was hailed as one of Copenhagen’s successes. In addition, the text regarding technology transfer remains unchanged from last year, and this section is considered to deliver a major outcome. The text suggests that establishment of a Climate Technology Centre and Network – the mechanism to support and organise the transfer of technology, encourage collaborative innovation, and skills development for developing countries. It is expected to be funded by the overarching funding mechanism and could begin as early as January 2011. Leading on from technology transfer, discussions so far at Bonn regarding capacity building have been largely inconclusive with additional brackets added to the text, and wide disagreement concerning its funding, delivery mechanism and reporting. With key uncertainties remaining, negotiators at Bonn have a lot of talking to do this week if success is to be achieved in any of these areas and a clear path to Cancun is to be laid.

The 45^th meeting of the Executive Board of the Clean Development Mechanism was carried between Feb.12^th and 13^th.

New EB Chair and Vice-Chair

The EB elected Mr. Lex de Jonge and Mr. Clifford Mahlung as Chair and Vice-Chair, respectively, of the Executive Board until the first meeting of the Board in 2010. Mr. De Jonge was previously Director of the CDM Division in the Netherlands. Mr. Mahlung was Jamaica’s chief negotiator to the recent United Nations climate change conference in Bali.

Business as usual

The approbation/refusal of registration of projects as well as the issuance of CERs was conducted without extended discussions. The Board however discussed situations in which the implementation of registered CDM projects may differ from description of the project in the registered Project Description Document. With regards to large-scale projects, it is in fact frequent to have a PDD which differs significantly from the implemented project. This is due, in part, to the delay in the approbation of the project. From the time the PDD is tunnelled in the CDM pipeline to the time it is verified and approved, there can be significant contingencies in the actual implementation of the project. The EB mandated studies on the matter.

Those expecting more debates will have to wait at the end of March for Bonn’s meeting of the AWG-LCA and AWG-KP, the two working groups responsible for preparing the table for Copenhagen. This will be the first real test for the Obama administration.

Challenges

Of particular interest were discussions on the management plan of the CDM. It highlighted the main challenges and strategic objectives of Kyoto’s flagship flexibility mechanism (see http://cdm.unfccc.int/EB/045/eb45_repan71.pdf). These challenges pertain mainly to the stunning increase in workload the CDM governance structure had to digest in the last years. Since the CDM is a bottom-up, voluntary mechanism, this workload is difficult to predict from year to year. This also raises the capacity constraints of the CDM-related processes in the market: Firms qualified enough and willing to act as Designated Operational Entities (DOEs) are not simply available on demand. More globally, there is a need for the CDM to surpass its “learning-by-doing” approach and enter a more mature, efficient and responsive phase.

The report however is silent about the global economic context. Yet, one might think that because of the economic crisis (and correlated diminution in industrial activity), the increase in demand for registration of CDM projects as well as pressure on the DOE market will be more modest than expected.