(Image by: Green Antilles)

In recent years the transfer of climate finance has emerged as a policy response to equitably addressing climate change mitigation and adaption in developing countries. Much attention has been given to setting up the multilateral or bilateral mechanisms needed to classify, transfer and disburse the funds pledged by donor countries. Of those that have sprung up, thirteen out of the twenty-four major funds focus on REDD+ as the sole or a major objective.

For some observers it has been difficult to keep track of the progress made by the new funds, not least because all thirteen emerged in the space of three years. Nevertheless, using the UK government’s recently commissioned analysis of existing REDD+ targeted funds as a springboard, some preliminary analysis on the progress made by the REDD+ targeted funds can be carried out.

What is being financed?

As a starting point, progress can be defined as the stage at which the most funding for REDD+ has been applied. The three phases that denote the proximity of a country to full implementation of REDD+ based emission reductions are readiness, demonstration and roll out at scale.

At present there has been very little funding applied beyond phase one, with only three countries – Norway, Australia and the USA – targeting phase two, and one country – Norway – targeting the final phase. Rather than an inherent unwillingness to fund beyond readiness, however, this is likely a result of the fact that both the bilateral and multilateral mechanisms have a strategic focus largely on the first two phases.

How much has been spent?

The level of disbursement at each phase perhaps gives a greater insight in to the progress being made. For the multilateral funds the disbursement has a range from zero to twenty per cent of the funds committed, with the Global Environment Facility at zero and the UN-REDD programme at twenty per cent, with all other multilateral funds lying in-between.

The multilateral fund to which the largest amount has been pledged, the Forest Investment Programme, has disbursed a total of £2 million or 3% of the total £335 million pledged. The World Bank’s flagship REDD+ fund, the Forest Carbon Partnership Facility, with its Readiness Fund dedicated to investing in phase one and the Carbon Fund dedicated to investing in phases two and three, has spent 11.4% of its Readiness Fund and none of its Carbon Fund as of FY10.

When considering the rates of disbursement, it is worth remembering that disbursement does not necessarily mean expenditure. As an example, take the UN-REDD programme. Funds are disbursed to the forest country offices of the United Nations Environment Programme, Food and Agriculture Organisation and United Nations Environment Programme, who then administer expenditure on behalf of the UN-REDD programme.

The move away from multilateralism

Possibly in response to the slow progress made by multilateral mechanisms, or perhaps due to domestic political motivations, bilateral approaches seem to be emerging as the preferred funding channel for REDD+. According to the UK government’s analysis, to date 67% of committed REDD+ funding has passed through bilateral mechanisms.

The implementation of phases II and III also appears to be moving ahead much quicker through bilateral mechanisms. Take Norway’s Internal Climate and Forest Initiative as an example: it’s currently developing a results-based payment scheme whereby the government of Guyana can receive up to US$250 million over 5 years from 2010 for REDD+ based emissions reductions.

Scratching at the surface

The reasons for low funding levels and the move towards bilateralism are unclear. Multilaterals often cite poor forest governance and a difficulty in establishing clear monitoring, reporting and verification (MRV) guidelines as the prime reasons for the low funding follow through. The move away from multilaterals is often attributed to ill-equipped organisations with anachronistic disbursement procedures.

However, the greater speed of implementation of phases II and III through bilateral mechanisms, the apparent preference for bilateral funds and the slow progress made by multilateral funds suggest that the reasons above only scratch at the surface. Moreover, they hint towards the idea that determining the real reasons may require some introspective analysis by the funds themselves.

On 11 March 2010 French President, Nicolas Sarkozy, opened an international conference on deforestation in Paris. The main focus of the International Conference on the Major Forest Basins was funding for REDD+ (reducing emissions from deforestation and forest degradation in developing countries, plus conservation, sustainable management of forests, and stock enhancement) activities during 2010-2012.

France and Norway are leading this effort to foster new climate partnership in 2010.

“Forests are in danger,” France’s Ecology Minister, Jean-Louis Borloo, said at a press conference. France intends to play a major role in saving the world’s forests, Borloo said, thanks to its “expertise in science and forestry.”

“The idea is to establish a partnership of everyone who wants to be included [in safeguarding forests], stated Norway’s Environment Minister, Erik Solheim. According to Solheim, the initiative will be transparent and “it will be open to everyone, even if you don’t contribute one single dollar, even if you don’t have a single tree.”

The conference brought together representatives from 54 countries, representing the main forest basins in the world as well as potential donor countries. The major focus was on the collective pledge for nearly US$3.5 billion in initial funding for REDD+ over the period 2010-2012 by Australia, France, Japan, Norway, the UK and the US (made in Copenhagen in December 2009).

Not many details on this first conference are available, but there is expectation the throughout a series of conference mechanisms will be established to go through the United Nations, the World Bank, and bilateral channels. Norway has existing bilateral agreements, which may serve as a model in the process. For example, Norway plans to include up to $1 billion for Brazil from 2008-2015, up to $280 million for Guyana from 2010-2015 and about $83 million for Tanzania. But, each of these contributions schemes also come with strings attached, depending on performance.

During the Conference, participants engaged in three sessions on: pledges of initial funding and action for forests; coordination of initial funding and action for forests; and organization of long-term international action concerning REDD+. A second conference will be organized in Oslo, Norway, in May 2010

Many developing countries with forests to protect seem pleased with the arrangement of having France and Norway in a leadership role. Norway has a strong donor performance for forest issues, while France, and President Sarkozy in particular, has been an advocate for partnerships and open dialogue in REDD+ negotiations, before and after Copenhagen (e.g. France-Brazil initiative in November 2009).

A recent survey study, by HSBC’s Climate Partnership , noted that nearly 45%of people surveyed in India view climate change as a higher priority than economic turmoil. Furthermore, the study also revealed that 42% of Indians are looking to the government  to take a lead in climate policies. Having noted before that India’s diverse topography and demography makes centralized decision making on environmental issues difficult- the role of state governments deserves some evaluation.Often in tension with the central government which has much of the resources, state governments must work under central government directives but also protect regional interests which often include valuable natural resources. In India, central-state government relations are difficult in terms of environmental policy as certain resources are jointly managed (forests) by both levels, complicating swift, effective management/governance of such valuable resources. On the other hand, resources such as waterways fall mainly under state jurisdiction and seek centralized oversight to mitigate state -to-state conflicts.

In a report titled, “Green India Standards” published by the Institute of Financial Management and Research, Indian states were evaluated on an Environment Sustainability Index based on performance based indicators covering components such as environmental stress, environmental governance, and population pressure. Overall, only a handful of India’s 28 Indian states achieved a high ESI ranking. As climate concerns become more visible to its citizenry and the global economic advantages of turning ‘green’ become solidified, Indian states will be more likely to engage in their own climate policies.

Already, current activities seem to support some of IFMR’s evaluations. Recently, the state of Himachal Pradesh in northeast India- facing visible climate pressures given such close proximity to the Himalayas and its receding glaciers, proposed its own national environmental policy. With the assistance of the World Bank, Himachal Pradesh’s state plan is said to include policy mechanisms such as payment of ecosystem services (PES) and carbon credit marks to generate ‘green’ growth in line with India’s national policy. In the state of TamilNadu, in the past two years, efforts by forest ministry have increased forest cover  within the state.

State initiatives are a welcoming and perhaps promising path for India in climate issues as state governments are more in tune with regional contexts in terms of resources, impacts, and stakeholder issues. In addition, growing awareness of and concern over climate change impacts among Indian citizens is also a positive sign in terms of policy making in India. Perhaps with a more localized approach and understanding of problems will also generate unique solutions for India.

The connections between climate change, deforestation and the growth of palm oil plantations are pretty clear. What to do is another thing. While it is easy enough to demand that the Indonesian government stop creating palm oil plantations this is an unrealistic objective. Caught between a rapidly increasing fiscal account deficit and its stated development goals, palm oil production is, like it or not, here to stay.

There are signs however that changes is afoot. To increase revenue, the Indonesian government would like to expand exports of palm oil to new markets, with Eastern Europe particularly targeted for expansion. However this runs into a major problem: from 2010, the EU will require biofuels to achieve a net carbon dioxide saving over oil of 35%. At present only one out of 300 listed producers do this, primarily because of the huge amount of carbon released into the atmosphere when clearing land away.

Furthermore, echoing one of the conclusions of the Economy and Environment Program for South East Asia (EEPSEA) report, fears about increases in floods and landslides due to deforestation have led the State of the Environment to instruct local administrations to cancel plans to convert natural forest into commercial areas. While putting the emphasis for action on the local administrations Masnellyarti Hilman, from the environment ministry, states that ‘It is time for local administrations to think in the long term rather than simply focus on the economic benefits of the short term, because the threat of natural disasters will most likely increase with climate change in the future’.

A solution? Use degraded land

This has the potential to not only help Indonesia’s economy but provide jobs and potential carbon offsets. Project POTICO (Palm Oil, Timber & Carbon Offsets) aims to rehabilitate 1.25 million acres of degraded land into palm plantations over three years. Created by the WRI (World Resources Institute) and NewPage Corporation, this new scheme was formed partially in response to changes in the US Lacey Act banning the use of paper from illegally harvested trees.

The link between illegal logging and palm oil plantation creation is primarily economic: as it takes four years from planting to generating an income from oil production, the revenue from the cleared timber helps offset costs. POTICO aims to counter this by creating up to three potential revenue streams:

• potential carbon offsets under REDD;
• a sustainable palm oil certification scheme to generate long-term cash flows;
• timber certification whereby oil palm companies with current timber concessions, are paid not to use the timber concessions until the palm oil plantation starts commercial production.

The potential for this is huge: Indonesia has 15-20 million hectares of degraded land. As Jonathan Lash commented “Project POTICO will relieve pressure on Indonesia’s virgin tropical rainforests, reduce greenhouse gas emissions from forest clearing, and prevent the loss of biodiversity in forests slated for conversion to oil palm plantations.”  While hurdles remain to be overcome, especially in how to demarcate degraded land from rainforest, this project suggests a way where palm oil production can increase while reducing greenhouse emissions and stopping deforestation.

When asked to think about the relationship between climate change and Indonesia, the most likely answers would revolve around rainforests, deforestation, orangutans and loss of livelihoods. Missing from this picture is any appreciation of the role played by the oceans of Indonesia. This is especially surprising given that Indonesia’s:

• the world’s largest archipelago;
• 17,000 islands stretch over 5000 thousand kilometres East to West, or an eighth of the world’s circumference;
• total sea area is four times bigger than the land area.

This makes Indonesia particularly vulnerable: as Rachmat Witoelar, the environment minister pointed out, the country could lose 2000 islands by 2030 if sea levels continue to rise. But it is not just Indonesia that stands to lose out. Globally the effect of climate change on coastal communities and island states is potentially horrendous. This therefore makes the neglect of oceans in recent climate change conferences all the more puzzling. As noted by Gellywynn Jusuf, in Bali only one session out of 800 discussed climate change and its impact on oceans: in Poznan, oceans were barely mentioned.

This, together with new research suggesting that sea-level rises have been under-estimated, makes the recent announcement of the World Ocean Conference in May all the more important. Taking place in Sulawesi, Indonesia, it is hoped that the WOC will refocus the world’s attention on the important relationship between the oceans and climate change. It aims to increase awareness of:

1. the links between climate change, the implications for the socio-economic position of coastal peoples and the ecological conditions of coastal and marine zones;
2. the vital role that oceans play in mitigating climate change;
3. the need for mitigation of disasters caused by climate change;
4. the need for a strong commitment for continued discussions on the role of oceans in climate change and the effects of climate change on oceans.

There is a further possible reason for the conference: besides increasing awareness of the relationship between climate change and the oceans, and shifting some of the focus away from forests, it is possible that this conference may lay the groundwork for some sort of remuneration scheme for those countries with large oceans.

Given the potential carbon sink capacity of oceans, with Indonesia alone purportedly having the ability to ‘absorb’ up to 60 million tonnes of CO2 a year through the oceans, a REDD-like scheme for oceans could bring huge monetary sums for those countries directly affected by rising sea-levels. As Freddy Numberi, the Indonesian Maritime and Fisheries Minister, suggests “by protecting the oceans, we will be saving the livelihoods of so many people in small-island states. For this reason, wealthy nations should contribute to the cause.”

Is such a scheme feasible? REDD at its core is simple: pay money to stop cutting down trees. Trying to quantify not only degradation in the oceans but also their ability to act as carbon sinks maybe impossible but such a scheme [I am suggesting Reducing Emissions from Oceanic Degradation in Developing Countries or REOD as the name for such a programme]could provide at the very least compensation for those island countries hardest hit by climate change. This makes it a possibility worth exploring.