Call for Board inputs REDD+ Results-Based Payments

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1 Page 1 Call for Board inputs REDD+ Results-Based Payments The GCF aims to support a paradigm shift in the global response to climate change, for which It allocates ex-ante resources to low-emission and climate-resilient projects and programmes in developing countries. RBP for REDD+ implies the allocation of ex-post resources to reward emission reductions and increased removals by forest. In the context of RBP for REDD+, the REDD+ activities will be in line with the paradigm shift that the GCF aims to support. At the fourteenth meeting, through decision B.14/03, the Board of the Green Climate Fund (GCF) requested the Secretariat to develop a request for proposals (RFP) for REDD+ results-based payments (RBP), including guidance consistent with the Warsaw Framework for REDD+ and other REDD+ decisions under the United Nations Framework Convention on Climate Change (UNFCCC). While the UNFCCC guidance including the Warsaw Framework provides guiding pillars for REDD+, operationalization of REDD+ results-based payments at the GCF requires further analysis and discussion of elements related to technical and procedural aspects in the context of the governing instrument of the Fund and current procedures. These elements have been identified in section 4.1 of document GCF/B.14/03 and section 3 of document GCF/B.15/Inf.07. These elements have also been discussed in the GCF dialogue at the 22nd session of the Conference of the Parties (COP) and analyses undertaken to date on the existing UNFCCC guidance and current GCF policies, standards and procedures. This call seeks inputs from the Board on those identified elements through a structured template which is included below. In the template, a distinction is made between those elements that relate to the GCF procedures and mandates requiring Board decisions for framing of the RFP and those elements that relate to the technical aspects of the modalities. A parallel process focused on the technical modalities only seeks inputs from relevant global stakeholders, including CSOs, Indigenous peoples representatives, private sector and REDD+ experts. Input from the Board will be shared publically and analysed by the Secretariat for the preparation of the first draft of the RfP. Input requested The Board is requested to provide input on the following key procedures and technical elements to support the development of the RfP for RBP. The template enclosed below includes guiding questions provided as reference only and can be complemented with additional questions identified by the Board. Please provide your inputs using the template and send to fundingproposal@gcfund.org by 20 th March 2017 at 23:59 Korean Standard Time with subject line Call for Inputs REDD+ Board. Include in the text message: Name title and Organization; Country/constituency

2 Page 2 Template for receiving inputs I. Elements related to procedures and mandates of the Fund (for the Board only) Procedure element 1: Access modality Issue: While the COP noted that national entities or focal points of developing country Parties may nominate their entities to obtain and receive RBF, 1 consistent with any specific operational modalities of the financing entities providing them with support, GCF resources are currently accessed through accredited entities. 2 Guidance is required regarding the access modality for channelling RBP in accordance to the Governing Instrument while following COP decisions. UNFCCC: Formally nominated national entities or focal points to receive RBPs, consistent with any specific operational modalities of the financing entities providing them with support Forest Carbon Partnership Facility (FCPF) Carbon Fund: Government or a government-approved entity that is authorized to enter into a legal agreement with the fund REDD Early Movers (REM): National and state administrations (e.g. Ministry of Environment) Norway-Guyana bilateral agreement: Finance channelled through the Guyana REDD+ Investment Fund Norway-Brazil bilateral agreement: The Amazon Fund administered by the Brazilian Development Bank Norway-Peru agreement: Implemented by the Inter-American Development Bank GER/BRA agreement on the Amazon Fund 1.1: What should be the role of the REDD+ national entities or focal points to the UNFCCC in accessing RBP? 1.2: What should be the role of the accredited entity (AE) in the RBP process? 1.3: Should there be another access modality for RBP other than though AE? 1.4: Should the NDA play a formal role in the RFP proposal process besides providing a NOL, and if so, what role should that be? 1.5 Others? : RBF should be channel through AE towards national entities or focal points. Decision 10/CP 19 invites Parties to designate a national entity or focal point to serve as a liason with the Secretariat and the relevant bodies of the Convention. These national entities or focal points may nominate entities to obtain and receive result based payments. As Decision 10/CP 19 points out this should happen in accordance with national circumstances and national sovereignty. Thus, the nomination process of national entities and its guiding criteria are driven by the REDD countries. If nominated, national entities that want to access RBF should be accredited to the GCF and submit a project proposal for results based payments. Accreditation should follow the established process under the GCF. Project proposals should be guided by the guidance provided in the Request for Proposal. REDD+ National Entities or Focal Points can also partner with implementing entities already accredited, who can submit Project proposals on behalf of the REDD+ country or subnational state, including the National Designated Authority non-objection. However, ownership and responsibility for the project by the REDD+ country (through its REDD National Entity or Focal Point) is paramount, especially to ensure that the project is developed in accordance with the national REDD+ process, policies and instruments. Further, we propose the request for proposals to include programmatic approaches which allow serving various countries. As the REDD+ RBF departs from standard input-based finance we propose that the Board mandates the GCF-Secretariat to analyze how the GCFs relevant provisions need to be complemented in order to deliver RBF on scale. This includes the analysis of the required adjustments and potentially necessary additional provisions to the Accreditation Master Agreements (AMA). It would have to be analysed if and how the current AMAs would be able to accommodate RBF as the disbursement and implementation logic is different from input-based standard projects and credit lines. The analysis should be undertaken in coordination with AE. 1 UNFCCC decision 10/CP.19, paragraphs 1 and 2. 2 Except for resources for readiness and preparatory support which can be accessed by national designated authorities.

3 Page 3 Procedure element 2: Financial valuation of results Issue: Guidance is required on how to determine the relationship between the Emissions Reductions results proposed and the amount of finance to be provided. For example, most initiatives set a payment per tonne of carbon dioxide equivalent (tco2eq). UNFCCC: No specific guidance on methods of financial valuation. FCPF Carbon Fund: Subject to negotiation between the fund and the REDD program but fund participants have currently indicated a willingness to pay up to USD 5 per tco2eq. No additional payment premium for co-benefits provided. REM: USD 5 per tco2eq Norway-Guyana bilateral agreement: USD 5 per tco2eq Norway-Brazil bilateral agreement: USD 5 per tco2eq 2.1: How should the valuation of results (payment/tonne CO2) be estimated? a) A single, fixed payment; if so, indicate the amount and rationale. b) A payment (or volume paid) adjusted according to methodologies used (i.e. use of IPCC tier 1-3 Good Practice Guidance, uncertainty level of estimated Emission Reductions, etc.) c) Open prices submitted to the RFP d) Other? The GCF should adopt the principle of equal reward for each tonne of reduced CO2. This means a fixed price per tonne for all proposals. There are several advantages to this approach: Transaction costs are low. Price/value negotiations are very costly as they might need considerable amount of additional information. Often proposed cost-based approaches would be technically extremely challenging to implement and to get right given the complexity of factors that lead to reduced emissions from deforestation and forest degradation. This could also lead to an unfair attribution of deforestation reduction successes and associated costs given different capacities and availability of data. Using a fixed price per tonne across the spectrum of REDD+ proposals is the most predictable approach for the GCF and REDD+ countries: the sooner REDD+ countries know what they can expect, the better they will be able to plan their programs. It is also a very transparent and equitable approach, likely more so than negotiated alternatives. It is easy to communicate and to engage in an inclusive dialogue with a range of stakeholders; including those with very limited market experience and negotiation know how. A ton is a ton, and should have the same price: this is what results-based REDD finance is about. The same price ensures transparency and coherence among accepted programs. However, a fixed price per tonne is not useful as an incentive to foster more complex methodological approaches over time and to address underestimated emissions from degradation. This could be addressed either by a lower volume of set aside ERs (e.g. Buffer in the context of preventing leakage) ) or by a discounting factor for accuracy and more comprehensive accounting. A price of USD 5 per ton has been applied in the largest REDD Funding vehicles and deals (Norwegian bilateral, REM, FCPF signals a willingness to pay up to USD 5 per ton), and has proven practical. Consistency among the different REDD funding vehicles is key from a donors perspective. Having considered the logic above, we propose the Request for Proposal should include/make explicit a fixed price of up to 5 USD/tCO2, allowing REDD Countries and Accredited Entities to elaborate their proposals on that basis. Page 3 of 12

4 Page 4 Procedure element 3: Size of the RFP Issue: The Board would need to determine the overall size of the RFP in terms of funding. This decision could take into account the existing funding available, the estimated potential demand for RBP during the period of the RFP, the potential to meet the objectives of the GCF via a RBP program, and other considerations such as the length of the RFP (discussed below under Procedure element 7). UNFCCC: No guidance on funding size, but encourages GCF to collectively channel adequate and predictable resultsbased finance in a fair and balanced manner, taking into account different policy approaches (Decision 9/CP.19 paragraph 5). FCPF Carbon Fund: Around US$ 735 million in committed funding for emission reduction payments through 2025 REM: US$ 56.5 million Norwegian International Climate and Forest Initiative (NICFI): US$ 365 million/year 3.1: What should be the total amount of funds to be set aside for the RFP at this time? 3.2: On what basis should the GCF estimate the total amount of funds to be set aside for the RFP? 3.3: How should the funds be channeled in a fair and balanced manner? a) An initial RFP for a limited number of countries with an equal cap per country. b) An initial RFP for a limited number of countries without a cap c) An initial equal cap per country allowing transferability of funds among countries d) A regional allocation of the overall funding available e) Other? : An initial conservative budget should be defined for the Request for Proposal. First proposals to come at sufficient quality should be served first, if they comply with the requirements of the RFP. In order not to exclude good proposals and/or REDD countries in the future, the Board might commit to making a subsequent Request for proposal, on the basis of a regularanalysis of the new incoming proposals. Regional balance is an important principle in the context of the GCF. For RBF an additional principle is of importance, as well: Results based finance is an instrument focused on rewarding performance and ambition. Countries showing higher performance (through e.g. a higher reduction of their deforestation and/or degradation based GHG emissions) or demonstrating higher ambition should expect a higher share from the RfPThe Request for Proposals should include this principle to incentivize ambitious REDD+ proposals. Initially, more countries would be in a position and with need to access Phase 2 REDD+ finance, with increasingly more REDD+ countries able to access RBF finance over the years. Procedure element 4: double financing Issue: The current REDD+ finance landscape provides finance through a range of bilateral and multilateral funding sources. There is also a potential overlap of finance provided for a country to generate emission reductions through ex-ante finance which could later pursue ex-post payments. This could take place from different sources of funding as well as from the current finance provided by the GCF under the regular project cycle and through RBP. UNFCCC: Risk of double finance is not mentioned in the COP decisions. Nonetheless, paragraph 9 of Decision 9/CP.19 establishes the information hub aiming to increase transparency of information on results-based actions, and the corresponding payments. Page 4 of 12

5 Page 5 FCPF Carbon Fund: Requirement that emission reductions sold and transferred to the Carbon Fund are not used again by any entity for sale, public relations, compliance or any other purpose. An ER transaction registry is required to offer insurance against double counting and provide transparency to the public that there is no double claiming of the environmental benefit, in respect of the GHG emission reductions or removals. REM: REDD+ partner countries should have a mechanism, such as a registry, in place that prevents double counting as well as payments or the use of these ERs as offsets. 4.1: In what instances may double financing of results generate a concern? How could this concern best be addressed? 4.2: How should the GCF take into account the ex-ante finance provided either by the GCF regular project cycle or other sources of finance? 4.3: Should GCF create or utilize an existing registry to track GCF-funded Emission Reduction tonnes in some way, in addition to the UNFCCC information hub? 4.4: Other? Primarily, it has to be distinguished between ex-ante and ex-post investment. The financing needed for the measures which generate ERs will usually come from various sources. Experience shows that in most countries external (or donor) funds as well as domestic funds are needed to catalyze change. Experience has also shown that it is very difficult to attribute ER performance in the land-use sector to individual finance streams and policy measures, with some exceptions such as plantations.. In general, The idea is that Phase 2 Finance (domestic and international) will generate ERs to be later rewarded through the REDD+ results based payments framework. Once ERs start to be generated, the stronger focus/shift can be on RBF. It is most important though, to ensure that the for the ex-post remuneration of ERs, there is a clear system in place that does prevent ERs to be sold or rewarded twice. A functional, robust and transparent carbon accounting system and a solid registry need to be in place to prevent double counting of ERs which has to be linked to the REDD Info Hub. This becomes even more important in jurisdictions where public and private initiatives are working on generating ERs (e.g. voluntary market REDD+ projects). The Registry has to account for all ER and should allow retiring or cancelling definitely those which have been rewarded through the GCF RBF scheme. Countries may put in place Registry Systems of their own (or systems which allow for tracking and cancelling rewarded ER). The GCF may use existing registries. As per Decision 9/CP19 the UNFCCC info hub is a tool which contains information on the quantity of results for which payments were received and the entity paying for results. However, the UNFCCC REDD+ Info Hub would need to be further developed to include all the necessary information for a robust carbon accounting system in order to substitute a registry that tracks and excludes ERS from future transactions. Procedure element 5: Use of proceeds Issue: The Board may need to consider if any restrictions are needed on how the GCF RBPs are subsequently used, for example for activities implemented that do not contradict the results achieved or more broadly contradict the objectives of the GCF. This is also related to Operationalization of the Cancun Safeguards discussed below. UNFCCC: Use of proceeds is not mentioned in the UNFCCC decisions FCPF Carbon fund: Programs to provide a description of the benefit-sharing arrangements including a benefit sharing plan REM: Programmatic benefit-sharing and investment plan are set in bilateral agreement; Requires that at least 50% of RBP reaches local level. Norway-Indonesia bilateral agreement: Transparent and equitable benefit-sharing mechanism required. 5.1: Should the GCF place any conditions or restrictions on the use of RBPs? If so, what kind of conditions would that be? 5.2: Other? The UNFCCC Warsaw framework is silent on conditions for the investment of proceeds from RBF, beyond the reference to Cancún Safeguards that would also apply to the use of the funds. Nevertheless, most REDD+ countries so far have opted to Page 5 of 12

6 Page 6 invest REDD+ proceeds in policies and measures that further reduce deforestation, promote sustainable management of forests and benefit local stakeholders that have contributed to reduced deforestation and forest conservations. This has been particular valuable, as traditionally the funds geared towards these activities have been quite limited compared to other sectors. In our view this approach should also be encouraged within the GCF, however not to the point of resulting in classical input-based projects but on clear rules and goals for investments as well as robust governance arrangement that ensure the responsible and transparent investment of these funds. Actions to reduce emissions in the REDD framework have to be consistent with the Cancun safeguards. The Cancun Safeguards set broadly the frame how activities have to be carried out. Beyond demonstrating how safeguards have been addressed and respected in the generation of rewarded ERs, the use of the proceeds should be consistent with this framework, as well. At least it should not contradict it, and it has to be ensured avoided that the proceeds are not used to undo progress. In practice, this also leads to an overlap with the principles of a classical safeguards approach, usually following WB/IFC standards, which is reconcilable with Cancún safeguards but is stronger focused on the risks associated with particular investments. Furthermore, sharing benefits and compensating and/or incentivizing actors for changing land use practices is key for successful and sustainable REDD+ implementation. A benefit sharing arrangement speaks for the quality of the project. The bases for providing incentives are the results generated in the context of transformational changes, sharing benefits will be a helpful approach to reinforce these changes. From this perspective, proposals should include details on the planned investment and benefit sharing arrangements, including an investment/benefit sharing plan. The approach to this plan does not need to resemble structures like log frames or performance matrices, but can be a set of rules consistent with the safeguards and strategic goals of the program. It should at least provide specifics about the policy frameworks and programs which are going to receive proceeds, the volume of the proceeds which are going to different groups of local stakeholders. Furthermore, it should provide for arrangements that benefit stakeholders at the deforestation/degradation frontier and stakeholders already engaged in forest conservation, sustainable use and restoration (e.g. indigenous people living inside forests). The latter is important to prevent perverse incentives. Finally, a robust and demonstrably viable governance structure is key that ensures transparency and responsibility in the investment-decision making. Whatever the proposed use of the RBF/proceeds, the proposal would need to demonstrate to what extent structures are in place to implement these and/or in what time frame these resources are planned to be implemented. Procedure element 6: Ownership, legal title and implications for NDCs Issue: The COP decisions do not provide any guidance regarding transfer and legal title of emissions reductions that result from REDD+ activities for the financial mechanisms like the GCF. Board would need to consider providing clarity on the status of Emission Reductions paid with GCF funds (may also apply for ex-ante finance). UNFCCC: REDD+ in the UNFCCC is referred to as policy approaches and positive incentives. Also, decision 2/CP.17, paragraphs 66 and 67, refer to both appropriate market-based approaches and non-market-based approaches could be developed to support the results-based actions by developing country Parties. While the COP decisions do not mention title creation and transfer, article 6 of the Paris Agreement envisions the use of internationally transferred mitigation outcomes on a voluntary basis as authorized by participating Parties through a mechanism established under the authority and guidance of the COP (rules, modalities and procedures are yet to be defined). FCPF Carbon fund: Requires transfer of ERs, formalized through emission reduction payment agreements (ERPAs) REM: No transfer of ERs; ERs are retired and cannot be used for offsets, but recipients may report ERs to UNFCCC NICFI: No transfer of ERs. 6.1: Should there be any legal title or transfer of ownership associated with the payments? If so, should the GCF-funded Emission Reductions be fungible with other mechanisms? 6.2: Should GCF pay for results without claiming any emission reductions? If so, would there be any obligation from the Page 6 of 12

7 Page 7 recipient country in relation to the paid emission reductions? 6.3: What are the implications for reporting in a country NDC from GCF-funded Emission Reductions? 6.4: Other? : The GCF will channel funds from donor countries. The main driver to this policy is the support of developing countries to reach their climate goals, and not the intention to offset emissions. In this context, the Request for Proposals is a non-market approach and there is no need to have emissions reductions that are fungible in the market place. Nevertheless, a legal title and its transfer to the GCF would ensure that no further use is given to ER which have already been rewarded. However, the GCF should not pay for ER but reward ER. Regarding the obligations, REDD countries should report on the rewarded ER in the REDD+ Info Hub and their respective BUR. However, in any case the rewarded ER should be retired and/or cancelled in a registry in order to prevent a double payment/reward be it through international REDD+ payments or potential domestic schemes. The rationale is that no further use is given to ER which have already been rewarded (see question 4). This is also valid for the use of ER in the context of possible Article 6 mechanisms or for as offsets in a market context. Procedure element 7: Eligibility date for payments and length of the RFP Issue: Under the current UNFCCC REDD+ decisions, Parties, when constructing their national (or subnational) forest reference emission level and/or forest reference level, may choose their own baseline. This flexibility results in various reference and accounting periods that vary by country. The Board may need to set a starting date from which it will operationalize financing for results achieved by countries. This will be linked to the overall length of the RFP. UNFCCC: no reference to eligibility date for payments. FCPF Carbon Fund: payments can be made for emission reductions during the term of the Emission Reduction Payment Agreement (ERPA). REM: varies by country, in the case of Acre-Brazil emissions reductions are accounted from 2012 to 2015 while in Colombia from : What should be the starting date for considering eligible results for RBP? 7.2: Should the starting period be the same for all countries or defined on a case by case basis? 7.3: What should the payment period be over what timeframe? i.e., when should it end? 7.4: Other questions? 7.2.: The best way for GCF RBF to contribute to climate change mitigation through emission reductions across tropical forest is to concentrate its reward on real and credible ERs of recent past. In this context the rules and flexibility regarding Reference Period, Payment Period, and periodical adjustments of Reference Levels are relevant. The rules for setting the start date should be clearly defined most workable would be a corridor that leaves some room for rewarding early action. However, the reference period is the more decisive element for the eligibility of payments. The gap between the reference period and the starting date of the payments should not be too large (e.g. not more than 2-5 years) in order to ensure an adequate reflection of the most recent past in the FREL. Also the allowed length of the reference period (10-15 years) as well as periodical adjustments of the reference level (e.g. 5 years, same periodicity as NDC update) to foster increased ambition, new ERs and additionality. The current challenge is that a number of current submissions of FREL to the UNFCCC have exceeded recommended values, stretching the limits of credible ER under these FREL considerably. Page 7 of 12

8 Page & 7.3 There should be some flexibility for the starting period to account for country circumstances and different speeds in program development. However, flexibility should be limited and the starting period should to some extent be tied to the submission of the proposal to make sure the GCF financing focuses on current date activities and rewards recent results the most. E.g. starting period could be the submission date of the program document, a fixed date up to 2-3 years before the signature of the contract to account for early action, or the contract signature. Earlier starting dates for ER reward should be justified with demonstrated political decisions and actions that have led to downward trends in deforestation. Payment period: There should be flexibility depending on the program design (of course with regards to the funding limitations within the fund, through e.g. a maximum program size), the payment schedule can be adapted accordingly. Some programs might result in a sharp drop in deforestation justifying a more front-loaded payment schedule and shorter period, whereas other programs might deliver a more gradual decline over time. As a rule of thumb a payment period of 4-5 years has been the guidance for both the REM program and the Carbon Fund. There should be a provision for contract extension for successful programs without having to negotiate the whole suite of clauses in the contract. Page 8 of 12

9 Page 9 II. Elements related to technical modalities (for the Board and REDD+ stakeholders) Technical element 1: Scale of implementation Issue: UNFCCC provisions request forest reference emission level and/or forest reference level (FREL/FRL) and measurement, reporting and verification (MRV) to be national with some flexibility for subnational scale as an interim measure. Guidance is required for defining the scale of implementation for countries requesting RBPs. The GCF needs to state in the RFP what scale of implementation is acceptable in proposals; while being consistent with UNFCCC guidance on FREL/FRL and MRV. The GCF should also contemplate whether and how the existing REDD+ initiatives at different scales and approaches can be considered in the RFP. UNFCCC: Requires national FREL/FRL or, if appropriate, as an interim measure, subnational FREL/FRL, in accordance with national circumstances (Decision 1/CP.16 paragraph 71). Forest Carbon Partnership Facility (FCPF) Carbon Fund: Allows for national and subnational (jurisdictional) level. Most programs are subnational. REDD Early Movers Program (REM): Allows for national and subnational. So far the experience has been subnational. Norwegian International Climate and Forest Initiative (NICFI): Mainly national level agreements with national governments, although implementation occurs at subnational scales in some countries. Guiding questions 1.1: What scale of implementation (national, subnational, nested) should be considered for the RFP? 1.2: Should the GCF provide detailed guidance for defining the scale of eligible proposals? 1.3: Other questions? The request for proposals should address both scales, national and subnational as an interim step. When addressing the subnational level, it has to be assured, however, that there is consistency between this level of implementation and the approach to REDD at the national level. An increase in scale of implementation can be encouraged as it addresses national leakage in subsequent RFPs, and respective REDD+ Safeguards. Guidelines on the issue of scale should be included into the Request for Proposals. The Secretariat should be requested therefore, to base its proposal to the Board on the guidelines and experiences of other REDD RBF Initiatives, for example the relevant criteria and indicators of the FCPF Carbon Fund Methodological Framework on scale. To ensure that REDD+ has the high-level political ownership and intersectoral transformational impact that it needs to be successful, small scale projects (municipalities, private projects, individual protected areas) should only be considered for results-based payments if they are nested in a subnational jurisdictional level approach. Technical element 2: Forest reference emissions levels (FREL)/forest reference levels (FRL) Issue: Warsaw Framework for REDD+ articulates modalities for the development and technical assessment of FRELs/FRLs, and for monitoring, reporting and verification (MRV) of emission reductions achieved through REDD+ activities. Under the current UNFCCC REDD+ decisions, Parties, when constructing their national (or subnational) forest reference emission level and/or forest reference level, may choose their own baseline. This flexibility results in various reference and accounting periods that vary by country. The GCF needs to consider ways to link these procedures with RBF while considering specific countries circumstances. Existing practices of other funds: FCPF Carbon Fund: Follows UNFCCC requirements of using historical averages and adjustment but it only allows limited adjustment for high forest low deforestation (HFLD) countries with justified changes in deforestation trends and puts in place further requirements on the historic averages by requiring that the historic period considered is about 10 years before the end date which should be the most recent date prior to two years before the start of the draft ER Program Document assessment. REM: Historical average rates Norway-Guyana bilateral agreement: Mean value of historic average rate and developing country average, with Page 9 of 12

10 Page 10 downward adjustment option Norway-Brazil bilateral agreement: Historical average rates, updated every 5 years 2.1: How should the GCF take into account the different approaches used for defining FREL/FRL and translated into verified REDD+ results? 2.2: Is there a need for additional GCF-specific criteria for FREL/FRL and MRV? If so, what type criteria should that be? 2.3: How should the GCF take into account the results of the analysis of the REDD+ technical annex3? What process and review criteria, if any, in order to make funding decisions? 2.4: Should a description of how alignment of subnational FREL/REL to national-scale FREL/REL be required? 2.5: Other questions? Environmental integrity of remunerated ERs is paramount to a functional RBF, this can only be ensured via an operational technical framework that defines a certain standard and a transparent, independent verification process, which goes significantly beyond current UNFCCC guidance. Given the experience of the currently operational payment for result schemes and the wide range of FRELs presented to the UNFCCC (in terms of methodologies applied, activities included, reference periods applied etc.), Germany sees the need for additional guidance in the Request for Proposals by the GCF especially for FRELs to establish a more level playing field and a transparent and coherent approach to measuring and verifying results as a basis for payments. This approach is backed by the Warsaw Framework which states that REDD finance is not obliged to pay for all the ERs reported to UNFCCC and might develop further guidance regarding their payments. Therefore proposals need to be methodologically sound, which should be assured by an independent review. The results of the technical annexes analysis are important information for the verification process but in itself not sufficient to result in verified ERs that can be remunerated by the GCF. A common guiding principle of the aforementioned references (FCPF Carbon Fund, REM, bilateral Norwegian agreements) is the focus for the FREL based on the historical average. Divergence from the historical average might be allowed for High Forest Low Deforestation countries (HFLD) under specified conditions and with limitations for the magnitude of a potential adjustment. The most comprehensive and operational guidance for RBF is the Methodological Framework of the Carbon Fund, which has been developed through a broad discussion involving donors, REDD+ countries and civil society. The Methodical Framework should serve as a sound starting point for the GCF as it covers a variety of methodological issues in relation to FRELs and subsequent technical questions and has been already applied for various ER Program country proposals. Lessons learnt will be emerging as the first results based payments are operationalized. The Norway Guyana and REM Colombia agreements have also generated real life lessons from REDD verification processes prior to RBF disbursements and can therefore serve as references as well The development of subnational and national FRELs can be sequential, but methodological coherence has to be ensured over time. Hence, countries need to provide a description of how the two levels will be aligned and in what time frame. This is also critical in the context of leakage and potential double counting of ERs. Full transparency on how emission reductions from REDD+ are integrated in the nationally determined contribution and a specification on how results under the REDD+-agreement with the GCF are accounted for are required. Technical element 3: Operationalization of the Cancun safeguards Issue: The Warsaw Framework for REDD+ and earlier COP decisions contain seven safeguards 4 that are required to be addressed and respected in all phases of REDD+. The GCF needs to consider how these relate to the existing GCF policies, procedures and reporting requirements, in particular how they can be reconciled with the interim safeguards of the GCF (IFC Performance Standards). The GCF also needs to decide if additional guidance is required on REDD+ RBP-specific considerations in order to 3 Decision 14/CP.19 4 Appendix I to UNFCCC decision 1/CP.16. Page 10 of 12

11 Page 11 operationalize RBP. Such guidance could be warranted, for example, to address the risks of reversals of Emission Reductions achieved, or information may be required to ensure GCF s ESS, fiduciary standards, and gender policy are upheld in activities that produced ERs being rewarded. Existing practices of other funds: FCPF Carbon Fund: World Bank safeguard policies and processes (Strategic Assessment and Management Framework); Benefit Sharing Plan REM: Cancun REDD+ Safeguards; KfW safeguards; BMZ human rights guidelines Norway-Guyana bilateral agreement: World Bank, IDB and UNEP safeguards Norway-Brazil bilateral agreement: Safeguards of the Brazilian Development Bank 3.1: How should the GCF assess the implementation of the Cancun Safeguards in addition to the IFC performance standards (interim GCF ESS)? 3.2: Should the GCF develop additional guidance for the reporting on how the Cancun Safeguards are being respected? 3.3: Other questions? The challenge for the delivery of RBF REDD+ finance is that it needs to reconcile the Cancún REDD+ Safeguards that ensure that the rewarded ERs were not generated with negative social or negative environmental impacts on the one hand and that the disbursed finance is implemented in a way that respects these Safeguards and standard investment safeguards, such as the IFC s Policy and Performance Standards on Environmental and Social Sustainability, and IFC s Access to Information Policy, procedures. The same is true for the need to ensure that the principle of free, prior and informed consent and other provisions of the UN Declaration on the Rights of Indigenous Peoples are fully respected. GCF should at a minimum apply FCPF standards with regards to the rights of indigenous peoples. Overall, the IFC and WB standards and practices are in principle consistent with the Cancun safeguards for REDD. The challenge is the scale of REDD+ at the national and subnational level that differs from the local level implementation of private (and public) investment projects and the silence of the Cancún safeguards on some of the IFC standards (e.g. Labor provisions). In accordance with relevant UNFCCC decisions (Decision 1/CP.16, Decision 12/CP.17, Decision 12/CP.19), the GCF should request REDD countries to provide a summary of information on how safeguards are addressed and respected. A safeguards framework/template should be developed to guide countries in their reporting (see question below). However, the UNFCCC process has provided hardly any guidance and includes no provision of quality control of the summary and its implementation, which poses a problem for REDD+ finance instruments and its due diligence. Therefore, there is need to introduce a quality control regarding how countries are addressing and respecting safeguards in the process of generating ERs. Concretely, additional guidance is necessary to steer reporting and make reports more comparable and meaningful. A uniform framework/template should be developed for RBP under the GCF while consistent with UNFCCC guidance. The framework/template, providing a broad and operational structure, should facilitate reporting and ensure quality, while avoiding overburdening REDD countries. In addition there is need to ensure that REDD+ finance is implemented in a way that follows the do no harm principles of development (and climate) finance. By focusing on the key risks identified in the REDD+ Safeguards and the Safeguards due diligence following IFC principles, both approaches can be reconciled and generate the additional requirements/risk managements approaches, if the risk level make this necessary. The safeguards review process also needs to take into consideration the degree of participation and consultation of stakeholders as well as the instruments that exist to respond to grievances and the identification of conflicts/risks. Any additional issues/comments Page 11 of 12

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