Financing REDD Projects. Agus Sari Nairobi, March 2010

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Bruno Hicks
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1 Financing REDD Projects Agus Sari Nairobi, March 2010

2 Sources of Funds Market Non Market Public Compliance markets Creditable NAMA Bilateral Markets Centralized (Global) Fund Decentralized (National) Fund Bilateral Initiatives (Performance Based Payment) Private Compliance markets Voluntary markets Creditable NAMA CSR PR Foundations or Charitables

3 What has Copenhagen left us with? $10 billion 2012 per year until $100 billion 2020 per year by REDD is a big part of it

4 Centralized (Global) Fund Private sector Donor Donor Global REDD Fund

5 Decentralized (National) Fund Private Sector Donor Donor Global REDD Fund National REDD Fund National REDD Fund National REDD Fund

6 Decentralized (National) Fund Private Sector Donor Donor Private Sector Global REDD Fund National REDD Fund National REDD Fund National REDD Fund Projects Projects Projects Projects

7 Markets Compliance Market Voluntary Market Depends on Post 2012 demands, currently inexistent Expected to be large (may be too big that it will flood and crowd out other markets) It exists today and is increasing But remain small (may be too small that it cannot absorb voluminous supply)

8 Creditable NAMA NAMA = Nationally Appropriate Mitigation Action Unilateral NAMA Financed NAMA Creditable NAMA REDD can be a NAMA National commitment to reduce emissions from deforestation This commitment can be methodologically quantified, monitored, and measured, reported, and verified The resulting emission reductions can be credited and compensated

9 Fund or market? Staged approach: fund first to prepare for markets. Scale of financing needed cannot be met by fund alone. Fund Market

10 Transactional Relationships Developed Country Government Payment Developing Country Central Government Payment Payment Regulations Developing Country Local Government Payment Developed Country Buyer / Intermediaries Payment Developing Country Developer / Seller

11 Distribution of payments Developing Country Central Government Payment for community benefits tax / levy Developing Country Local Government Payment after tax / levy Payment for community benefits tax / levy Developing Country Developer / Seller Payment for community benefits Community

12 Developing A National REDD Fund Trustee BOD Investment Committee Custodian Bank Expenditure Fund Grants Projects / Policy Initiatives Investment Fund Projects / Policy Initiatives Investment Bank

13 Perceptions of Risk Carbon risks at the project level Project risks Country risks International agreement risks Additionality Availability of financing Investment and trade regime Approvals (international and domestic) Monitoring and verification Permits and other legal compliance Conservation risks Forestry sector regulations Securities regulation and regime REDD will generate (compliance) and tradable credits? Fund based or marketbased? Governmental or private sector oriented Carbon title Operational risks Asset class regime Developed country reduction commitments Market risks (price etc) Social issues Distribution of benefits (levies, taxes, etc) Enforcement of law (and governance regime in general) Domestic REDD regulations Size of the markets Methodology for REDD project development

14 What makes a good (profitable) REDD project? Additional Secure tenurial regime Secure credit title Relatively large amount of reduction per hectare (usually in peat forests) Significant payment distribution (benefits) to local community Relatively low social dispute Strong biodiversity value

15 Thank you

COUNCIL OF THE EUROPEAN UNION. Brussels, 11 May /10 ECOFIN 249 ENV 265 POLGEN 69

COUNCIL OF THE EUROPEAN UNION. Brussels, 11 May /10 ECOFIN 249 ENV 265 POLGEN 69 COUNCIL OF THE EUROPEAN UNION Brussels, 11 May 2010 9437/10 ECOFIN 249 ENV 265 POLGEN 69 NOTE from: to: Subject: The General Secretariat of the Council Delegations Financing climate change- fast start