A global comparative review of REDD+ benefit sharing mechanisms

Grace Wong

Workshop on Context, Elements and Dynamics of REDD+ in Indonesia Jakarta, May 15, 2013

Presentation Outline

Definition of benefit sharing Review of benefit sharing mechanisms in 13 countries

Comparing for effectiveness, efficiency and equity Assessment of risks Concluding thoughts

What do we mean by ‘benefit  sharing’  in  REDD+?

• Benefit sharing = distribution of direct and indirect net gains from the implementation of REDD+

• Benefits come with costs:

• Direct financial outlays related to REDD+ (implementation and transaction costs)

• Foregone revenues from alternative forest land and resource use (opportunity costs)

• Benefit sharing mechanism = range of institutional means, governance structures and instruments that distribute the net benefits

Comparative review of benefit sharing mechanisms

• Reviewed existing benefit-sharing mechanisms (BSMs) in REDD+ and forest management

• Evaluated BSMs for their potential 3E (effectiveness, efficiency and equity) outcomes, and risks

• Comparative analysis of 13 countries based on country profiles developed in 2009-2012, political economy analyses, and other relevant literature reviews

• Bolivia, Brazil, Burkina Faso, Cameroon, Democratic Republic of the Congo, Indonesia, Lao PDR, Mozambique, Nepal, Papua New Guinea, Peru, Tanzania, Vietnam

Study approach

Pham, T.T. et al. (2013)

Effectiveness, Efficiency, Equity

Effectiveness and efficiency = priority is to achieve carbon emission reductions at least cost

Equity = examines who has the right to benefit and aspects of social inclusiveness

Trade-offs are involved between the 3Es depending on the BSM approaches, their design and how they are implemented

Prevalence of effectiveness, efficiency and equity debates in study countries

Countries Effectiveness vs.

efficiency: Benefits

should be used as an

incentive to bring

about reduction in

emissions and should

go to actors providing

these reductions

Equity discourse I:

Benefits should go

to those with legal

rights (statutory or

customary)

Equity discourse

II: Benefits

should reward

low-emitting

forest stewards

Equity discourse

III: Benefits

should

compensate

those incurring

costs

Equity discourse

IV: Benefits

should go to

effective

facilitators of

implementation

Brazil X X X X Bolivia X X X X Peru X X X X Indonesia X X X X

Vietnam X X X X X Nepal X X X X X Lao PDR X X X X PNG X X X X Tanzania X X X X Burkina Faso X X X X Cameroon X X X X DRC X X X X Mozambique X X X X

• Only four countries (Vietnam, Indonesia, Brazil and Tanzania) have national REDD+ programmes that regulate the distribution of REDD+ finance

• Benefit sharing approaches tend to build upon existing models or practices in-country

• Conflicts of interest and governance issues have delayed implementation of REDD+ policies, and benefit sharing is characterised by minimal interaction between sectors

• Many  of  the  “enabling  factors”  identified  as necessary for achieving 3E BSMs are lacking in all countries

Study findings (1)

• Market-based instruments: PES (national-level mechanisms in Brazil and Vietnam; projects implemented in almost all countries, most notably in Latin America), CDM/CERs

• Community forestry systems: Mixed success in most countries, Nepal and Tanzania are best known

• Fund-based approaches: • Independent: FUNBIO (Brazil), PROFONANPE (Peru) • Managed by State: Amazon Fund (Brazil), Reforestation Fund

(Indonesia), FONABOSQUE (Bolivia) • Within State budget: Donor aid (Nepal, Mozambique, Vietnam)

• Forest concessions: All countries, except Tanzania

Study findings (2): Common BSM approaches

Market-based

instruments (e.g. PES)

Collaborative forest

management

Fund-based models Forest concession

revenue-sharing

Effectiveness Well-defined legal framework and likely to be well enforced

Poor performance-based measurement

Weak monitoring of environmental and social impacts

Efficiency Better performance than traditional programmes

Potential for domestic financial sustainability

High transaction costs due to large number of buyers and financial management requirement

Equity National PES programmes also used to address poverty reduction goals, with mixed results

Elite capture problem Payments can be very low

Market-based

instruments (e.g. PES)

Collaborative forest

management

Fund-based models Forest concession

revenue-sharing

Effectiveness Well-defined legal framework and likely to be well enforced

Poor performance-based measurement

Weak monitoring of environmental and social impacts

Sustainable implementation with commitment and project ownership of communities and households

Efficiency Better performance than traditional programmes

Potential for domestic financial sustainability

High transaction costs due to large number of buyers and financial management requirement

Higher efficiency through increased community control and poverty reduction of people living near forests

High transaction costs due to large numbers of community members

Equity National PES programmes also used to address poverty reduction goals, with mixed results

Elite capture problem Payments can be very low

Difficult to achieve equitable distribution, State retains largest share of revenues

Legal framework does not recognize customary or community rights

Elite capture problem

Market-based

instruments (e.g. PES)

Collaborative forest

management

Fund-based models Forest concession

revenue-sharing

Effectiveness Well-defined legal framework and likely to be well enforced

Poor performance-based measurement

Weak monitoring of environmental and social impacts

Sustainable implementation with commitment and project ownership of communities and households

Independent funds: easy to attract funding, leakage depends on mandate, weak in sector coordination

Funds within state: require strict conditions for additionality, strong for sector coordination and controlling leakage

Efficiency Better performance than traditional programmes

Potential for domestic financial sustainability

High transaction costs due to large number of buyers and financial management requirement

Higher efficiency through increased community control and poverty reduction of people living near forests

High transaction costs due to large numbers of community members

Independent funds: lower transaction costs

Funds within state: low costs only if there is well-functioning administrative structure

Competitiveness increases as REDD+ grows in volume

Equity National PES programmes also used to address poverty reduction goals, with mixed results

Elite capture problem Payments can be very low

Difficult to achieve equitable distribution, State retains largest share of revenues

Legal framework does not recognize customary or community rights

Elite capture problem

Independent funds: can provide direct local compensation, transparent, potential to capture co-benefits

Funds within state: risk of being used to balance state budgets

Elite capture problem

Market-based

instruments (e.g. PES)

Collaborative forest

management

Fund-based models Forest concession

revenue-sharing

Effectiveness Well-defined legal framework and likely to be well enforced

Poor performance-based measurement

Weak monitoring of environmental and social impacts

Sustainable implementation with commitment and project ownership of communities and households

Independent funds: easy to attract funding, leakage depends on mandate, weak in sector coordination

Funds within state: require strict conditions for additionality, strong for sector coordination and controlling leakage

‘Easy’  option  to  distribute  benefits from state-owned forest land

Simple forestry fee and fixed revenue sharing arrangements

Potential over- of under-payments, given differences in opportunity costs

Efficiency Better performance than traditional programmes

Potential for domestic financial sustainability

High transaction costs due to large number of buyers and financial management requirement

Higher efficiency through increased community control and poverty reduction of people living near forests

High transaction costs due to large numbers of community members

Independent funds: lower transaction costs

Funds within state: low costs only if there is well-functioning administrative structure

Competitiveness increases as REDD+ grows in volume

If land tenure is not an issue, transaction costs can be low and large amounts of carbon sequestered efficiently

Quick scale-up potential

Equity National PES programmes also used to address poverty reduction goals, with mixed results

Elite capture problem Payments can be very low

Difficult to achieve equitable distribution, State retains largest share of revenues

Legal framework does not recognize customary or community rights

Elite capture problem

Independent funds: can provide direct local compensation, transparent, potential to capture co-benefits

Funds within state: risk of being used to balance state budgets

Elite capture problem

Favours large-scale commercial actors

Disadvantages local-level Excludes local and

marginalized people in decision-making process, leading to poor compliance by communities

Elite capture problem

Study findings (3): Equity implications

• All countries lean towards allocating benefits to those with legal rights and to compensating those who incur costs • Conflicts between customary and formal rights

over land are evident in almost all countries studied

• Carbon rights are in infancy with no legal framework

• Allocation of REDD+ benefits to reward low emitting stewards is not a priority, potentially marginalising sustainable forest users

• Unclear and insecure land tenure creates injustice

• Under-representation of certain actors in decision-making reduces the legitimacy of REDD+ policies

• Lessons on the enabling conditions for REDD+ are disconnected from national decision-making

• Decentralisation can be meaningful only if it is coupled with adequate capacity building for local government

• The  scale  and  scope  of  the  definition  of  ‘forest’  and  land  tenure systems can lead to differences in the design and implementation of REDD+ activities

Assessment of risks

• Study  has  found  that  there  is  progress  …  reviews  to  clarify land tenure and rights over carbon; investments in monitoring, reporting and verification systems; new agency around the value of standing forests

• Risks can be mitigated through  …  improved  coordination,  better enforcement; clear guidance for and monitoring of financial flows; improved information exchange; stronger involvement and capacity of all actors

• Can REDD+ catalyse these  changes?  Depends  …  on  how  costs  and benefits of REDD+ are shared, if benefits are large enough to incentivize change of behavior and policies, and on an inclusive process

Concluding thoughts

Terima Kasih!

For further information: Pham, T.T., Brockhaus, M., Wong, G., Dung, L.N., Tjajadi, J.S., Loft, L., Luttrell C. and Assembe Mvondo, S. (2013) Approaches to benefit sharing: A preliminary comparative analysis of 13 REDD+ countries. Working Paper 108. CIFOR, Bogor, Indonesia . http://www.cifor.org/online-library/browse/view-publication/publication/4102.html