Redd the Little Redd Book Dec 08

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TheLittleREDD


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Authors: Charlie Parker, Andrew Mitchell,Mandar Trivedi and Niki Mardas

Contributions to the text were gratefully received from:Katia Karousakis, Doug Boucher, Diana Movius,Carolyn Davidson, Ralph Ashton, Bronson Griscom,David Shoch, Bill Stanley, Rane Cortez, and Saskia Ozinga.

Global Canopy Foundation 2008

First Published November 2008

Published by:Global Canopy ProgrammeJohn Krebs Field StationOxford OX2 8QJUK

Designed by Companywww.company-london.com

The Global Canopy Programme is an alliance of 37 scientic institutionsin 19 countries, which lead the world in forest canopy research, educationand conservation. Today, our 3 main programmes - in science, policy andnance - aim to dene and explore the range and economic value of forestecosystem services and to share our ndings with decision-makers in

government and nance.

Visitwww.globalcanopy.org for more information.

CountryAustraliaBrazilCanadaChile

Coalition for Rainforest Nations (CfRN)ColombiaCentral African Forest Commission (COMIFAC)Costa RicaEuropean Union (EU)IndiaIndonesiaJapanMalaysiaMexicoNew ZealandNorwayParaguay

TuvaluUSA

Proposal dateJun 2008Feb 2007Apr 2008Aug 2007

May 2008Apr 2008Mar 2007Apr 2008Mar 2008Mar 2008Mar 2008Apr 2008Mar 2007Aug 2008Aug 2008Sep 2008Apr 2007

Sep 2007Mar 2008

OrganisationCANCATIECCAPCISDLCSERGEEDFGreenpeaceHSI

IDDRIIIASAJRCTCGWHRC

ApproachAAU AuctioningNested ApproachDual Markets ApproachCarbon Stock ApproachCombined IncentivesCompensated ReductionsTDERMCarbon Stores Approach

Compensated Successful EffortsAvoiding REDD Hot AirIncentive AccountingTerrestrial CarbonStock-Flow Approach

Proposal dateFeb 2008Oct 2007Aug 2007Jun 2008Feb 2007Jan 2008Dec 2006Dec 2007

Aug 2008Oct 2008Mar 2006Jul 2008Aug 2008

Governmental Proposals

Non-governmental Proposals

LIST OF PROPOSALS


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ACRONYMS

Assigned Amount UnitAgriculture, Forestry and Land Use changeClean Development MechanismCertied Emission ReductionConference of the PartiesDevelopment Adjustment FactorEmission ReductionEcosystem ServiceFood and Agriculture OrganisationForest Carbon Partnership FacilityForest Law Enforcement Governance and TradeGreenhouse gasGlobal Observation of Forest and Land Cover DynamicsHigh Forest Low DeforestationInternational Institute for Environment and DevelopmentInter Governmental Panel on Climate ChangeInternational Payments for Ecosystem ServicesLand Use, Land Use Change and ForestryMeasurable, Reportable, VeriableNon-governmental OrganisationOfcial Development AssistancePayments for Ecosystem ServicesProgramme of activityReducing Emissions from DeforestationReducing Emissions from Deforestation and(Forest) DegradationReference Emission RateReference ScenarioSubsidiary Body on Scientic and Technical AdviceSustainable Forest ManagementUnited Nations Framework Convention on Climate ChangeWorld Resources InstituteWorld Wildlife Foundation

AAUAFOLUCDMCERCOPDAFERESFAOFCPFFLEGTGHGGOFC-GOLDHFLDIIEDIPCCIPESLULUCFMRVNGOODAPESPOAREDREDD

RERRSSBSTASFMUNFCCCWRIWWF

Acknowledgements:We are especially grateful to Lord James Russell and to Lord RobinRussell and the Benindi Fund, for making production of this bookpossible. The editorial costs were supported by the Ashden Trust.

The core costs of the Global Canopy Programme are supported entirelby voluntary donations from foundations including The Rufford MaurLaing Foundation, The Waterloo Foundation, The John EllermanFoundation, The Millichope Foundation, CHK Charities, Ernest KleinCharitable Trust and donations from individuals. We thank all of themthis valuable support.

The Global Canopy Programme would like to thank the following:

The Global Canopy Program would additionally like to thank ConservInternational, IIASA, Terrestrial Carbon Group, CIFOR, Union of ConScientists, The Nature Conservancy, TerraCarbon, FERN and the authof the proposals for their comments and assistance in compiling this g

www.princesrainforestsproject.org


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FOREWORD

If a post-Kyoto climate agreement fails to act onavoiding tropical deforestation, the achievement ofoverall climate change goals will become virtuallyimpossible. The lives and livelihoods of millions of

people will be put at risk, and the eventual economic

cost of combating climate change will be far higherthan it needs to be.

For these reasons, the next agreement must createmeaningful incentives to remunerate forest nations

for the valuable climate services they provide tothe world.

Important progress has been made over the past year

by those working on REDD. But to make REDD asuccess three over-arching challenges remain.

First, the REDD framework must provide incentivesfor all rainforest countries if any signicant groupof countries is left out, then deforestation will move tothose jurisdictions, and we will have failed to avoidgreenhouse gas emissions from deforestation and

forest degradation.

Second, these incentives must be at the scale requiredto solve the problem if they are insufcient invalue, they will not out-compete the other legitimateeconomic activities which drive deforestation.

Third, the citizens of forest countries especiallythose who depend on the forest for livelihoods mbe active participants in framing a solution. In thsame way as there is no solution to climate changwithout forestry, there is no solution to deforestawithout the support of forest populations. Thanksthe work of many within the REDD community a

elsewhere, there is a path to resolving the remainscientic, economic and methodological issues. Wis urgently required now is political will and effecaction to design and implement national-scalesolutions to meet the challenges.

I welcome the publication of The Little REDD Booand hope that it will help to move the forestry deb

forward - from talking about the role of forests in

combating climate change to acting with the urgeand clarity that the people of our planet require.

HIS EXCELLENCY BHARRAT JAGDEO

President of Guyana

November, 2008


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CONTENTS

UNDERSTANDING REDD

Forests: Why are they Important?REDD: A Solution to the Problem

THE FRAMEWORK

A framework for understanding the proposals

PROPOSALS

Guide to the proposalsGovernmental ProposalsNon-governmental Proposals

HOW DO THEY COMPARE?

ScopeReference LevelDistributionFinancing

WHERE DO WE GO FROM HERE?

What else is being done?What are the challenges?The road to Copenhagen

ANNEXES

BibliographyGlossary of terms

WHY THIS GUIDE IS NEEDED

The IPCC estimate of emissions from tropical deforestation in the 1990swas 1.6 billion tonnes of carbon per year equating to 20% of global carbonemissions. To create a mechanism that addresses this problem, manydiffering proposals to reduce emissions from deforestation and degradation(REDD) have been put forward to the UNFCCC, which has resulted in someconfusion. This non-partisan guide to the proposals is intended to accelerateunderstanding.

The Little REDD Book has been compiled by the GCP with the support of awide range of contributors from around the world including many proposalauthors. The Princes Rainforests Project has kindly provided its analysisof the proposals, which is at the heart of this guide. It shows how they havedeveloped over time, either directly or indirectly building on what has comebefore. Most importantly, it demonstrates how much common ground thereis between proposals - that for every point of difference there are manypoints of agreement, and that a menu of commonly held principles andapproaches is emerging.

Agreement on REDD is within reach. The spread of new technologies suchas satellite monitoring is overcoming some long-standing technical barriers.

Collaboration by scientists, economists and policy makers at the UNFCCC,IPCC and other forums, is helping to clarify outstanding methodologicalissues. Money for capacity building and pilot projects has started to ow.The imperative now is for the international community to continue workingcollaboratively and with renewed urgency towards achieving politicalconsensus at Copenhagen. It is our hope that this publication and itsonline counterpart www.littleREDDbook.org can help build understandingas the countdown to COP 15 begins in earnest.

Andrew W. Mitchell

Founder & Director

Global Canopy Programme


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UNDERSTANDINREDD


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FORESTS: WHY ARE THEY IMPORTANT?

COMBATING CLIMATE CHANGETropical forests cover about 15% of the worlds land surface1 and containabout 25% of the carbon in the terrestrial biosphere. But they are beingrapidly degraded and deforested resulting in the emission of heat-trappingcarbon dioxide to the atmosphere. Roughly 13 million hectares an areathe size of Nicaragua are converted to other land uses each year1. This lossaccounts for a fth of global carbon emissions, making land cover change thesecond largest contributor to global warming. Forests therefore play a vitalrole in any initiative to combat climate change.

A HOME TO LOCAL COMMUNITIESForest resources directly support the livelihoods of 90% of the 1.2 billionpeople living in extreme poverty and are home to nearly 90% of the world'sterrestrial biodiversity. Local communities depend on forests as a sourceof fuel, food, medicines and shelter. The loss of forests jeopardises povertyalleviation. Indigenous and forest-dependent peoples are stewards of theirforests, providing the rest of humanity with vital ecosystem services (ES).Climate change will hit the poorest hardest and so reducing deforestationwill help build their resilience to climate impacts.

MORE THAN JUST CARBONAt local to global scales, forests provide essential ecosystem services beyondcarbon storage such as watershed protection, water ow regulation,nutrient recycling, rainfall generation and disease regulation. Old growthforests also soak up carbon dioxide from the atmosphere offsettinganthropogenic emissions. Protecting tropical forests has a double-coolingeffect, by reducing carbon emissions and maintaining high levels ofevaporation from the canopy.

THE CAUSES OF DEFORESTATIONThe causes of deforestation are multiple and complex and vary from countryto country (see Figure 1). Local pressures arise from communities using

forests to provide sources of food, fuel and farmland. Poverty and populationpressure can lead inexorably to the loss of forest cover, trapping people inperpetual poverty. Whilst millions of people still cut down trees to make aliving for their families, a major cause of deforestation is now large-scaleagriculture driven by consumer demand. In recent decades deforestation

has shifted from a largely state-initiated to an enterprise-driven proceThe drivers of the demand for agricultural land vary globally. In Africaprimarily small-scale subsistence farming. In South America, it is largfarming enterprises, producing beef and soya for export markets. In SEast Asia, the driver is somewhere between the two, with palm oil, cofand timber the main products. Demand for timber also drives deforesand therefore contributes to land-use change emissions.

Figure 1. Regions of deforestation in recent decades

Source: Millennium Ecosystem Assessment


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REDD: A SOLUTION TO THE PROBLEM

WHAT IS REDD?The basic idea behind Reducing Emissions from Deforestation andDegradation (REDD) is simple: Countries that are willing and able toreduce emissions from deforestation should be nancially compensatedfor doing so6. Previous approaches to curb global deforestation have so farbeen unsuccessful, however, and REDD provides a new framework to allowdeforesting countries to break this historic trend.

WHAT ARE THE OBJECTIVES OF REDD?REDD is primarily about emissions reductions. The Bali Action Plan decidedat the Conference of the Parties (COP) at its thirteenth session states thata comprehensive approach to mitigate climate change should include:

Policy approaches and positive incentives on issues relating toreducing emissions from deforestation and forest degradation indeveloping countries

But, a future REDD mechanism has the potential to deliver much more.REDD could simultaneously address climate change and rural poverty,while conserving biodiversity and sustaining vital ecosystem services.

Although these benets are real and important considerations, the crucialquestion is to what extent the inclusion of development and conservationobjectives will either promote the overall success of a future REDDframework or complicate and therefore possibly hamper the ongoingprocess of REDD negotiations.

THE STORY SO FAR...A fundamental milestone was achieved at COP 11 in Montreal in 2005when Papua New Guinea and Costa Rica supported by eight other Partiesproposed a mechanism for Reducing Emissions from Deforestation inDeveloping Countries. The proposal received wide support from Partiesand the COP established a contact group and thereafter began a two year

process to explore options for REDD. This decision resulted in a widerange of Parties and observers over this period submitting proposals andrecommendations to the Subsidiary Body on Scientic and Technical Advice(SBSTA) to reduce greenhouse gas (GHG) emissions from deforestation anddegradation. We are now at the stage where we have a number of proposalson the table. Under the Bali Action Plan, if REDD is to be included in a

post-2012 framework, a decision about what a REDD mechanism willlike and what it will include needs to be agreed by COP15 in Copenhagin December, 2009. Reaching a consensus on this issue is of paramouimportance for a global deal on climate change 9.

HOW DOES THE LITTLE REDD BOOK HELP?The task at hand is to have meaningful and informed debates about thnature and implications of the proposals on the table.

The Little REDD Book draws upon recent work undertaken by ThePrinces Rainforests Project to analyse thirty-three governmental andnon-governmental proposals submitted to the UNFCCC. Twenty ofthese submissions are by Parties to the Convention and thirteen by nogovernmental organisations (NGOs) (see the inside front cover of thisfor reference).

The aim of the Little REDD Book is to help forest stakeholders to undand compare current and future proposals in a consistent way in ordepromote a consensus on how to reduce emissions from deforestation adegradation. To do this the Little REDD Book introduces a frameworkwhich resolves REDD mechanisms into four distinct modules.

These modules can be thought of as independent building blocks that be arranged in a mix and match approach: taking the most desirableoption from each module to create an effective, efcient, and equitablREDD proposal which maximises the potential benets and minimisethe perverse outcomes.

The Little REDD Book uses this framework to assess each of the propoindividually to allow clear comparisons to be drawn between the diffeREDD mechanisms. The individual proposals are then analysed jointlshow convergence and divergence in an effort to add clarity to the ovepicture.

In addition, to help stakeholders understand the various proposals quand simply, key elements of the proposals have been presented graphithroughout this document. This visual language is introduced on pageand is also available on the inside back cover for quick reference.


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THEFRAMEWORK


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THE BUILDING BLOCKS

The diagram opposite presents a new framework for understanding REDDproposals. The framework comprises four basic building blocks as follows: Scope:Whatisbeingdelivered?

ReferenceLevel:Howisitbeingmeasured? Distribution:Where/towhomdoesthemoneygo?

Financing:Wheredoesthemoneycomefrom?

Theoveralleffectiveness,efciencyandequityofaproposalisdeterminedbyitsscope,referencelevel,andnancinganddistributionmechanisms,asshowninFigure2.

ItishelpfultoviewREDDproposalsinthiswaybecauseitallowsustounderstandtheelementsofindividualproposals.Italsoshowsusthe

distributionandevolutionofideasofthecombinedproposalsandenablesustoseeareaswheretherearehighlevelsofconvergenceordivergence.

MIX AND MATCH OPTIONS

Eachofthefourmoduleshasaseriesofoptionsthathaveemergedfromthedifferent proposals. More detail on the options encompassed within eachmoduleisgiveninthefollowingpages.

Someoptionspotentiallyimposeconstraintsonothers.Whenviewingtheproposalsasagroup,however,thereareanumberofdifferentmixandmatchoptions;forexample,thedecisiontoincludedeforestationanddegradation(REDD)orjustdeforestation(RED)can,broadlyspeaking,be

addressedseparatelyfromthequestionofwhethertouseafundoramarket.

A FRAMEWORK FOR UNDERSTANDING THE PROPOSALSFigure2.BuildingblocksofaREDDproposal.

IMPACTS

Environementally eective?Economically efecient?Equitably distributed?Politically easible?

REFERENCE

LEVEL

How is it measured?Over what period?Across what scale?

FINANCING

Where does the mcome rom?Multiple mechanis

DISTRIBUTION

Where / to whom doesthe money go?What assets will berewarded?At what scale?

SCOPE

What is eligible?Which activities?Which carbon pools?Which countries?

Toprovideaquickreferencetothedifferentmodulesoftheframeworcoloursforthefourmodulesshownaboveareusedthroughoutthisgu

greenwillalwayssignifyscope,blue:referencelevels,purple: distribuand orange:nancingmechanisms.Asmalliconwillalsobedisplayedcornerofthepageifaspecicmoduleintheframeworkisbeingdiscu

Theframeworkintroducedhere,andtheanalysisbehind'Howdotheycompare'havebeendevelopedbyThePrince'sRainforestsProject.ForfurtherinformationemailAnnaCreed:[email protected]:www.princesrainforestsproject.org/redd


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SCOPE

The rst step in understanding REDD proposals is to quantify what isincluded. The scope refers to the activities, carbon pools and countries thatare considered eligible for generating emissions reductions under REDD.

OPTIONSActivities: Reducing emissions from deforestation (RED), Reducingemissions from deforestation and degradation (REDD) or enhancementof carbon stocks (REDD+).

Carbon pools (see Figure 3): Above ground biomass, below groundbiomass, soil carbon and / or all terrestrial carbon.

Participating Countries: Non-Annex I, Annex I.

The choice of scope will have an impact on the scale, relative cost andmitigation potential of a RED-D mechanism. It will also play an importantrole in the political feasibility of an agreement and the ability of developingcountries to measure, report and verify the options considered within scopein a proposal. In addition the countries that might benet under REDD isalso inuenced by the agreed scope (see Box 1).

Figure 3. What is a Carbon Pool?

SOIL CARBON- Organic- Inorganic

ABOVE GROUND BIOMASS- Stem- Branches- Foliage

S

R D F

Some carbon is transerred rombelowground biomass to the soils.

BELOW GROUND BIOMASS- Roots- Litter

Carbon is lost backto the atmospherethrough respiration.

Atmosphericcabon is fxed bytrees and othervegetation throughphotosynthesis

REFERENCE LEVEL

A REDD mechanism must specify how emissions reductions (ERs) aremeasured. The reference leveldenes the reference period and scale awhich the activities within scope are measured.

OPTIONSScale: Sub-national, National, Global

Reference period: Historic baseline, Current (structural), Projectedbaseline

Reference levels dene the business as usual scenario over a predeneand can therefore be used to determine the additionality of a given actAlthough the choice of reference level greatly impacts the types of couthat generate ERs it need not necessarily inuence which countries befrom those ERs. The distribution or allocation of benets to actors oththan those generating the reductions is discussed in the distribution mReference levels, however, are often conated with an adjustment facta negotiable element to account for differing country circumstances.

It is worth noting that the science of forestry carbon accounting, and

moreover the assessment of business as usual practices within forestsimprecise10 and as such both historic and projected baselines have a laelement of uncertainty. Much work has been done and continues to behowever, to improve technical and methodological know-how in this aGlobal Observation of Forest and Land Cover Dynamics (GOFC-GOLDand the IPCC are recognised within the intergovernmental and scienticommunities as sources of high quality scientic knowledge thatis increasing certainty in the establishment of reference levels andmonitoring methods.

R

Carbon is lost tothe atmospherethrough respirationand decomposition.

Fallen leaves, tressand derbis addcarbon to soils.

After: U.S. Environmental Protection Agency


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DISTRIBUTION

The scope and reference level determine how many emissions reductionswill be generated. Of equal importance is how the benets of thosereductions will be allocated. The majority of proposals advocate incentivesor compensation directly in line with a Partys own actions. Other proposalssuggest that some of these benets should be redistributed to Parties otherthan those generating the emissions reductions through a distributionmechanism.

OPTIONSAsset: Emissions, Carbon Stock, Opportunity Costs

Scale: Sub-national, National, Global

The choice of how to distribute benets has the potential to greatly inuencethe impact across countries (see Box 1). Some proposals, for equity reasonsor to address socioeconomic factors, have chosen a distribution mechanismwhich allocates funds to historically low emitters who may emit at somepoint into the future. Other proposals, to avoid international leakage, havesuggested that a proportion of funds generated through REDD should bedistributed to countries with currently low rates of deforestation but high

forest cover. The argument goes that if these countries are not rewarded toprotect their current stocks there will be a perverse incentive to chop downtheir forests for more protable ventures.

The choice of methodology for distributing benets can be scientic ornegotiated. Furthermore, proposals which allocate benets in line withgenerated reductions will be regarded in this book as having no distributionmechanism. As discussed, proposals sometimes conate reference levelswith distribution mechanisms. Where this is the case this book will separatethese two elements to allow for a simpler comparison.

S

R D F FINANCING

The nal step in dening the framework of a REDD proposal is wherethe money comes from, or who pays for what.

OPTIONSSource: Direct-Market, Hybrid / Market-linked, Voluntary Fund

Activities for REDD can be nanced though a voluntary fund, a direct

market or a hybrid / market-linked mechanism. A voluntary fund couoperate at the national (i.e. uni- or multilateral) or international scaleOfcial Development Assistance (ODA) is an example of a fundingmechanism. In general, however, non-Annex I Parties call for new andadditional contributions from developed countries. It is important to that credits purchased through a fund cannot be used for compliance carbon markets. In a market-based mechanism REDD credits would btraded alongside existing certied emissions reductions (CERs), and cbe used by companies to meet emissions targets in their national cap-trade systems. A market-linked mechanism generates nances througeither an auction process, or by establishing a dual-market in which Rcredits are linked to but are not fungible with existing CERs. Norwaysproposal to auction Assigned Amount Units (AAUs), the Center for Cl

Air Policys Dual Markets approach and Greenpeaces TDERM are aexamples of market-linked mechanisms11.

Each of these approaches has its strengths and weaknesses, however agrowing consensus is emerging that a combination of these approachebe needed to match the different stages of development and differing nof tropical rainforest nations11.

R


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BOX 1: WHO CAN BENEFIT?Fonseca and colleagues have devised a matrix to show that developingcountries fall into four basic categories or quadrants based on their forestcover and recent deforestation rate (see Table 1).

These quadrants are important within the context of the REDD debate asnot all countries will benet equally under any proposed REDD mechanismdepending on the choice of options within the basic building blocks of theframework.

Table 1: A matrix to split countries by their forest cover and historical rateof deforestation.

Depending on the choice of scope, reference level, distribution, and to anextent funding mechanism of a given proposal, some countries stand tobenet more than others under REDD. For example, countries in QuadrantsI and III with historically high deforestation rates will, broadly speaking,stand to gain more from proposals that use a historical baseline, than say

a projected baseline. Countries in Quadrants III and IV with high forestcover will also benet more from proposals that have an explicit distributionmechanism based on carbon stocks. Finally, countries in Quadrant II withlow forest cover and low rates of deforestation will nd it difcult to benetunder REDD unless enhancement activities are included in the scope ofthe mechanism.

HIGH

DEFORESTATION

RATE( > 0.22%/yr)

LOWDEFORESTATION

RATE

( < 0.22%/yr)

Quadrant I

e.g. Guatemala, Thailand,Madagascar

No. o Countries: 44Forest area: 28%Forest carbon total: 22%Deorestation annual 48%

Quadrant IIDominican Republic,Angola, Vietnam

No. o Countries:15Forest area: 20%Forest carbon total: 12%Deorestation annual 1%

LOW FOREST COVER ( < 50%) HIGH FOREST COVER ( > 50%)

Quadrant III

e.g. Papua New Guinea,Brazil, Congo (DR)


Quadrant IVe.g. Suriname, Belize, Gabon,


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PROPOSALS


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GUIDE TO THE PROPOSALS

The following pages present a guide to the thirty-three proposals currentlybeing considered using the analytical framework introduced above. Eachproposal has been represented graphically using the icons shown overleaf.These icons represent the main options from the analytical framework, andhave been grouped into their respective modules.

Figure 4. Icon bar

The icons will be presented at the top of each proposal in an icon bar (seeFigure 4 above). Not all proposals aim to dene all of the modules of theframework. Therefore to simplify matters, all icons in the icon bar willbe grey by default and only the options that are explicitly proposed in thesubmissions will be highlighted in colour. The colour will correspond to themodule of the framework in which the icon is grouped.

The example in Figure 4 above indicates that the scope of this hypotheticalproposal includes deforestation and degradation, the reference level ishistoric, the proposal hasn't specied an explicit distribution mechanismand the nancing is through a hybrid / market-linked fund.

SCOPE

DISTRIBUTION

Figure 5. Key to Icons

SCALE

Deg rada ti on Enh anc em entDeorestation Historic

Emissions Direct Market

Current

Carbon Stock Hybrid / Market-linkedOpportunityCosts

REFERENCE LEVEL

FINANCING

National Sub-national Global

SCOPE REFERENCE LEVEL DISTRIBUTION FINANCING


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GOVERNMENTALPROPOSALS


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AUSTRALIA

UNFCCC Document Code*FCCC/SBSTA/2006/MISC.5, FCCC/SBSTA/

2007/MISC.2, FCCC/SBSTA/2007/MISC.14/Add.1, FCCC/SBSTA/2008/MISC.4/Add.2

DateJune 2008

SUMMARY

Australia states that the overarching principles, rather than the individualmechanisms, will determine the successful outcome of a future REDDframework and propose ve key principles to be considered. Among theseare the need for a clearly dened scope with robust monitoring and reportingmethodologies, a national sectoral baseline to address national-level leakage,and a consistent treatment of emissions across the AFOLU sector.

REDD will be most effectively addressed through a market-basedmechanism, and Parties should try also to maximise co-benets includingbiodiversity conservation, air, soil and water pollution reduction and theimprovement of rights of indigenous and forest dependent peoples.

Australia believes that Parties and relevant organisations should progressdemonstration activities as a priority and is working in partnership withIndonesia and Papua New Guinea on practical activities to reduce emissionsfrom deforestation and forest degradation in the context of SFM.


BRAZIL


2007/MISC.2, FCCC/SBSTA/2007/MISC.14DateFebruary 2007

SUMMARY

Brazil proposes the establishment of a voluntary fund into which devecountries provide new nancial resources additional to existing fundinactivities. Developing countries are entitled to ex-post nancial incentfrom the arrangement after they demonstrate, in a transparent and crmanner, that they have reduced their emissions from deforestation.

Incentives should be based on a comparison between the rate of emiss

from deforestation over a past time period and a reference emissions r(RER). Decreases in emissions will be credited and increases in emissiwill be converted into a debit from future nancial incentives. The pritonne of carbon for incentives will be negotiable and reviewed periodi

Accounting will be at the national level and incentives will be distributthe same ratio as the emissions reductions each country has achievedRER is the average rate of deforestation over the previous 10 year peristarting from the time of implementation within the UNFCCC, and wirecalculated every 3 years as the average of the last three years emissifrom deforestation (if rates have fallen below the RER).


* UNFCCC documcan be searched onUNFCCC website a

unfccc.int/documdocuments/advanitems/3594.php usDocument SymboNumber text eld

* UNFCCC document codescan be searched on theUNFCCC website at: http://

unfccc.int/documentation/documents/advanced_search/items/3594.php using theDocument Symbol or CallNumber text eld


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CANADA

UNFCCC Document Code*FCCC/SBSTA/2008/MISC.4

DateApril 2008

SUMMARY

Canada recognises the importance of the IPCC and GOFC-GOLD andrecommends the IPCC to produce a report on methodological guidancefor a REDD mechanism.

The indicative guidance provided in the Annex to Decision 2/CP.13 statesthat reductions in emissions or increases resulting from a demonstrationactivity should be based on historical emissions, taking into account nationalcircumstances. Further guidance will be necessary from SBSTA to identify

factors that must be considered in the determination of reference emissionslevels, e.g. national circumstances.

Canada believes that the inability to meet methodological requirementsrelated to forest degradation should not result in the complete exclusionof a Party from an incentive to reduce emissions from deforestation,provided that the said Party meets the methodological requirements relatedto deforestation.


CHILE


2007/MISC.2, FCCC/SBSTA/2007/MISC.14DateAugust 2007

SUMMARYThis proposal uses the Nested Approach proposed by CATIE, summunder non-governmental proposals on page 53.







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COALITION FOR RAINFOREST NATIONS (CRN)


2007/MISC.2, FCCC/SBSTA/2007/MISC.14,FCCC/SBSTA/2008/MISC.4/Add.1,Unpublished material

DateAugust 2008

SUMMARY

CfRN recognises three distinct categories of national development whichrequire differing approaches and sources of funding. Category I, thereadiness phase, would use voluntary funding to build capacity in developingcountries. It could build on existing platforms such as the FCPF or theUN-REDD Initiative. Category II, scaling-up, would still be voluntarily

funded, and could incorporate a trial market phase. It aims to encourage andexpand a range of national, sub-national, local and project-level activities.Category III, future markets, calls for a series of policy measures that mustbe considered to establish an effective mechanism for REDD. These include,crediting for early action to ensure that current emissions reductions fromdeforestation are creditable post 2012, an adjustment mechanism takinginto consideration national circumstances as well as environmental, socialand economic factors, and a market mechanism which is fully fungible withAAUs but complementary and additional to the CDM.

A reference emissions rate (RER) should be determined by assessing ratesof deforestation over a historical Reference Period no shorter than ve

years. Incentives would be allocated by calculating the estimated reducedemissions, using IPCC guidelines, over an agreed upon past time period,evaluated against the RER plus a development adjustment (DA) factor.


COLOMBIA


2008/MISC.4DateApril 2008

SUMMARY

Colombia, as other Latin-American countries, proposes some basic eleof a future REDD mechanism. These include Incentives for early actiounder the UNFCCC framework, a market mechanism involving the prsector to mobilize the necessary investment ows into developing couwider participation and deeper GHG emission reduction commitmentAnnex I countries. Incentives should be complemented by instrumentallow countries to build capacities and enhance the availability and qu

of data.

The proposed mechanism should be consistent with the principles of tcarbon market and rely on the technical and institutional infrastructualready in place. Colombia believes that each Party should be able to cfrom either a sub-national to national reference level and suggests thaleakage issues could be managed at the project-level through an appromethodology whereby the displaced emissions are deducted from theproject credits.

Reference levels could use either an extrapolation of past trends into tfuture, prevailing technology or practice, or logical arguments made bactivity participants based on observed trends. Tradable and fully fun

emission reduction credits would be issued against the aforementionereference levels.







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CENTRAL AFRICAN FOREST COMMISSION (COMIFAC)


2007/MISC.2, FCCC/SBSTA/2007/MISC.14,FCCC/SBSTA/2008/MISC.4

DateMarch 2007

SUMMARY

To achieve real and measurable benets for the climate, COMIFAC statesthat policy approaches and positive incentives should be based on a basketapproach designed to address the di ffering dynamics of the forest sectorwithin developing countries, linked with substantial emissions reductioncommitments in developed countries. Within this context, three voluntaryfunding options, similar to the proposal by CfRN, are available for three

distinct deforestation phases. Firstly, an enabling fund would be neededto build capacity with reference scenarios and policy measures to reducedeforestation. Secondly, a stabilization fund would be used in countrieswith currently low rates of deforestation to protect and maintain carbonstocks; funding could come from a share of proceeds from REDD creditscombined with additional funds provided by Annex I countries throughODA or taxation. Thirdly, a REDD mechanism, whereby positive incentivesare awarded for emissions reductions below a reference scenario (RS) couldprovide positive incentives for REDD. The RS would be a combination ofa historical reference emissions rate (RER) and a development adjustmentfactor (DAF).

Given the diversity of national circumstances, it is essential to be exiblein selecting approaches and relevant action levels for consideration; bothnational and sub-national approaches are compatible and relevant in CongoBasin countries.


COSTA RICA

UNFCCC Document Code*FCCC/CP/2005/MISC.1, FCCC/SBSTA/2006/MISC.5,

FCCC/SBSTA/2008/MISC.4DateApril 2008

SUMMARY

Costa Rica proposes a market based mechanism based on solid techniand methodological procedures that allows Non-Annex I Parties, whovoluntarily elect to reduce their emissions from deforestation, to be ncompensated by Annex I Parties on the basis of their performance.

To avoid the creation of any perverse incentives that may deteriorate oprogrammes or planned efforts, Parties should support early action of

developing countries by ensuring that any emissions reductions obtaiduring the period from 1990 to the start of any future agreement on Rcan be used to assist in achieving future compliance.

Reference emission levels should be estimated using historical data fochanges in forest cover area, and IPCC procedures to estimate associacarbon stocks and carbon stock changes. Developing countries with eapolicy approaches that have led to reduced deforestation rates shouldpermitted to adjust their reference emission levels to a date appropriato national circumstances.

On an annual basis, a proportion of the projected emission reductions

be kept in reserve, and could be drawn from during periods of unpredthereby providing continuity of funding to support ongoing activities.


* UNFCCC documcan be searched onUNFCCC website aunfccc.int/documdocuments/advanitems/3594.php usDocument SymboNumber text eld

* UNFCCC document codescan be searched on theUNFCCC website at: http://unfccc.int/documentation/documents/advanced_search/items/3594.php using theDocument Symbol or CallNumber text eld


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EUROPEAN UNION (EU)


2007/MISC.2, FCCC/SBSTA/2007/MISC.14,FCCC/SBSTA/2008/MISC.4, Unpublished Material

DateJuly 2008

SUMMARYThe EU proposes that policies should focus on positive incentives to reduceemissions from deforestation and forest degradation and that additionalactions on conservation, SFM and enhancement of forest carbon stockscould complement measures for REDD.

The EU favours an approach that bases incentives on agreed national

reference emissions levels, which should be ambitious, yet realisticallyachievable, taking into account national circumstances including existingpolicies and initiatives, historical data, current trends and developmentsin land use. The agreed level would be negotiated and revised periodically.The EU recognises that sub-national approaches may be appropriate undersome national circumstances, as a step towards the development of nationalapproaches, reference levels and estimates, however, national approachesare essential to avoiding the risk of leakage within the national boundary.

The EU recognises that public nancing is currently not sufcient and notsustainably available, and therefore recognises the need to further assess allnancing options, in particular with respect to scale and sustainability theymight provide, and notes that a well designed market-linked approach can

contribute to long-term action.


INDIA


2007/MISC.14/Add.2, FCCC/SBSTA/2008/MISC.4DateMarch 2008

SUMMARYIndia highlights that Brazils submission for compensated reduction ufavours countries with high deforestation rates, and therefore proposemechanism of Compensated Conservation that also rewards countrifor maintaining and increasing their forests as a result of conservationsuch, India would support a common methodology that i) assessed chin carbon stocks and GHG emissions due to conservation and sustainamanagement of forest, and ii) reductions in emissions from deforestat

and degradation.The UNFCCC could create three different nancial instruments for thrange of different actions to be implemented by the countries accordintheir national circumstances. These might include a Reducing DeforesFund, a Stabilization Fund, and a Forest Carbon Conservation Fund. Ilike other Parties, also considers an Enabling Fund to support capacitbuilding and pilot activities related to REDD activities for developing/developed countries.

To enable robust reporting of changes in forest cover, a national baselrecommended, to prevent double accounting and leakage. CDM A/R pactivity, will also be entered as a debit in the national inventory for REaccounting.





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MALAYSIA


2007/MISC.2DateFebruary 2007

SUMMARYMalaysia believes that policy approaches for REDD should be based onboth measures taken as well as opportunity costs foregone. Developingcountries that have retained large tracts of natural forests will be undergreater pressure to convert forest to other land uses and incentives for thesecountries should be maximized to ensure that the remaining forest is notdeforested. Both total protection and SFM practices should be consideredas positive practices to avoid deforestation.

Malaysia believes that new and additional funds will have to be set aside fordeveloping countries to assist in building technical and institutional capacityto implement effective measures for REDD. Positive incentives should bevoluntary, exible, and offer a range of incentives that would be applicableto the wide variety of forestry environments, management regimes andsocio-economic and development conditions of developing countries.

Malaysia is concerned that countries anticipating a mechanism whichrewards reductions in emissions over a historical baseline will give rise toa perverse incentive to increase timber harvests in the years prior to theonset of the rst commitment period. Malaysia can see the advantages ofa national based approach for the REDD mechanism as it would simplifyreporting and validation. Project-based approaches, however, should alsobe considered.


MEXICO

UNFCCC Document Code*FCCC/SBSTA/2007/MISC.2, FCCC/SBSTA/2008/

MISC.4/Add.3, Unpublished MaterialDateAugust 2008

SUMMARYIn order to increase the cost-effectiveness of REDD activities, it will befundamental to account for their participation in the carbon market. Mconsiders that discussions on how to appropriately integrate REDD acwithin this market should be conducted in the context of the Second Rof the Kyoto Protocol. Funds will play a critical role for activities such capacity building, conservation and SFM, which need non-return fundorder to be deployed.

Reference emissions levels, at all scales of implementation, should be on historical data on GHG emissions and should take into account natcircumstances. Mexico strongly encourages a national accounting systfacilitate reporting and to avoid double-counting of emission reductioremovals. The implementation of activities at the national or sub-natilevel will be determined by each country on a voluntary basis, as theirsovereign right, taking into account their specic national circumstanand requirements. Sub-national approaches for some countries, howemight constitute a step towards the development of national approach





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NEW ZEALAND

UNFCCC Document Code*FCCC/SBSTA/2006/MISC.5, FCCC/SBSTA/2007/

MISC.2, Unpublished MaterialDateAugust 2008

SUMMARYAny REDD mechanism must provide developing countries with adequatenancial resources to compensate them for the economic benets they forgoby reducing deforestation and degradation.

To provide the primary nancial resources to address REDD, a market-based approach is likely to be more durable and economically efcient thana fund-based approach. Both approaches, however, have their benets anddrawbacks and New Zealand is open to exploring both options.

A national-based mechanism (be it market-or fund-based) is likely to besignicantly superior to a project-based mechanism, primarily becauseit is better at addressing intra-country leakage. Some form of fund-basedapproach may be appropriate as an initial step to aid countries developmentof a national-level approach, even if a market-based approach at the nationallevel is ultimately agreed as the primary funding mechanism.

Any mechanism should have maximum potential for global coverage, as thisis the best way to address issues of international leakage. The mechanismshould not apply arbitrary adjustments to nancial incentives to correctfor possible international leakage.


NORWAY

UNFCCC Document Code*FCCC/SBSTA/2006/MISC.5, Unpublished Material

DateSeptember 2007

SUMMARYNorway believes that REDD should be additional to, and not a substitdeep cuts in developed countries emissions. As well as promoting redin emissions a REDD mechanism should promote SFM, contribute to protection of biodiversity and secure the rights and involvement of loccommunities and indigenous peoples.

Norway believes in principle that reference levels should be based onhistorical emission data, but recognises that for many countries with l

rates of deforestation and degradation such historical rates would nota sufciently strong incentive. A future REDD regime should operate the national level in order to reduce tahe risk of within country leakagTransitional solutions may be needed to help countries in developingnational approaches. Such transitional solutions must address the riskintra-national leakage, by for example limiting credits from sub-natioREDD activities to fund-based approaches, without an offset mechani

Norway believes a combination of market- and fund-based mechanismis needed. Markets could be useful in mobilizing resources from theprivate sector, but could be less effective for countries with low rates odeforestation. Further, a market based mechanism would not be relevfor capacity-building. On the other hand, a fund that solely relies on a

donations would not necessarily be sustainable in the long run.Norway has proposed more recently that an auctioning of emissionsallowances at the international level could be used as a source of nanfor REDD. A 2% levy on AAUs could generate an income between $1525 billion per year.





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PARAGUAY*


2008/MISC.4DateApril 2007

SUMMARYThis proposal uses the Nested Approach proposed by CATIE, summarisedunder non-governmental proposals on page 53.


TUVALU

UNFCCC Document Code*FCCC/SBSTA/2007/MISC.2/Add.1, FCCC/SBSTA/

2007/MISC.14, FCCC/SBSTA/2007/MISC.14/Add.3DateNovember 2007

SUMMARYTuvalu suggests, rstly, that for the purpose of REDD discussionsappropriate denitions of deforestation and degradation need to bedeveloped that minimise potential perverse outcomes. Conservation oexisting carbon stocks should be explored outside the REDD mechanias there are no emissions being traded.

Tuvalu highlights three market approaches for REDD, but demonstratthat there are inherent complications with these approaches which neto be properly addressed before decisions can be made to adopt thesemechanisms. These include the risk of leakage with project-level baseooding of carbon markets, and measurement difculties. Tuvalu sugpossible solutions to these issues: the use of a national baseline for leadual markets, increased Annex I targets, or discounted REDD credits avoid market devaluation, and wide availability of remote sensing andground sensing methodologies in developing countries to allow consismeasuring. Tuvalu also proposes that non-market sources of funding also be explored and could be used to support capacity building and eaction on REDD.


* on Behalf of Argentina, Honduras, Mexico, Panama and Peru

* UNFCCC documcan be searched onUNFCCC website aunfccc.int/docum

documents/advanitems/3594.php usDocument SymboNumber text eld

* UNFCCC document codescan be searched on theUNFCCC website at: http://unfccc.int/documentation/

documents/advanced_search/items/3594.php using theDocument Symbol or CallNumber text eld


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USA

UNFCCC Document Code*FCCC/SBSTA/2006/MISC.5, FCCC/SBSTA/2007/MISC.14, FCCC/SBSTA/2008/MISC.4

DateMarch 2008

SUMMARYDenitional issues should be examined as part of the technical workprogram; a clear denition or set of denitions for forest degradationwithin the REDD context are particularly necessary.


* UNFCCC document codescan be searched on theUNFCCC website at: http://unfccc.int/documentation/

documents/advanced_search/items/3594.php using theDocument Symbol or CallNumber text eld

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NON-GOVERNMENTAL

PROPOSALS


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CLIMATE ACTION NETWORK (CAN)

Websitewww.climatenetwork.org

DateFebruary 2008

SUMMARYThe proposal developed by CAN suggests auctioning all or part of the AnnexI Assigned Amount Units (AAUs), which are currently allocated for free, togenerate funds for REDD activities. There are a range of options that shouldbe explored in this eld including:

On the international level, AAUs would not be allocated forfree to countries, but rather would be determined by a centralauction under an agreed, and tight, overall cap. Part of therevenues generated would be put in a separate global fund insupport of adaptation, technology and REDD

On the international level,partof the Assigned Amount would notbe allocated for free to countries but rather taken out and put in aseparate global fund to be monetized and allocated to adaptation,technology and REDD

On the nationallevel, permits would be auctioned and part of thatrevenue would be placed in a national fund coordinated with othernational funds or an international fund for adaptation, technologyand REDD

Auctioning could be a signicant funding source. For example, assuming

a price of $30 to $40/tonne, each one percent of Annex I AAUs set asidewould generate $3.75bn/year.


TROPICAL AGRICULTURAL RESEARCH AND

HIGHER EDUCATION CENTER (CATIE)

NESTED APPROACHAuthorsLucio Pedroni

Websitewww.catie.ac.cr

DateOctober 2008

SUMMARYThe Nested Approach proposed by CATIE aims to address project-leinvestment risk within national-level accounting mechanisms. Under national-level crediting system, Individual projects, which generate reemissions reductions below an approved baseline methodology, wouldbe credited unless the overall country emissions reductions were belonational baseline.

To address this outcome, the Nested Approach uses an accountingmechanism at both the national- and project-level. Countries withemissions below a negotiated target would receive credits that can theredistributed to local actors. Sub-national entities are also direct recipof credits, regardless of national performance, thus creating a directopportunity for private sector investment.

After its initial release the Nested Approach has since been supporteda number of organizations and Latin American countries (see Chile, aParaguay on behalf of Argentina, Honduras, Mexico, Panama and Per


CENTER FOR CLEAN AIR POLICY (CCAP) CENTRE FOR INTERNATIONAL SUSTAINABLE


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CENTER FOR CLEAN AIR POLICY (CCAP)

DUAL MARKETS APPROACH

AuthorsMatthew Ogonowski, Ned Helme, Diana Movius, Jake Schmidt

Websitewww.ccap.org

DateAugust 2007

SUMMARYThe so-called dual markets approach developed by the Center for Clean AirPolicy (CCAP) proposes the creation of a new carbon market that would beseparate from the post-2012 carbon market and would trade solely in REDD

credits. Emissions reductions within this market could be used by Annex IParties to achieve national targets but credits would not be fungible betweenthe two markets.

The rationale behind creating an independent market is to separate theimpacts and risks of integrating a REDD market with the post-2012 regime.Concerns exist that development of a single market would risk ooding withan excess supply of REDD units and raise concerns related to volatility andpermanence, leading to disruptions in the post-2012 carbon market. Thedual markets approach allows time for a REDD program to develop beforeany market linking.

The COP would decide the maximum amount of credits derived from REDD

activities that could be used to meet national targets. Annex I Parties wouldspecify at the outset how many, and from which developing countries, offsetswill be purchased, thereby providing a minimum level of demand for REDD.


CENTRE FOR INTERNATIONAL SUSTAINABLE

DEVELOPMENT LAW (CISDL)

CARBON STOCK APPROACH

AuthorsSteve Prior, Charlotte Streck, Robert OSullivan

Websitewww.cisdl.org

DateFebruary 2007

SUMMARYThe carbon stock approach aims to overcome a number of difcultieassociated with proposals that rely on a national baseline that require

central oversight and coordination to establish emissions reductions.

CISDL and GPPI highlight three issues with baseline methodologies atraditional government to government cooperation: Weak and poorlyenforced forest administration, failure to capture private sector investand failure to generate ex-ante nancial incentives. To address theseconcerns Prior et al. propose a Carbon Stock Mechanism that awards allowances based on the carbon stock of a country. A reserve of protecstock is established over part of the national forest area and projects tcommit to permanently protecting threatened stock outside of the resreceive further tradable credits. Credits are issued over time to createincentives for long-term protection. The area of reserved forest is calcusing a future projected baseline that estimates the expected forest co

at a negotiable future date in the future.



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INTERNATIONAL INSTITUTE FOR APPLIED SYSTEMSINSTITUTE FOR SUSTAINABLE DEVELOPMENT AND


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INTERNATIONAL INSTITUTE FOR APPLIED SYSTEMS

ANALYSIS (IIASA)

AVOIDING REDD HOT AIR

AuthorsMichael Obersteiner, et al.

Websitewww.iiasa.ac.at

DateOctober 2008

SUMMARYThe proposal by IIASA aims to address two key requirements of anypotential REDD mechanism; rstly the generation of measurable, rep

and veriable (MRV) REDD credits, and secondly the provision ofsustainable emissions reductions.

To ensure MRV credits, IIASA advocate the establishment of anInternational Emission Reference Scenario Coordination Centre (IERThe IERSCC would act as a global clearing house for harmonized datain reference scenario modelling. It would be tasked with the collectionreporting and subsequent processing of earth observation, and deforeand degradation driver information in a globally consistent manner. TIERSCC would also coordinate reference emission scenarios of individcountries against which "real" REDD efforts can be measured.

To maximise ecosystem services co-benets, Obersteiner et al. use a D

tender auction of REDD credits. The auction can be implemented in otwo ways: either maximizing the ecosystem value per REDD unit or thmitigation per fungible Annex I emission reduction unit.


INSTITUTE FOR SUSTAINABLE DEVELOPMENT AND

INTERNATIONAL RELATIONS (IDDRI)

COMPENSATED SUCCESSFUL EFFORTS

AuthorsP. Combes Motel, R. Pirad, J.-L. Combes

Websitewww.cerdi.org

DateJune 2008

SUMMARYThe compensated successful efforts methodology put forward byIDDRI and the Centre d'tudes et de Recherches sur le Dveloppement

International (CERDI) aims to bypass methodological issues of baselineestimation used by other proposals.

The authors highlight thematic issues in calculating emissions reductionsthat rely on an ex-ante estimation or negotiation of a counterfactual value.They suggest that any such methodology could result in the generation offake credits and misallocation of nancial resources that would ultimatelyundermine the efciency of any future REDD mechanism.

The proposal instead suggests that REDD funds support a countrysdomestic policies and measures to avoid deforestation (called successfulefforts). To identify the effectiveness of these efforts the authors use aneconometric model that explicitly takes into account ex-post structural

drivers of deforestation, thereby using their real values during the creditingperiod. Any effects which are not a result of structural drivers are assumedto be a result of domestic action and if positive can be used as criteria to helpwith further nancing decisions.


JOINT RESEARCH CENTRE (JRC) TERRESTRIAL CARBON GROUP (TCG)


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JOINT RESEARCH CENTRE (JRC)

INCENTIVE ACCOUNTING

AuthorsDanilo Mollicone et al.

Websitewww.jrc.it

DateMarch 2006

SUMMARYThe JRC propose a new accounting mechanism for REDD that awards bothreducing deforestation in countries with high forest conversion rates, andmaintaining low forest conversion rates in the other countries. Mollicone et

al. point out that if a hypothetical remuneration mechanism is based solelyon national baselines, those countries with low forest conversion rates willsee little or no benet in making further reductions.

Baselines under the mechanism are established using an average over anhistorical reference period between two negotiable dates. To avoid intra-national leakage Mollicone et al. state that any baseline should be at thecountry level.

The generation of credits is determined through a countrys historicalconversion rate relative to the global average. Mollicone et al. propose thatcountries with emissions less than half of a global average baseline arerewarded for maintaining their carbon stock and countries with emissions

higher than average are rewarded for reducing emissions from forestconversion.


TERRESTRIAL CARBON GROUP (TCG)

AuthorsRalph Ashton et al.

Websitewww.terrestrialcarbon.org

DateJuly 2008

SUMMARYThe TCG demonstrate that all types of terrestrial carbon are essential combating climate change and should therefore be included in any futclimate change response. Initially this would include peatlands, forestlands that can become secondary forest; other areas could be phased ithe science develops.

Under the proposal, developing countries would be allocated a nationterrestrial carbon budget which they can emit over a xed period (say50 years) into the future. The national budget would be dened asany terrestrial carbon that was not protected terrestrial carbon on apredetermined date; protected refers to carbon currently protected blaw, or not likely to be emitted over the xed period because of econombiophysical constraints. The system therefore applies to developing nawith different historical and current terrestrial carbon circumstances

Credits would be allocated under the proposed system for emitting lesthe national budget, and/or the creation of any new protected terrestrcarbon, thereby safeguarding against permanence. Revenue could begenerated from a variety of market or fund-based mechanisms. The sy

rests on national terrestrial carbon accounting and monitoring, but alnational- and sub-national-level activities and participation by the prisector and civil society.


THE WOODS HOLE RESEARCH CENTER (WHRC)


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THE WOODS HOLE RESEARCH CENTER (WHRC)

STOCK-FLOW APPROACH

AuthorsAndrea Cattaneo

Websitewww.whrc.org

DateAugust 2008

SUMMARYThe stock-ow approach by WHRC proposes a new allocation mechanismto address concerns in existing proposals. Cattaneo builds on thecompensated reduction approach in a way that avoids the implicit penalty

imposed on countries with a historically low rate of deforestation, andproposes an approach that is along the lines of the combined incentiveapproach, but with a stronger underlying economic rationale.

To distribute funds, the stock-ow approach uses an analogy betweenforest carbon and nancial assets, paying for avoided depreciation of thecarbon stock (REDD) and providing dividends for stock as an incentive toavoid leakage. The global revenue is calculated from the overall emissionreductions - paid by Annex I countries (demand) - at the market price forREDD credits. The global revenue is distributed - to REDD providers in non-Annex I countries (supply) - according to a negotiated price to be paid fornational emission reductions. The funds arising from the price differenceare distributed as a dividend per ton of standing carbon stock.

A low price for suppliers of emissions reductions activities will thereforemean a higher dividend price for carbon stock and vice versa. Similarlyhigher prices of demand will lead to higher prices received for bothmaintaining carbon stock and reducing emissions.


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HOW DO THEYCOMPARE?

COMPARATIVE ANALYSIS

SCOPE: R


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Deforestation, Degradation

and Enhancement (REDD+)

Deforestation and

Degradation (REDD)

Deforestation (RED)

What the proposals include

This diagram shows the proposedscope of the various governmentaland non-governmental proposals.

Proposals have either chosento include emissions fromdeforestation (RED), deforestationand degradation (REDD), ordeforestation, degradation andenhancement (REDD+).

Proposals have been grouped intonon-governmental, developed anddeveloping country proposals.

*Chile and Paraguay have not been shown here as theyessentially use the nested approach proposed by CATIE.

AUSTRALIA

CANADA

EU

JAPAN

NEW ZEALAND

USA

EDF

GREENPEACE

CERDI

CATIE*

CSERGE I

CCAP

CSERGE II

IIASA

CISDL

JRC

WHRC

CHILE

COLOMBIA

INDONESIA

MEXICO

PARAGUAY

MALAYSIA

NORWAY COMIFAC

INDIA

TCG

BRAZIL

Developingcountries

Non-governmentalproposals

Developedcountries

CRN

SCOPE: Conclusions

COMPARATIVE ANALYSISS

R D F


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There is an overwhelming consensus that a future mechanism for REDDshould include both deforestation and forest degradation. A minority ofproposals explicitly emphasise that carbon enhancement activities shouldbe considered of equal importance as reduced emissions.

Although deforestation and degradation are the immediate priorities,there is widespread recognition that a future REDD mechanism could havea staggered approach, that phases in degradation and/or enhancementactivities at later stages.

The rationale behind this approach is mainly practical for reasons including:the political feasibility of negotiations under the UNFCCC with a simplerscope; and the need for developing countries to build capacity in carbonaccounting practices.

There is agreement that only developing countries can participate in REDD,and participation should be on a voluntary basis only.

Most proposals make no reference to the carbon pools that might beincluded under REDD.

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R


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The diagram opposite showswhether proposals specify areference level at the sub-national,national or global scale.

Some proposals use multiplereference levels and are shown hereon the line between two options.

The scale o reerence levels

IIASA and USA do not specify a scale for the reference level.


Sub-national

Global

National

EU

NEW ZEALAND

CSERGE I

JRC

WHRC

CRN

INDONESIA

MEXICONORWAY

COLOMBIA

COMIFAC

INDIA

CCAP

IIASA

CISDL

TCG

IDDRI

EDF

GREENPEACE

BRAZIL

*CATIE

Developingcountries


Developedcountries


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REFERENCE LEVEL: Evolutiono thinking rom 2005 2008

R


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Sub-national

2005 2006

Global

National

The following diagram shows theevolution of the reference levelmethodology specied in proposals.

Some key milestones in thedevelopment of ideas have beenhighlighted.

Proposals that use two scales, i.e.both a sub-national and nationalreference level, are located on theline dividing two groups.

The coloured arrows denote theevolution of different lines ofthinking.

o thinking rom 2005 2008


EDF

JRC

2. Introduction o aglobal baseline to oerincentives to countriesthat have historically lowrates o deorestation.

1. The original idea ocompensated reductionrom a national historicbaseline. Still a valid andsupported methodologyand served as a startingpoint or the purpose ostimulating debate.

Year osubm

2007 2008

CISDL TCG CERDI

CCAP

WHRC

GREENPEACE

4. Introduction o a nationaland sub-national baseline topromote early action in projectbased activities.

3. Introduction oprotected areasas a preconditionor participationand the use o aprojected baseline.

CSERGE

CSERGE

The ocus o theseproposals is fnancingrather than reerencelevel. The same is trueor IIASA

6. Movement away rom greerence level back to nadue to concerns over easwidespread participation scheme. Assessment is na combination o nationareerence levels

Projected Current Hi

5. Global baseline usedor the frst time toaddress internationalleakage as well asequity and distributionconcerns.

*CATIE

Developingcountries


Developedcountries

REFERENCE LEVEL: Conclusions


R D F CATIE is an interesting proposal as it species a projected, forward-looking baseline for sub-national activities (in line with current CDM


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ScaleThere is a strong consensus that reference levels should be at the nationalscale. With only a few proposals supporting sub-national or globalreference levels.

Sub-national reference levels are used for several reasons:

to allow developing countries who do not have the capacity to

create national carbon accounting mechanisms to participate atsome level in REDD (COMIFAC, Colombia, Malaysia);

to provide an incentive for both project level and national levelactivities, as proposed in the nested approach (CATIE, Chile,Paraguay);

as a transitional mechanism in which a country may start witha sub-national reference level, and move to a national referencelevel in the long term (EU, Norway, New Zealand, Mexico).

Global reference levels have been proposed to address concerns overinternational leakage (CSERGE, WHRC) and to allow for a distribution of

benets to historically low deforesting countries (JRC, CSERGE, WHRC).

Reference PeriodThere is a clear preference for national and global proposals to use referencelevels based on historic emissions, whereas sub-national approaches may bebetter suited to a projected reference level, as proposed by CATIE.

In the end though, there may be little difference between the use of historicor projected reference levels; many of the proposals that use a historicreference period argue for the incorporation of a development adjustmentfactor or something similar (Canada, CfRN, COMIFAC, Costa Rica, EU,Japan, Mexico, EDF), which effectively creates a projected reference level.

IDDRI is a unique case in this picture; instead of using either a projected oran historic baseline proposes to establish efforts by analysing the currentcauses of deforestation given national socioeconomic circumstances.

looking baseline for sub national activities (in line with current CDM methodologies), but uses a historic baseline for national-level activitieline with the majority of proposals).

Indonesia also uses dual baselines; these are not, however, according and both operate at the national level. National historic rates are propfor unplanned emissions and a national projected rate for planned act

DISTRIBUTION: Proposals withexplicit distribution mechanisms


R


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The diagram opposite shows theproposals that explicitly denea distribution mechanism.

The proposals that are representedhere in transparent boxes havedistributional implications but donot specify an actual distributionmechanism. These proposals allaward benets directly in proportionto generated emissions reductions.

Proposals that have solid boxesspecify an explicit distributionmechanism. These proposals allallocate a proportion of benets tocountries other than those directlygenerating emissions reductions.The small icon in the corners ofthese proposals denotes whichassets are rewarded under these

mechanisms.

explicit distribution mechanisms

Projected

Current

Historic


Sub-nationalScale

CSER

JR

WH

National Global

COLOMBIA

MALAYSIA

COMIFAC

Emissions Stock OpCo

Developingcountries


Developedcountries

DISTRIBUTION: Conclusions


R D F


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Generally, distribution implications are simply implicit in the reference levelmethodology. Most countries dont suggest any further redistribution ofbenets (and New Zealand is strongly against it).

The implication of implicit distribution mechanisms (or lack thereof) is thatthe majority of proposals reward historically high emitters and exclude low.

Some proposals (including CfRN) make reference to the possibility of

allocating notional reference levels (incorporating a development adjustmentfactor) to low emitting countries, which would in effect redistribute funds tothese countries. It seems that Parties are increasingly open to this option.

Three proposals explicitly specify a distribution mechanism to redistributefunds to countries that would otherwise not benet (CSERGE, JRC andWHRC). All three proposals use a global historic baseline to calculateemissions reductions and then use a variety of mechanisms to allocate aproportion of benets to countries other than those generating emissionsreductions.

COMIFAC proposes a stabilisation fund to support countries with low ratesof deforestation that could be partly derived from a share of proceeds from

REDD credits.

Malaysia believes that policy approaches for REDD should be based on bothmeasures taken as well as opportunity costs foregone.

JamesA

ldre

d


FINANCING: The choice o fnancialmechanism o the proposals

R


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Hybrid

Fund

Market

mechanism o the proposals

The diagram opposite showswhether proposals choose to usea market, fund or hybrid/marketlinked mechanism to nanceREDD activities.

Proposals that use two nancialmechanisms are located on the line

dividing two groups.

Norway is represented in threeareas at it proposes threenancing vehicles.

AUSTRALIA

IDDRI

CATIE

CISDL

COLOMBIA

COSTA RICA

BRAZIL

EU

GREENPEACE

CCAP

NORWAYCAN TUVALU

Developingcountries


Developedcountries

IIASA

CRN

INDONESIA

MEXICO

COMIFAC

INDIA

EDF

CSERGE I

WHRC

TCG

CSERGE IINEW ZEALAND

NORWAY

FINANCING: Conclusions


R D F


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The proposal developed by CAN suggests auctioning all or part of AnnexI Assigned Amount Units (AAUs), which are currently allocated for free,to generate funds for REDD activities. The range of options that could beexplored include:

Many proposals support both a fund and a market mechanism for differenttypes of activity.

Funds are considered to be more appropriate for capacity buildingand pilot activities.

Funds are also proposed for the conservation of standing forests.

Markets are often recognised as providing more consistent andgreater funding potential in the long term.

Several countries explicitly refer to a Basket of Approaches (CfRN,COMIFAC, Indonesia) that focuses on combining different sourcesof nancing for different aspects of REDD on appropriate timescales.This idea is discussed further on page 92).

Some proposals explicitly state that sub-national entities will be authorisedto engage directly with nancing systems, however the majority give noindication who the principle agents are, nor how money is transferred.

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WHERE DO WE


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WHERE DO WEGO FROM HERE?

WHAT ELSE IS BEING DONE? Figure 6. Forest area conserved by REDD incentives (dont forget With and without REDD incentives)


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COLLABORATIVE MODELLING INITIATIVE ON REDD ECONOMICS

Terrestrial Carbon Group, University of East Anglia,Conservation International, Environmental Defense Fund,and Woods Hole Research Center

The Collaborative Modelling Initiative on REDD Economics aims toprovide relevant economic information to support UNFCCC negotiations

on REDD. The Initiative will build an open source data set and model toevaluate the carbon emission and nancial implications of alternativeapproaches to providing positive economic incentives for REDD, ensuringcomparability of results.

Participating organizations include the Terrestrial CarbonGroup, Conservation International, Environmental Defense Fund,University of East Anglia, and Woods Hole Research Center, with inputfrom the International Institute for Applied Systems Analysis and thePrince's Rainforests Project.

This group will initially evaluate ve proposals from the participatingorganizations. Preliminary results will be available by the UNFCCC COP

in Poznan in December 2008, with further results available by March 2009.The data and model will also be available to those interested in modellingand understanding the likely impacts of various proposals.

Results will compare and contrast the ndings of different approaches withrespect to the following factors:

(a) The maximum volume of carbon emissions that could be rewarded undereach proposal (overall and on a country-by-country basis); and,

(b) The likely volume of carbon emission reductions, forests conserved,revenues generated, and international leakage at given carbon prices basedon assumptions and dynamic modelling (overall and on a country-by-

country basis).

Figure 6 shows the analytical framework of country level supply curvedeforestation, and shifts in these supply curves due to the implementaof global REDD policies and the effect of leakage. Results predict landclearance, reductions in emissions, and revenues by country accordingto different proposed REDD policies and different carbon prices.

The participating organizations plan to hold a side event at the Poznanto present preliminary results, and would welcome engagement from wider community interested in REDD.

Contact:Dick Rice (Conservation International): [email protected] Ashton (TCG): [email protected]

+

Q' QQ'Q' Q'Q' Q'Ha Ha Ha

+ =

P'P

Country I

REDD eligible

Country II

REDD eligible

Country II|

REDD ineligible

Tropical To

Total extent o

deorestation av

Annual market or agricultural land cleared rom orest With and without REDD incenti

COMPLEMENTARY FINANCING

U i f C d S i ti t

In direct carbon market funding, industrialized countries purchasREDD credits for use as emissions allowances in their national cap-antrade systems potentially thereby purchasing the right to emit more


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Union of Concerned Scientists

With many nancing options emerging, the Complementary Financingapproach (discussed by CfRN and the WRI, among others) focuses oncombining different sources of nancing for different aspects of REDD onappropriate timescales. The complementary nancing approach utilizesthree important sources of potential money for REDD: direct carbonmarket funding, market-linked funding and voluntary funding.

Figure 7. Expected Evolution of Funding Needs

|2010

|2020

|2030

VOLUNTARY

MARKET-LINKED

DIRECT CARBON MARKET

trade systems, potentially thereby purchasing the right to emit moredomestically than their caps allow, by offsetting their emissions abroaMarket-linked approaches generate funding by using auction revenor allocated allowances for REDD, or by establishing systems in whichREDD credits are not fungible with industrial country allowances. In linked options, funding increases as cap-and-trade markets and the prof carbon increase, but, crucially, the REDD credits are not offsets. Finvoluntaryfunding provided by countries or individuals is unconnecttheir cap-and-trade markets such as ofcial development assistance (

or Norway's $2.6 billion commitment announced at Bali.

The complementary nancing approach aims to connect these threenancing methods with the timeframe in which it can be most usefultowards achieving overall REDD goals (see Figure 7) and emphasizes all three nancing approaches are needed, and should be complementto maximize their effectiveness. In the short-run, the exibility of voluapproaches presents the quickest way to build up capacity. Approachi2020, more funding will be needed to bolster REDD, but risks of leakanon-additionality and monitoring errors constrain how much should cdirectly from a carbon market. During this time period, market-linkedoptions should play a large role, which helps to avoid the risks from leand non-additionality. Finally, in the 2020s, and beyond, presuming a

built-up capacity, a broad experience base and near-global participatidirect carbon market can provide the large and continual funding neeREDD.

The debate over REDD nancing must address which methods meet tunique objectives of different time periods in building credible and lonlasting REDD regime. Each method plays an important role, providinsmaller or larger amounts of funding over time as the REDD process eThe complementary nancing approach seeks to maximize the benetof each nancing option by applying them to different time periods incomplementary ways.

Contact:

Diana Movius: [email protected]

INTEGRATING REDD INTO THE GLOBAL CLIMATE PROTECTION REGIME

CIFOR

CIFOR has also produced a book on major issues related to REDD. Thbook aims to add clarity to the debate surrounding the negotiations, a


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CIFOR

CIFORs work on REDD focuses on a wide range of issues from technicalmethodologies to national level governance and international policy relatedto the climate negotiations. Ongoing work encompasses:

Developing cost-efcient methods for determining REDDbaselines and monitoring changes in carbon stocks;

Improving policies, institutional arrangements and rewardmechanisms for efcient, effective and equitable REDD schemes; and

Establishing appropriate REDD architecture, including consistentpolicies linking local contexts to national and global regimes.

Current projects include work on the global architecture and design of REDD(with ODI); learning lessons from Payments for Ecosystem Services for REDD(with IIED/WRI), introducing REDD into tools for capacity building ondonor assistance to forests and climate change, work on regional mechanismsfor REDD in Eastern and Southern Africa (with IIED and WWF), andinvestigating the potential for REDD and local people in Brazil, Ghana, Laos,Vietnam and southern Africa.

The work on the global architecture and design of REDD focuses on analyticalpriorities of relevance to the negotiations. These priorities were informedby consultations among representatives of climate negotiators, key researchinstitutions, advocacy organizations, and the private sector. The key themesinclude:

The implications of different scales in approaches to REDD:national, sub-national and nested approaches

The implications of different methodological approachesto degradation

Linking country needs and nancing sources for REDD

Lessons from economic models for the role of REDD instabilizing greenhouse gas concentrations

book aims to add clarity to the debate surrounding the negotiations, ahelp readers focus on the critical issues. Both of these streams of workto clarify what the options are and to assess their implications in termeffectiveness, efciency and equity.

CIFOR is engaged in the REDD debate in several countries. For exampIndonesia CIFOR has been involved in supporting the design of the naREDD architecture. This work covered issues such as the policy frameland-use strategies, reference levels and monitoring systems.

Contact:Daniel Murdiyarso: [email protected]

Website:www.cifor.cgiar.org/carbofor/projects/globalredd/introduction.htm

FOREST LAW ENFORCEMENT GOVERNANCE AND TRADE (FLEGT)

FERN

Current projects include:

putting into practice the lessons learned from FLEGT in the


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FERN

FERN's work on REDD follows on from involvement in the development andimplementation of the EU Forest Law Enforcement Governance and Trade(FLEGT) Action Plan, presented in 2003. The Action Plan sets out a range ofmeasures that aim to tackle illegal logging by improving forest governance,strengthening local peoples' tenure rights, developing a licensing schemethat assures timber has been legally produced and creating a system forindependent monitoring of the implementation process. Over the past ve

years, FERN has been working closely with partn

Redd the Little Redd Book Dec 08

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