PROVIDING INCENTIVES FOR MULTIPLE BENEFITS

LINKING FINANCE, RESULTS AND SAFEGUARDS

18th Conference of Parties UN Framework Convention on Climate Change Doha, 26 November 7 December 2012
1. INTRODUCTION1 The vision of REDD+ is changing. There is increasing recognition that a narrow model based solely on a market for credits for emission reductions/removals (ERRs) is not feasible in the short term due to limited political will to set stringent and ambitious mitigation targets. Achieving multiple benefits (i.e. ERRs plus non-carbon benefits or NCBs1) is more likely to produce lasting results. Moreover, since countries are at various stages of implementation, a flexible international mechanism capable of accommodating different ways of achieving and paying for different types of results is needed to enable broad participation. There is also increasing recognition that a number of NCBs (notably governance improvements, ecosystem resilience and community benefits) need to be achieved for ERRs to be realized and be permanent. The changing vision of REDD+ was reflected in discussions at the most recent UNFCCC meeting in Bangkok and captured in the LCA informal note.2 This suggests NCBs could be considered as part of enabling conditions and identifies the need to further explore whether results-based REDD+ payments should go beyond carbon benefits to include non-carbon benefits, acknowledging a recognition that carbon benefits and non-carbon benefits cannot be unbundled from each other. The note proposes that in Doha, negotiators should consider the need for SBSTA to assess the potential of including co-benefits and noncarbon benefits as part of results-based payments and consider the need for guidance and methodologies for assessing the co-benefits and non-carbon benefits arising from the full implementation of results-based actions. The importance of multiple benefits for long-term success is also captured in advice on the application of biodiversity safeguards agreed recently at the conference of the Convention on Biological Diversity (CBD) in Hyderabad.3 In light of Bangkok, this discussion paper attempts to clarify the different approaches both to linking results to finance and to their assessment. It views safeguards as a minimum requirement for successful results-based actions, with effective implementation of safeguards creating an enabling environment for achieving multiple benefits. It builds on previous briefing papers prepared by the REDD+ Safeguards Working Group (R-SWG) for the Bonn and Bangkok meetings4 which together are the basis for the groups recommendations for Doha (see separate document). 2. DEFINING RESULTS, CLARIFYING QUESTIONS Defining results: How results are defined (and therefore how payments/incentives will be distributed) affects the number and variety of actions that are eligible to generate such incentives under REDD+ and therefore its flexibility, Two types of results can be defined: Results Type 1: A result defined by quantifiable units measured against a starting point/baseline (e.g., 10 tons of carbon reduced, five hectares of tree planted, $100 gained by a community). This definition envisions rewarding behaviour based on the number of units accomplished and is used by many payments for ecosystem services (PES) programmes. Results Type 2: A result that achieves a pre-defined goal (e.g., passing a law, conserving 1 million hectares of forest). This type of result is more difficult to quantify, but still possible to monitor and assess, and is useful to support enabling activities or to reward desired outcomes more quickly. Clarifying questions: Other issues that need to be considered and clarified when looking at different approaches for linking results to finance and assessing them as part of a more flexible mechanism are: (1) the links between safeguards and NCBs and role of the safeguards information system (SIS); (2) simplifying the monitoring of ERRs through proxies; and, (3) the challenge of demonstrating actions through only ERRs. (1) Safeguards and benefits and the role of the SIS: Achieving additional NCBs means going beyond doing no harm. While many see the UNFCCC REDD+ safeguards as taking a no-harm approach, the language of the safeguards and their effective implementation actually go beyond this, and can result in NCBs. Some of these NCBsin particular governance improvementsneed to be realized during early phases of REDD+ in order to enable ERRs and other NCBs later on. For its part, the SIS monitors both 1) the implementation of
* This discussion paper attempts to clarify questions and present different options for consideration. It does not represent a formal position of the REDD+ Safeguards Working Group (formerly the REDD+ Safeguards Information System Working Group).

DISCUSSION PAPER

policies and procedures to ensure that no harm occurs, and 2) the results or impacts of implementing safeguards. This second function of the SIS would overlap with assessing additional NCBs so they may be viewed as two sides of the same coin. Links between REDD+ finance, safeguards and benefits and the role of the SIS are illustrated in Figure 1, while Figure 2 uses biodiversity as an example to show how results-based payments might work to incentivize safeguards implementation and non-carbon benefits, noting that advice and reporting requirements under the CBD are relevant for the assessment of biodiversity. Since, at a minimum countries need to demonstrate through the SIS that safeguards have been addressed and respected, and the safeguards go beyond a no-harm approach, the SIS is well positioned to demonstrate additional NCBs. Another important question to consider is whether or not to bundle payments for ERRs and NCBs. Under a bundling approach, payments would be made for ERRs and NCBs bundled into a REDD+ unit. Under an unbundled approach, an additional incentive is provided only if NCBs are achieved beyond the minimum requirement (e.g., through premium payments for NCBs in addition to payments for ERRs). As argued in the previous R-SWG briefing on REDD+ finance and safeguards, bundling payments would be more likely to lead to outcomes that are sustainable over the long-term.5 Figure 1. Links between REDD+ finance, safeguards and benefits and the role of the SIS

Figure 2. Illustrating how results-based payments might work to incentivize safeguards implementation and non-carbon benefits

(2) Monitoring emissions reductions/removals through proxy indicators: If ERRs are not used to offset emissions produced elsewhere, a simplified approach to measurement through proxy indicatorswhich are used to measure a result indirectlycan be used. This also increases flexibility of REDD+. Proxies can be closely linked to quantifying ERRs (e.g., area planted or conserved) or linked to an activity assumed to reduce emissions / increase removals (e.g., increasing the area of land managed by Indigenous Peoples). There are advantages and disadvantages of both approaches. The former has the advantage that data would be captured as part of a forest monitoring system, which countries need to develop anyway for managing their forests and as part of the requirements under the Cancun agreement,6 but makes an assumption about the amount of carbon stored in a given area, and that conserving trees reduces/removes emissions. The latter has the advantage of combining an emission outcome with a social outcome, but makes an assumption that the outcome will reduce/remove emissions and provide social benefits. (3) Challenges of demonstrating actions only through emissions reductions/removals: Experiences with monitoring LULUCF (land use, land use change and forestry) in developed countries have shown that there are challenges with demonstrating actions only through ERRs, e.g., it may take time for behavior to change (enforcement), or to implement the action (addressing tenure security), or unexpected natural events (droughts or fires) may mask the emission reductions/removals. Even without these factors, EERs from LULUCF are difficult to measure accurately. ERRs may also occur when no actions have been taken (e.g., due to a change in global commodity price). In these cases it may be more useful to structure payments around Type 2 results if the goal is to create an incentive for actions. 3. OPTIONS FOR RESULTS BASED PAYMENTS If we accept that there are several ways to think about results-based approaches, and that how results are defined will affect what is being paid for, different options for payments can be identified. The two approaches (Type 1 and Type 2 defined above) are relevant whether thinking about results in terms of emission reductions/removals, safeguards, or NCBs. Table 1 illustrates different options and approaches for assessing results. Table 1. Different options and approaches for assessing results
Emission reduction/removals results framing Payment for ERRs only Type 1: Payment per unit X dollars per unit of ERRs which is not pre-defined X dollars per hectare of forest not cut Type 2: Payment per pre-defined result X dollars for a set amount of ERRs

Payment for close ERR proxy Payment for action proxy

X dollars for a set area of forest conserved

X dollars for each new hectare of land managed by Indigenous Peoples

X dollars for X amount of land managed by Indigenous Peoples

Payment for ERRX dollars per policy passed (e.g., on focused implementation equitable distribution of benefits) X dollars per number of people with new capacity

X dollars for policy passed, budget for participatory processes, implementation agency with capacity and work plan

Non Carbon Benefits Social X dollars for every person making X dollars over the baseline X dollars for each hectare of land with clarified tenure for local actors Environmental X dollars for each additional hectare of intact forest Programme aimed at reducing poverty with specific aspects whose implementation can be tracked (e.g., local communities credit system set up and proved to be used) Programme aimed at increasing biodiversity with specific aspects which can be tracked (e.g., planting native species, diverting infrastructure out of biodiversity hot spots) Demonstrate, e.g., participatory process occurred and inputs were responded to

Governance

X dollars per policy passed

DISCUSSION PAPER*

A REDD+ finance mechanism that could recognize both Type 1 and Type 2 results would be useful for developing a more flexible system that would enable countries to access results-based payments based on different starting points. The different criteria for defining which option to choose might be: the type and amount of finance; the timing and length of time finance is necessary; and the type of results the REDD+ country is trying to achieve. There may even be ways to link both types of results. 4. CONCLUSIONS There are many options when it comes to developing an international system that could recognize and support countries taking actions to reduce emissions from deforestation and forest degradation, and to achieve multiple benefits. REDD+ is at a critical juncture in its development. A clear understanding of results-based payments and how they link to safeguards and achieving multiple benefits is needed. Meanwhile, available finance needs to be directed towards enabling activities, particularly governance improvements, that will ensure both carbon and non-carbon benefits, recognizing that safeguards implementation and the SIS are minimum requirements. The direction provided in Doha on REDD+ finance and for SBSTAs work programme in 2013 and beyond will be important for determining if REDD+ can respond to the changing vision of the system, begin to address linkages between its different elements, as well as synergies with relevant processes such as the CBD, and develop as a more flexible system to enable broad participation. ----------------------------------------------------------------Endnotes
1. 2. NCBs include social and biodiversity benefits (e.g., livelihood security and enhanced ecosystem resilience through increased biodiversity) and governance improvements (e.g., strengthened tenure/use/access/management rights). Informal note, Policy approaches and positive incentives on issues relating to reducing emissions from deforestation and forest degradation in developing countries; and the role of conservation, sustainable management of forests and enhancement of forest carbon stocks in developing countries (Agenda item 3(b)(iii)), LCA Informal Additional Session, 30 Aug 5 Sept 2012. (LCA is the Ad Hoc Working Group on long-term Cooperative Action under the Convention, i.e. UN Framework Convention on Climate Change). CBD Decision XI/19, http://www.cbd.int/cop/cop-11/doc/2012-10-24-advanced-unedited-cop-11-decisions-en.pdf (advance version), Biodiversity and Climate Change and Related Issues: Advice on the application of relevant safeguards for biodiversity with regard to policy approaches and positive incentives on issues relating to reducing emissions from deforestation and forest degradation and the role of conservation, sustainable management of forests and enhancement of forest carbon stocks in developing countries. See also previous Briefing Papers: Additional Guidance on REDD+ Safeguards Information Systems: Briefing Paper: 36th Session of the Subsidiary Body for Scientific and Technological Advice UN Framework Convention on Climate Change, Bonn, 14-25 May 2012 and supplement Recommendations on Safeguards; and REDD+ Finance and Safeguards: Briefing Paper: Informal Additional Sessions of the Ad Hoc Working Groups UN Framework Convention on Climate Change, Bangkok, 30 August - 5 September 2012. Available at http://www.scribd.com/doc/113736314/AdditionalGuidance-on-REDD-SIS. REDD+ Finance and Safeguards: Briefing Paper: Informal Additional Sessions of the Ad Hoc Working Groups UN Framework Convention on Climate Change, Bangkok, 30 August - 5 September 2012.Available at: http://www.scribd.com/doc/113736317/Briefing-Paper-on-REDD-Finance-and-Safeguards. Decision 1/CP.16, para 71(c).

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18th Conference of Parties UN Framework Convention on Climate Change Doha, 26 November 7 December 2012

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