Fourth speaker 'Options for REDD and reducing the financial gap' Jessica Brown (Overseas Development Institute)
3rd August 2009 - Imperial College (CEP)
project management information system lecture notes
Financing the World's Forests: integrating markets and stakeholders
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4. Phased approach to implementation Phase 1: National REDD strategy development, including national dialogue, institutional strengthening, and demonstration activities. Phase 2: Implementation of policies and measures (PAMs) proposed in those national REDD strategies. Phase 3: Payment for performance on the basis of quantified forest emissions and removals against agreed reference levels. Recommendations from the Norwegian government’s REDD Options Assessment Report (REDD-OAR)
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9. How do we fill the financing gaps? Most promising avenues for meeting financing shortfalls in post-2012 context is from ‘new and innovative’ forms of finance.
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11. Proposals on the table Proposal Source of funds Amount of funds generated AUCTIONS OF EMISSIONS ALLOWANCES Norway’s auctioning of AAUs Annex I allowances withheld, auctioned internationally $20-30 Bn annually A UNIFORM GLOBAL TAX ON CO2 EMISSIONS Swiss Global Carbon Tax Tax ($2/t CO 2 ) on emissions; ≤1.5/t CO 2 per capita exempt $30-40 Bn annually LEVIES ON EMISSIONS FROM INTERNATIONAL MARITIME AND AVIATION International Air Passenger Levy, International Maritime Emission Reductions Scheme, Tuvalu’s Burden Sharing Mechanism, Oxfam International, etc $6 per ticket fee (economy class), $62 per ticket fee (business/first class); or a straight charge on emissions (not based on ticket); or levy on international airfares, maritime transport charges $8-10 Bn annually, for first five years of operation
12. Proposals on the table (cont’d) Proposal Source of funds Amount of funds generated CARBON MARKET-BASED LEVIES Extending the levy to JI and/or IET Levy on JI and/or IET 2008–2012: $5.5–8.5 Bn p.a. 2013–2020: $3.5–7.0 Bn p.a. Pakistan’s CDM levy 3-5% levy on CDM $0.2–0.5 Bn p.a. at levy of 5% BONDS EC GCFM High rated bonds $1.3 Bn annually for next five years CURRENCY TRANSACTION TAX Currency transaction tax small levy (0.005%) on foreign currency exchange transaction $15-20 Bn annually HYBRIDS Mexico’s World Climate Change Fund Multiple sources Initially $10, scaling up to $95 in 2030
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15. Thank you Contact: Jessica Brown [email_address] Visit: www.climatefundsupdate.org www.odi.org.uk/climatechange
Notas del editor
Capturing the mitigation potential of REDD requires a flexible, phased approach to implementation in order to accommodate (i) the diverse capabilities of REDD countries; (ii) an expanded scope of REDD to include conservation, sustainable management of forests, and enhancement of forest carbon stocks; 2 and (iii) the nearterm constraints of the current global financial crisis. The timing of graduations from one phase to the next will vary, and REDD countries could skip a particular phase provided they meet the eligibility criteria for the next phase. Within countries, overlap between phases may also be necessary and even desirable. MRV should advance progressively with phase graduation, and should be upwardly compatible with a future framework that could encompass the whole agriculture, forestry, and other land uses (AFOLU).
Strategy development elements would include, for example, reference level and MRV assessments, and participation of indegenous peoples and local communities.
Strategy implementation elements would include, for example, reference level setting, improvement of MRV, and participation of indigenous peoples and local communities.
Clearly there will be gaps between what the money that is needed and the money that is available. For example, the current picture of available funding for forestry efforts that come from international public financing sources equates to 6-11% of the funding that would be needed to halve net global emissions from forests by 2030 (as estimated by Eliasch). (The cost of halving net global carbon dioxide emissions from forests by 2030 is estimated at USD 17–33 billion annually, if forest carbon is included in global emissions trading (Eliasch 2008).
Alternative financing sources could substantially increase the amount of finance available to address needs not financed directly by markets or ODA. These include proceeds from auctioning allowances in emission-trading schemes by Annex I countries and the allocation of revenues from other fees, fines and taxes. These may qualify as either ODA or some other public funding stream, depending on how these funds are channelled.
Auctioning of assigned amounts or emission allowances: Each Annex I country receives a number of greenhouse gas units to release and/or trade ( Assigned Amount Units, AAUs) in accordance with the Kyoto Protocol during the 2008-2012 commitment period. The underlying principle of this scheme is to auction a certain share of AAUs to generate revenue, rather than giving them out for free to Annex I domestic firms that have to comply with emission reductions. A uniform global tax on CO2 emissions: Funds are raised by placing a global tax on all carbon emissions, but with a per capita exemption for least developed countries. Levies on emissions from international maritime transport and aviation, or on air travel: Funds are raised by charging individuals and companies, based on their responsibility for climate change and/or their capability to pay. The charges or levies could be applied to international aviation and maritime transport, or air travel.
Carbon market-based levies: Funding can be generated by applying a levy to the Kyoto Protocol’s tradable units generated from the CDM, JI, or emissions trading (a form of ‘climate currency’ with each tradable unit representing one metric tonne of CO 2 equivalent). The 2% CDM levy mechanism used to raise funds for the Kyoto Protocol’s Adaptation Fund is an example of a carbon market-based levy. There is interest in extending or increasing the levy to other aspects of the carbon market. Bonds : Funds can be raised through bonds issued on the international markets available for immediate use. Currency transaction tax: a tax on wholesale currency transactions
Funding will have to be integrated into the overall financing architecture developed under the UNFCCC as part of a Copenhagen agreement. To ensure predictability, international REDD financing should be clearly identified and funding commitments firm, verifiable, and enforceable. International REDD finance would complement domestic funding by REDD countries, taking into account pre-existing national efforts and expenditures in sustainable forest management, forest protection, and forest inventories. Disbursement could be based either on five-year national REDD implementation plans and annual performance indicators, or left to the responsibility of a national decision-making process.
vertical funds (global initiatives): Partnerships and related initiatives whose benefits are intended to cut across more than one region of the world and in which the partners: (a) reach explicit agreement on objectives; (b) agree to establish a new (formal or informal) organization; (c) generate new products or services; and (d) contribute dedicated resources to the program. Whereas a horizontal approach would provide support for existing country systems, vertical funds target focused global causes, such as health or education. Particularly prominent are debates surrounding new vertical funds to be managed by institutions such as the Global Environment Facility (GEF) (the main financial mechanism for the UNFCCC), and the World Bank. Concerns have been raised by developing countries about the lack of representation in the governance structures of such funds, long lead times for accessing funding, complex application procedures and the type of finance (e.g. whether grants or loans).