This document discusses setting up an interim international mechanism to support REDD+ activities between now and a long-term international REDD+ mechanism. It proposes establishing a REDD+ fund with three windows to support a phased approach. The first window would support readiness activities, the second would support implementation of REDD+ strategies through results-based finance, and the third window would support implementation through payments for verified emission reductions. It also discusses establishing national REDD+ governance structures based on principles like developing national trust funds and transitioning to direct access to funds over time. Overall, the document argues for coordinating and strengthening existing REDD+ initiatives through an interim international arrangement until a long-term mechanism is agreed.

1. Moving forward:
Interim REDD+
Partnership
Arrangement
Towards a long-term
International REDD+ Mechanism
Paris, France
11 March 2010

2. Agenda
1. PNG’s Experience: Development & REDD+
2. Status for REDD+ post-Copenhagen
3. Thoughts on the Institutional Needs for an
Interim REDD+ Arrangement
4. Conclusions and Next Steps
Interim REDD+ Partnership Arrangement –11 March 2010 - Paris | 1

3. Papua New Guinea’s Climate-Compatible Development Strategy has
three overarching goals to be achieved together
Strategic framework Goals
Economic Development: Achieve
GDP per capita of US$ 3,000 by
2030 (from US$ 1,000 in 2009)
while meeting our people’s
Development aspirations for a better life.
Mitigation: Reduce emissions of
greenhouse gases, by at least 50%
Climate by 2030 and become carbon
Compatible neutral by 2050. Over 90% of this
Develop- goal will come from REDD+
ment
Mitigation Adaptation
Adaptation: Invest to reduce the
vulnerability to the risks associated
with climate change, such as
coastal and inland flooding, malaria
and agricultural yield change.
SOURCE: McKinsey Interim REDD+ Partnership Arrangement –11 March 2010 - Paris | 2

4. PNG’s “Vision 2050” implies strong growth, relying heavily on
agriculture, mining, oil, gas and services
Assumptions for growth by sector GDP by sector Agriculture and forestry
▪ Food crops ▪ 1% yield & 1% area p.a. Constant 2007 USD bn
Mining, oil and gas
Agri- ▪ Palm oil ▪ 2% yield & 7.5% area p.a. Manufacturing
culture
and ▪ Coffee ▪ 2% yield p.a. Services
forestry ▪ Cocoa 28
▪ 2% yield p.a.
26
▪ Forestry ▪ Slow rate of increase
24
▪ Gold ▪ Double production by 2020
22
Mining, ▪ Copper ▪ Double production by 2020 20
7-8%
oil and ▪ Nickel ▪ Double production by 2020 18
gas
▪ Oil ▪ Gradual decline 16
▪ Gas ▪ Open 2 plants (2013,2023) 14
▪ Manufac- ▪ 8% p.a. 12
turing 10
Industry
▪ Construction ▪ 8% p.a. 8
▪ Power ▪ 5% p.a. for all
6
▪ Retail ▪ 8% p.a. 4
▪ Transport ▪ 8% p.a. 2
Services ▪ Telecoms ▪ 8% p.a.
0
▪ Tourism ▪ 10% p.a. 2007 2010 2015 2020 2025 2030
▪ Fin. services ▪ 8% p.a.
Interim REDD+ Partnership Arrangement –11 March 2010 - Paris | 3

5. Overall, emissions can be reduced by 50-75% by 2030 on PRELIMINARY
the way to carbon neutrality by 2050
Emissions from all sectors under maximum abatement scenario
Mt of CO2e/ year; 2005-2030
140
130 1) Smallholder
Business as Usual agriculture
120 high growth
110 emissions path 2) Palm oil plantations
100
90 50-
3) Timber harvesting (SFM) 75%
80
70 6) Fire management
60 4) Afforestation/Reforestation
50
Low-carbon 5) Secondary forest mgmt
growth and
40 Non-forestry sectors
emissions path
(oil/gas, power,
30
transport)
20
10
0
2005 2010 2020 2030
SOURCE: REDD+ working group and McKinsey analysis Interim REDD+ Partnership Arrangement –11 March 2010 - Paris | 4

6. Predictability of funding necessary for developing countries to
embark on a low carbon growth pathway
Political and economic … needs to be
risk associated with balanced with
difficult economic adequate, predictable,
transformations… sustainable funding
$
Interim REDD+ Partnership Arrangement –11 March 2010 - Paris | 5

7. Agenda
1. PNG’s Experience: Development & REDD+
2. Status for REDD+ post-Copenhagen
3. Initial Thoughts on the Institutional Needs for
an Interim REDD+ Arrangement
4. Conclusions and next steps
Interim REDD+ Partnership Arrangement –11 March 2010 - Paris | 6

8. The Copenhagen Accord includes substantial financial commitments
Principles of Copenhagen Accord Funding and next steps
Funding of CDM versus Copenhagen
▪ Sets goal for all countries to limit global
USD billion
temperature rise to less than 2 degrees
above pre-industrial level
CDM 2008
▪ Recognises that mitigation in developing
countries must go together with economic Copenhagen
development ~10
2010-12 average
▪ Broadens scope of mitigation actions to Copenhagen
more countries and sectors, including ~100
2020 target
land-use change and forestry
▪ Confirms REDD+ as a critical component
Next steps
of mitigation
▪ Over 70 countries have made public
▪ Raises importance of adaptation and commitments to mitigation and
provides additional funds adaptation actions since Copenhagen
▪ Commits developed countries to ▪ The Accord envisages continued
unprecedented financial support overall, engagement through the UNFCCC
rising to $100bn per year by 2020 process, leading to COP-16 in Mexico
Interim REDD+ Partnership Arrangement –11 March 2010 - Paris | 7

9. Short term financing committed through a ‘fast start’ partnership
Fast start funding per annum 2010–12
$bn
▪ Formal commitment of
$30bn for 2010-12 by
developed countries
– Adaptation and REDD
+54% strongly emphasized
0.5
– Mechanism for
channelling funds
unclear
▪ Goal of $100bn per year by
2020 in long-term finance
– Sources undefined
– Governance systems to
be defined
EU Japan Norway Others Total CDM – CDM not addressed
2008 (yet)
SOURCE: Copenhagen Accord, National announcements,WB. Interim REDD+ Partnership Arrangement –11 March 2010 - Paris | 8

10. AS OF JAN 12
The role of REDD recognized and $3.5bn so far committed
$3.5bn committed for REDD-plus…
$bn, total 2010-12 …but commitment is only first step
$bn
100% = 3.5 20.0-35.0
Japan
Norway
Australia 3.5
0.12 1.00
France 0.35 2010-12 2010-15
committed required
0.48 €15–25bn ($20-35bn) is required
UK for early action on REDD+
1.00
between 2010–15 for a decrease
US in global deforestation rates of
25% [IWG-IFR]
2010–12 commitments approx 1/3
of required level
SOURCE: IWG-IFR, press search, McKinsey Interim REDD+ Partnership Arrangement –11 March 2010 - Paris | 9

11. REDD+ almost completed within the UNFCCC
Body Overview
▪ REDD+ part of future regimes
Conference ▪ Apply IPCC Methods for carbon estimation
of the Parties ▪ National forest monitoring systems (steps toward)
▪ Guidance for Demonstration Activities
▪ National forest monitoring systems
SBSTA
▪ if appropriate, sub-national systems as part of
national monitoring systems
▪ historic data, and adjust for national circumstances
▪ Principles
AWG-LCA
▪ Safeguards
▪ Inclusive of all REDD+ Actions
▪ Phased Approach
▪ Ambition (reductions and finance)
Remaining ▪ Structure of Financial Mechanism (NAMAs?)
Issues ▪ National Accounting (role of sub-national)
▪ Systems for MRV of Actions and Support
Interim REDD+ Partnership Arrangement –11 March 2010 - Paris | 10

12. Agenda
1. PNG’s Experience: Development & REDD+
2. Status for REDD+ post-Copenhagen
3. Thoughts on the Institutional Needs for an
Interim REDD+ Arrangement
4. Conclusions and next steps
Interim REDD+ Partnership Arrangement –11 March 2010 - Paris | 11

13. NOT EXHAUSTIVE
Overview of the current landscape of major REDD+
initiatives
REDD+ Initiative Payment
▪ FCPF Readiness Fund ▪ Pay readiness plan and
($180 / $155 / $10 / $3*) readiness activities
Multilateral funds
▪ FCPF Carbon Fund ▪ Pay for readiness and
($55 / $34/ $0 / $0*) emission reductions ▪ Pledges:
USD ~ $1 bil.
▪ UN REDD Programme ▪ Pay for readiness
($74 / $54 / $10 / $16[$2]*) preparations ▪ Disbursed
▪ FIP ▪ Pay for readiness directly to
($406 / $0 / $0 / $0*) transformation REDD+ :
USD ~10
▪ GEF ▪ Pay for projects million
($250 / $0 / $0 / $0*)
▪ CBFF ▪ Pay for projects
($200 / $200 / $? / $?*)
▪ The Amazon Fund ▪ Pay for performance
Bilateral
partnerships ▪ Guyana REDD+ Investment ▪ Pay for performance
Fund (GRIF)
Other
▪ NGO’s ▪ n/a (Initiative specific)
▪ VC’s
* $ Pledged / $ Received / $Secretariat, $ Paid Out
SOURCE: FCPF; UN-REDD Programme; CBFF; FIP Interim REDD+ Partnership Arrangement –11 March 2010 - Paris | 12

14. There is pressing need to restructure existing REDD+ efforts
Situation today… … needs to be improved
▪ Lack of coordination ▪ Establishment of central coordination
▪ Overlapping governance ▪ Clear responsibilities
▪ Significantly underfunded ▪ Funding from multiple sources
▪ Inconsistent methods ▪ An agreed set of guidelines
▪ Learning silos ▪ Best practise and knowledge exchange
▪ Inefficient decision-making ▪ Clear and lean processes
▪ Misguided stakeholder involvement ▪ Appropriate and timely consultation
▪ Un-integrated development planning ▪ National development strategies
Interim REDD+ Partnership Arrangement –11 March 2010 - Paris | 13

15. An institutional and finance framework should be built Responsible:
to support the financing process IRC Interim REDD+ Com.
DC Developing Countries
Top down assessment Generation of bottom-up
of funding need by a analysis (climate plans)
mandated institution by developing countries
Pledging process to
1 2 3
ensure predictability
Strategy and sustainability of
Scope design and funding
planning Commit-
IRC DC
ments
IRC IRC
4
Assessment of Assess-
commitments ment
and actions
Implemen-
DC
tation
6 IRC Developing countries
MRV1 DC
taking action that
matches the level of
5 commitments
MRV of funding and actions
Payment by verified results
1 DC responsible for Measurement and Reporting, with HLB overseeing Verification
Interim REDD+ Partnership Arrangement –11 March 2010 - Paris | 14

16. A phased approach provides flexibility and immediate action Potential
scope for
interim
financing
▪ National ▪ REDD+ strategy
commitment to ▪ Multi-stakeholder consultation
develop REDD+ ▪ Minimum monitoring capability ▪ Advanced monitoring
strategy ▪ Safeguards capability
Phase 1 Phase 2 Phase 3
▪ Design a REDD+ ▪ REDD+ strategy ▪ REDD+ strategy
strategy implementation implementation
– Grant payments a) Grants for – Payments for
enablers verified emission
b) Payments for reductions and
Keystone, i.e., removals
emission
the interim
reductions
incentive
measured by
system
verified proxies
SOURCE: IWG IFR Secretariat Interim REDD+ Partnership Arrangement –11 March 2010 - Paris | 15

17. National options for distribution of finance based on policies or drivers
International forestry finance
All units registered nationally
National Accounting to avoid ‘double counting’
national State can opt to invest directly
fund and keep the credits centrally...
regions/ …and /or devolve credits
provinces to regional level
…and / or allow investors and
communities to certify projects
and receive credits in return
Source: The Eliasch Review Interim REDD+ Partnership Arrangement –11 March 2010 - Paris | 16

18. Public finance needed before carbon markets can be phased in
during the medium term
2030 target: carbon market
finance could make the sector
carbon neutral
Funding
Funding gap: $11-19
billion per year in 2020
Global cap
2020 projection: carbon and trade
market finance could be $7
billion per year and fund a
22% cut in deforestation Funds from partial
emissions
access to carbon
markets
2012
Short term Medium term Long term
Source: Modelling for the Eliasch Review Interim REDD+ Partnership Arrangement –11 March 2010 - Paris | 17

19. National level institutions built around a set of principles
Principle Description
Development of ▪ Developing countries should establish a governance
national structure that matches the global finance mechanism,
governance supports strengthening of national institutions, and
functions ensures development of technical bodies
Strengthen
▪ National trust funds should be made to work reliably
and transparently
national trust
funds
▪ Equitable and fair benefit distribution
▪ Prudent financial management
Transition to
▪ Developing countries may enter partnerships with
international institutions to ensure fiduciary oversight
direct access to
funds
▪ Developing countries should over time develop own
process and capabilities
Flexible choice of
▪ The choice of implementing partners should be under
national control of developing countries
implementing
agencies
▪ Encourage public-private partnerships
Interim REDD+ Partnership Arrangement –11 March 2010 - Paris | 18

20. In a REDD+ institutional framework, a REDD+ fund with three windows
supporting a phased approach Authority Information
COP
Apply lessons learnt
from FCPF, FIP and UN
REDD Programme
High Level Body
Registry & Verification
Interim REDD+ Committee (i) MRV funding
(ii) MRV action
Standards
Climate Fund(s)
Incentive Systems Single fund
REDD+ Fund with three
funding
streams
Bi-, multi-lateral & Strategy design Implementation Performance
Bi-lateral funds Market-based
national
Bi-lateral and planning (incl. investment) proxies carbon credits
Funding flows controlled Funding flows controlled by Committee / COP Funding flows
by Parties, accounted by controlled by the
Committee / COP private sector
Interim REDD+ Partnership Arrangement –11 March 2010 - Paris | 19

21. Agenda
1. PNG’s Experience: Development & REDD+
2. Status for REDD+ post-Copenhagen
3. Thoughts on the Institutional Needs for an
Interim REDD+ Arrangement
4. Conclusions and Next Steps
Interim REDD+ Partnership Arrangement –11 March 2010 - Paris | 20

22. Suggested outcomes from today’s discussion
▪ Agree to work together towards the establishment of an
‘Interim REDD+ Partnership Arrangement’…
▪ … which should be guided by and support UNFCCC
negotiations
▪ Start process today (Paris meeting of March 11)…
▪ … finalize arrangements by May 27 at the ‘Oslo Climate
and Forest Conference’
▪ be informed by a thorough review of the status quo
(actions, finance and institutions) which should be
completed asap
▪ draft concepts for the Interim REDD+ arrangement
could be submitted asap
▪ Virtual group of facilitator countries (4+4) overseeing
a small technical ‘secretariat’ to drive process in an
inclusive and transparent manner
▪ Outcome to include ‘Oslo Accord for an Interim
REDD+ Partnership’ including a scale-up plan for
funding Interim REDD+ Partnership Arrangement –11 March 2010 - Paris | 21