76916 FY2010 Annual Report Partners in REDD+ Demonstrating activities that reduce emissions from deforestation and forest degradation Copyright © 2010 by Carbon Finance Unit, World Bank Group. All rights reserved. All photos by World Bank Photo Library/Rhett A. Butler unless otherwise noted. On the cover, top right photo: Mayumi Terao/iStockphoto Design by Sensical Design & Communication Letter from the FCPF Chair In the process of working together since we started designing the FCPF in 2006, all the parties involved—forest countries, donor countries, indigenous peoples, civil society, the private sector and international organizations—have learnt a lot from one another. The FCPF has provided a forum for discussions both at international and country levels, where governments, traditional rights holders and various stakeholders come together to discuss REDD+ strategies. The FCPF and other programs and initiatives ways that will benefit them the most, not in isola- focused on REDD+ are gathering precious experi- tion but in combination with each other. The forum ence and developing new approaches to tackle the and processes set up by the FCPF help make this drivers of deforestation and forest degradation. possible. Over the past year, the FCPF has accelerated The next six months will bring important de- the assessment of proposals prepared by forest velopments in a number of areas, including the countries on how they intend to prepare them- start of operations of the Carbon Fund. It seeks to selves for REDD+ (the so-called Readiness Prepa- ration Proposals) and has allocated about US$40 million in grant funding to implement these. Many more countries will be formulating and present- The FCPF and other programs and ing their proposals in the coming year. We know disbursements from the FCPF have been slow but initiatives focused on REDD+ are World Bank teams are working with government gathering precious experience and counterparts to address the issues and clear the developing new approaches. way for fund disbursement. We are keen to invite other delivery partners, including multilateral development banks and UN Agencies, to provide readiness services to coun- demonstrate how performance-based payments tries under the FCPF. REDD+ poses tremendous can incentivize fundamental changes in the way development challenges and requires that the ca- countries manage their forest heritage. These pacity of all partners be harnessed using common payments will complement investment finance for fiduciary and safeguards approaches. REDD+, providing another good reason for coun- In the year ahead, we also look forward to see- tries to get ready for REDD+. ing the complementary roles of the FCPF and its partners, the UN-REDD Programme, the Global Inger Andersen Environment Facility and the Forest Investment Vice President, Sustainable Program, crystallize in particular at the country Development, World Bank level. We encourage forest nations to tap into October 2010 the support offered by these various initiatives in FY2010 Annual Report  |  1 Acronyms AFD Agence Française de Développement M&E Monitoring and Evaluation AusAid Australian Agency for International MRV Measurement, Reporting and Verification Development NGO Non-Governmental Organization CF Carbon Fund PA Participants Assembly COICA Coordinadora de las Organizaciones Indígenas PC Participants Committee de la Cuenca Amazónica REDD Reducing emissions from deforestation and COONAPIP Coordinadora Nacional de Los Pueblos forest degradation Indígenas de Panama REDD+ Reducing emissions from deforestation and CSO Civil Society Organization forest degradation, and through conservation, DRC Democratic Republic of Congo sustainable management of forests and FCPF Forest Carbon Partnership Facility enhancement of forest carbon FIP Forest Investment Program RF Readiness Fund FMT Facility Management Team R-PP Readiness Preparation Proposal FY Fiscal Year (World Bank fiscal year, July 1 SESA Strategic Environmental and Social to June 30) Assessment GEF Global Environment Facility TAP Technical Advisory Panel GTCR Groupe de Travail Climat REDD UNEP United Nations Environment Programme IPs Indigenous Peoples UNFCCC United Nations Framework Convention on IP Program Indigenous Peoples and other Forest Dwellers Climate Change Capacity Building Program UN-REDD The United Nations Collaborative Programme IPACC Indigenous Peoples of Africa Coordinating on Reducing Emissions from Deforestation and Committee Forest Degradation in Developing Countries Lao PDR Lao People’s Democratic Republic WBI World Bank Institute 2  |  Forest Carbon Partnership Facility Table of Contents Executive Summary 5 Achievements in Fiscal Year 2010 6 1.1 FCPF Secretariat Services 7 1.1.1 Meetings of the Participants 7 1.1.2 Building International Partnerships and Fostering Institutional Cooperation 8 1.1.3 Services to the Interim REDD+ Partnership  10 1.2 Country Implementation Support and Advisory Services 10 1.2.1 Status of REDD Country Participation in the FCPF  11 1.2.2 Collaboration with Partners in REDD+ Countries 12 1.2.3 National Stakeholder Participation and Consultation for REDD+  13 1.3 Global REDD+ Methodology Support 13 1.3.1 Technical Advisory Panels: Early Lessons Learned and Emerging Good Practices in R-PPs 13 1.3.2 Development of FCPF REDD+ Readiness Instruments 15 1.3.3 Advancing and Exchanging Knowledge on Key REDD+ Issues 17 1.3.4 Building REDD+ Capacity among Forest-Dependent Indigenous Peoples and Forest Dwellers 17 1.4 Fund Management and Governance 20 1.4.1 Fund Participation  20 1.4.2 Governance Arrangements 20 1.4.3 Audits  23 FY10 Financial Report of the Readiness Fund 24 2.1 The FCPF Budget Process  24 2.2 Funding Sources  25 2.3 Funding Uses in FY10  25 2.4 Financial Commitments over the Longer Term  28 Carbon Fund Development 30 Conclusions, Insights and the Road Ahead 32 FY2010 Annual Report  |  3 Executive Summary In the past year, the Forest Carbon Partnership Facility (FCPF) has strength- ened its partnership of countries and stakeholders working together to reduce emissions from deforestation and forest degradation, and foster conservation, sustainable management of forests, and enhancement of forest carbon stocks (REDD+). Significant progress has been made in moving from a planning stage to preparations for REDD+ “Readiness� in forested developing countries. Eight “REDD countries� submitted formal leveraging the lessons from other countries to REDD+ Readiness Preparation Proposals (R-PPs) collectively address challenges. In response to and five submitted draft proposals, providing a this demand, the FCPF facilitated a number of wealth of experience and information from which regional meetings and workshops in FY10 where the international community is learning about countries were able to discuss the technical is- REDD+. The eight countries that submitted R-PPs sues most relevant to them. It has been a useful, were allocated funding for their proposals in Fiscal Year 2010 (FY10), and are looking ahead towards their implementation. As the second year of the FCPF draws to a close, Deforestation and forest degradation it is clear that the issues of deforestation and for- are on the minds of most parties est degradation are on the minds of most parties when discussing climate change, and that REDD+ when discussing climate change. will be relied upon as a key element in fighting cli- mate change. The FCPF has served as a platform for bringing together 50 countries and a broad hands-on approach and has helped strengthen representation of stakeholders, and for engaging the formulation of R-PPs. The FCPF’s Facility these parties in the REDD+ agenda. This unique Management Team (FMT) has also tackled other partnership has not only allowed participants to issues in the past year, such as further develop- discuss opportunities and challenges to imple- ing the R-PP template and collaborating with menting REDD+ in their respective countries, but partners to provide services to countries that are has also given them a neutral and innovative space getting “ready for REDD+.� to put forward different solutions with the rich in- The FCPF Readiness Fund welcomed Denmark put of colleagues and forestry experts outside of as a new donor in FY10 and is also now able to offer the climate negotiations. $200,000 grants to all REDD Participant Countries As the FCPF has developed, new needs have to support the formulation of their R-PPs. Look- arisen. With countries rapidly gaining experience ing ahead, many FCPF partners and stakeholders in preparing for REDD+, there is an increased are awaiting the results of the first independent awareness of what the greatest challenges are and evaluation of the FCPF, which will provide valuable a growing demand for opportunities where coun- lessons learned, along with the possibility of in- tries can learn from one another’s experiences, creasing membership in the future. FY2010 Annual Report  |  5 1. Achievements in Fiscal Year 2010 The Forest Carbon Partnership Facility (FCPF) advances a mission with global significance: to help tropical countries build capacity to reduce greenhouse gas emissions from deforestation and forest degradation—by conserving forest car- bon stocks, sustainably managing forests, and enhancing forest carbon stocks (commonly known as “REDD+�)—while supporting and testing performance- based financing approaches that demonstrate how REDD+ can work. On June 30, 2010, the FCPF completed its 8–9, and Table 4, page 21). It is also providing a second full year of operation. FY10 is notable for framework for the engagement of key stakehold- the transition from the previous year’s efforts to ers within forested countries, including indigenous lay the groundwork for FCPF operations, to a year peoples, other forest-dependent peoples, and of dynamic, collaborative development of REDD+ local non-governmental organizations (NGOs), as proposals and strategies in a number of forested well as global stakeholders such as international countries. NGOs. These interactions facilitate development The FCPF’s diversity of activities in FY10 bolstered of equitable REDD+ strategies, and also inject the global effort to realize REDD+ in two key areas. valuable knowledge and experience into the First, through refining the FCPF framework and sup- Readiness preparation process. Highlights from FY10 include: • Active participation and collaboration of REDD The FCPF’s diversity of activities countries, FCPF financial contributors, stakehold- and achievements in FY10 added ers and observers drove continuous improve- significant value to the global effort ments in the Readiness preparation process. • Eight countries submitted R-PPs and were al- to realize REDD+. located grant funding (Argentina, Republic of Congo, Costa Rica, the Democratic Republic of Congo (DRC), Ghana, Kenya, Mexico and Ne- porting the development of Participant countries’ pal), and five countries presented draft R-PPs REDD+ proposals, the FCPF helped to clarify what (Argentina, Madagascar, Peru, Suriname and it means for a country to be “ready for REDD+.� Tanzania). Second, the FCPF has created a platform for ex- • A wealth of lessons has been learned about change of information and experiences on REDD+ REDD+ Readiness, based on countries’ experi- among forested countries and other global stake- ences in the past year. holders. The FCPF is providing 37 REDD Country • Several fora supported by the FCPF facilitated Participants and 14 Donor and Carbon Fund Par- South-South transfer of knowledge among ticipants space to learn from one another’s efforts, REDD countries. share innovations and accrue expertise (see map of • The FCPF supported a number of capacity build- REDD Countries participating in the FCPF, pages ing activities among Indigenous Peoples (IPs). 6  |  Forest Carbon Partnership Facility 1.1 FCPF Secretariat Services Secretariat services for the FCPF are provided by FCPF Readiness Fund. Each of these four meetings a Facility Management Team (FMT), housed in the strengthened the process of preparing for REDD+, World Bank. In FY10, the FMT took on a range of helped advance the REDD+ agendas of participat- activities, from organizing meetings of the Facil- ing countries, and improved the operation of the ity’s governing body, to promoting knowledge FCPF. Key outcomes of each of the meetings are exchange and, most importantly, fostering coop- discussed in detail in Section 1.4.2. eration amongst diverse stakeholders and with Two of the three PC meetings were held in REDD other REDD+ initiatives. countries—Gabon and Guyana—helping to ex- pose FCPF Participants directly to the experiences 1.1.1 Meetings of the Participants of these countries in preparing for REDD+. They also provided an excellent opportunity for forest During FY10, the FMT coordinated the FCPF’s stakeholders and other civil society groups in REDD second Participants Assembly (PA) meeting in countries to engage with members of the partner- October 2009, as well as the Participants Com- ship. For example, on June 26, 2010, in advance of mittee (PC) meetings in October 2009 (“PC4�), the PC meeting in Georgetown, the FMT hosted March 2010 (“PC5�) and June 2010 (“PC6�). These an information exchange session for Guyana’s meetings, including the participation of eligible civil society stakeholders. More than 60 people REDD Country Participants and key stakeholders attended to learn about the FCPF and engage in such as the Observer for Forest-Dependent Indig- a lively discussion focused on consultations with enous Peoples and Other Forest Dwellers, were indigenous peoples. Participants recognized differ- made possible through financial support from the ences and challenges, but also expressed optimism FY2010 Annual Report  |  7 REDD Country Participants REDD Country Participants The 37 tropical and sub-tropical developing countries thus far selected by the Participants Committee of the Forest Carbon Partnership MEXICO Facility to be assisted in their efforts to reduce emissions from deforestation and GUATEMALA HONDURAS degradation—called REDD—by providing EL SALVADOR NICARAGUA value to standing forests. COSTA RICA PANAMA GUYANA Argentina Gabon Nicaragua COLOMBIA SURINAME Bolivia Ghana Panama Cambodia Guatemala Papua New Guinea Cameroon Guyana Paraguay Central African Rep. Honduras Peru Chile Indonesia Suriname PERU Colombia Kenya Tanzania Congo, D.R. of Lao P.D.R. Thailand BOLIVIA Congo, Rep. of Liberia Uganda Costa Rica Madagascar Vanuatu PARAGUAY El Salvador Mexico Vietnam Equatorial Guinea Mozambique CHILE Ethiopia Nepal ARGENTINA IBRD 36759R1 OCTOBER 2010 This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, or any endorsement or acceptance of such boundaries. and willingness to work together. The FCPF plans to the FCPF’s definition of REDD to match language continue organizing some of its governance meet- adopted by the UNFCCC1 and harmonize with ings in REDD countries in FY11 and beyond. other major REDD+ initiatives, as follows: “REDD� means REDD plus [REDD+], i.e. reducing 1.1.2 Building International Partnerships emissions from deforestation and forest degra- and Fostering Institutional Cooperation dation, and the role of conservation, sustainable management of forests and enhancement of A major focus of the FCPF during FY10 was on forest carbon stocks, as may be modified to be consistent with the UNFCCC Guidance on REDD. building greater cooperation and closer partner- ships among international institutions working to In addition, the FCPF, the UN-REDD Programme advance REDD+. To start, at PC4, the PC revised and the Forest Investment Program (FIP) developed 1. United Nations Framework Convention on Climate Change (UNFCCC). 17 February 2009. “Report of the Subsidiary Body for Scientific and Technological Advice on its twenty-ninth session, held in Poznan from 1 to 10 December 2008.� FCCC/ SBSTA/2008/13 http://unfccc.int/resource/docs/2008/sbsta/eng/13.pdf 8  |  Forest Carbon Partnership Facility NEPAL LAO P.D.R. THAILAND VIETNAM CAMBODIA GHANA CENTRAL AFR. ETHIOPIA LIBERIA REP. CAMEROON EQ. GUINEA REP. OF UGANDA GABON CONGO KENYA DEM. REP. OF CONGO TANZANIA INDONESIA PAPUA NEW GUINEA MOZAMBIQUE VANUATU MADAGASCAR a joint paper entitled Enhancing Cooperation and joint platform for sharing country experiences and Coherence Among REDD+ Institutions to Support lessons. REDD+ Activities, which explored financing and 2 Another key achievement in enhancing coop- support under the three initiatives; the context and eration in FY10 was the collaborative work under- options for enhanced collaboration at the country taken with the UN-REDD Programme to develop level; and suggestions for strategic collaboration a common template for countries developing on REDD+. As a result, the FCPF has endeavored REDD+ Readiness proposals for both initiatives. to coordinate support to REDD countries that are The objective of this work has been to align pro- participants to both the FCPF and the UN-REDD cesses in an effort to reduce country transaction Programme and, to the extent possible, plans to costs and improve country proposals through coordinate future FCPF governance meetings with complementary support. DRC, which helped pio- those of the other initiatives in order to create a neer this joint submission process, was noted as 2. The draft presented at PC6 is available at http://www.forestcarbonpartnership.org/fcp/sites/forestcarbonpartnership. org/files/Documents/PDF/Jun2010/2b_REDD%2BCooperation_06-22-10.pdf. FY2010 Annual Report  |  9 benefitting significantly from review by both the Ultimately the partnership would be replaced by, FCPF and the UN-REDD Programme. or folded into, a future UNFCCC mechanism in- cluding REDD+. 1.1.3 Services to the Interim REDD+ The World Bank and the UN were requested to Partnership jointly provide secretariat services to the REDD+ Partnership, building on the extensive coopera- At the Oslo Climate and Forest Conference on tion between the organizations through initiatives May 27, 2010, more than 50 countries launched the like the FCPF, FIP and the UN-REDD Programme. new interim “REDD+ Partnership.� Approximately At PC6, the PC authorized the FMT to provide $4 billion was pledged to support developing some secretariat services—shared with the UN- countries in their efforts to reduce emissions from REDD team—to the REDD+ Partnership, with the forest loss during 2010–2012. The partnership caveat that these additional services should be is intended to allow developing and developed differentiated from the usual work of the FMT and countries to act now to implement REDD+, build- not detract from the FCPF itself. The FMT is being ing on the political momentum from Copenhagen. strengthened to take on these added tasks. 1.2 Country Implementation Support and Advisory Services Technical assistance to REDD countries is the Support, comprised of Readiness preparation core product of the FCPF Readiness Mechanism. support and fiduciary and safeguard assistance The FCPF provides two types of country level from World Bank country teams; and (2) Country technical assistance: (1) Country Implementation Advisory Services, comprised of the coordination Figure 1. Status of REDD Countries Figure 2. Formulation Grant Disbursement by REDD Country Participant FY09 FY10 (in US$ thousands) R-PP Funding Disbursed Undisbursed Allocated 3 8 $0 $200 by the PC Costa Rica $139 DRC $177 Informal R-PP 2 5 Ethiopia $100 Presentations Gabon $0 Participation Ghana $200 Agreements 33 2 Guyana $0 Signed Kenya $0 Lao $50 Countries 37 Liberia $75 Selected Nepal $91 Rep. of Congo $87 Uganda $40 Vanuatu $0 TOTAL $959 disbursed 10  |  Forest Carbon Partnership Facility and feedback of FMT staff and World Bank forestry experts on country documents and other aspects of country readiness work. Visits to REDD+ coun- In FY10, the emphasis in FCPF tries have been vital to these efforts, because they country services shifted away from provide direct, multidisciplinary technical support to REDD+ countries “onsite� as they formulate selecting REDD Country Participants their unique R-PPs. In addition, in an effort to to developing R-PPs. provide closer technical assistance to countries, the FMT has posted a staff member in the World Bank’s Country Office in Kinshasa, DRC. This has allowed the FMT to intensify interactions with the them, with cumulative numbers from the inception governments of Congo Basin countries and other of the FCPF through June 30, 2010. national and regional forest stakeholders, and has Many of these REDD Participant Countries were also facilitated World Bank support to the national also awarded Formulation Grants of $200,000 to REDD+ Readiness preparation processes. support the development of their R-PPs. As pre- sented in Figure 2, of the 13 countries with signed 1.2.1 Status of REDD Country Formulation Grant Agreements, nine were actively Participation in the FCPF disbursing the funds as of June 30, 2010. More of this information is available on the In FY10, the emphasis in FCPF country services FCPF “dashboard,� a reporting tool that was shifted away from selecting REDD Country Partici- developed during FY10 and contains country- pants and signing new Participation Agreements by-country information on Readiness preparation to the next important phase: developing R-PPs. progress. After presentation by the FMT and PC This shift is evident in the data on R-PPs presented discussion of the dashboard, it has been agreed in Figure 1. The chart lists the key milestones and that the dashboard will be updated regularly and the number of REDD Countries that have achieved made available to all on the FCPF website.3 3. The FCPF dashboard can be viewed at http://www.forestcarbonpartnership.org/fcp/node/283 FY2010 Annual Report  |  11 1.2.2 Collaboration with Partners in society organizations and the private sector. The REDD+ Countries R-PP is serving as a tool to coordinate different interventions by such organizations in support of In FY10, the FCPF took steps to further broaden REDD+. the global partnership of the FCPF, with new in- As an example, in FY10, the PC allocated fund- terested REDD countries as well as international ing to DRC to implement its R-PP, and the FCPF organizations and institutions. and UN-REDD Programme have been coordinat- At PC5, the PC noted expressions of interest ing their support to the country in its Readiness to observe FCPF governance meetings by several efforts. As part of the preparation of its national countries not currently participating in the FCPF— REDD+ strategy, DRC will implement a series of including Bhutan, Guinea, Nigeria and Sudan—and seven pilot projects tackling the main causes of in FY11 will consider options for including new ob- deforestation in different regions of the country so servers in the FCPF process. In addition, to foster as to generate initial lessons to feed into the strat- cooperation among the international REDD+ initia- egy. These projects will be financed by the Congo tives, the PC invited FIP pilot member Burkina Faso 4 Basin Forest Fund, which has expressed strong to observe future PC meetings, as a step toward interest in aligning its assistance to DRC with the inclusion of all five FIP pilot members in the FCPF. ongoing Readiness process. A grant from the The FCPF has also been fostering coopera- International Tropical Timber Organization for ca- tion on REDD+ Readiness with various organiza- pacity building on carbon stock measurement will tions from different sectors, including financial directly support the early efforts to implement the and technical partners to REDD+ countries, civil country’s measurement, reporting and verification 4. See the Climate Investment Funds “Summary of the Co-Chairs Forest Investment Program Sub-Committee Meeting,� March 17, 2010, at http://www.climateinvestmentfunds.org/cif/sites/climateinvestmentfunds.org/files/Summary%20 of%20Co-Chairs%20FIP%20SC%20March%202010%20FINAL.pdf. 12  |  Forest Carbon Partnership Facility (MRV) system. A strong partnership has also Many of the FCPF countries began been forged with national civil society, organized to engage indigenous peoples, around the Groupe de Travail Climat REDD, which has been participating in the implementation of ensuring that their needs and all components of Readiness, including the plan realities are taken into consideration for consulting with stakeholders on the national REDD+ strategy, and analytical studies (such as in REDD+ Readiness processes. the study on causes of deforestation). 1.2.3 National Stakeholder Participation to country preparation efforts. Accordingly, the and Consultation for REDD+ FCPF provides financial and technical support to ongoing stakeholder participation in the design, The FCPF strives to convene and balance the formulation, review and implementation of REDD+ diverse interests involved in REDD+ activities in strategies. order to ensure that REDD+ is implemented in In FY10, many of the FCPF countries began to a sustainable way. Engaging the participation of engage indigenous peoples, ensuring that their stakeholders—including indigenous peoples, needs and realities are taken into consideration other forest-dependent communities, civil society in planning for REDD+. Some countries, including organizations, the private sector and other REDD+ DRC, Kenya, Panama and Uganda, have included initiatives—is a crucial element of FCPF-supported representatives of indigenous peoples and civil activities. Because these stakeholders often have society organizations in their National REDD+ unique knowledge and understanding of tropical Technical Working Groups as formal elements of forests, and of the drivers and underlying causes their management framework for designing and of deforestation, their inclusion also adds value implementing activities. 1.3 Global REDD+ Methodology Support Building on the advances of the previous year, in 1.3.1 Technical Advisory Panels: FY10 the FCPF continued to: Early Lessons Learned and Emerging Good Practices in R-PPs 1. finance and coordinate the independent Tech- nical Advisory Panels (TAPs) to provide multi- Considerable work to support development of disciplinary, expert review of REDD countries’ REDD+ methodologies among FCPF member R-PPs; countries was carried out by the multidisciplinary 2. develop the fundamental elements of REDD+ group of scientific and technical experts constitut- Readiness preparation, and incorporate these ing the TAP. The FCPF relies on an extensive ros- elements into templates and guidance docu- ter of experts—nominated by FCPF Participants, ments to organize and facilitate the Readiness Observers, and the FMT—from which it assembles preparation process; teams to review and provide technical guidance 3. ensure consistent cooperation and informa- for country R-PP submissions. tion exchange with other global forestry and In FY10, eight REDD+ countries developed and REDD+ programs, and with entities developing submitted final R-PPs for review by the TAP and five methodologies; and REDD+ countries submitted draft R-PPs—an ac- 4. build REDD+ capacity among forest-dependent celeration of process under the FCPF. A total of 15 indigenous peoples and forest dwellers. countries have submitted draft and/or final R-PPs FY2010 Annual Report  |  13 since the FCPF’s start. An important innovation during FY10 is that each R-PP was also reviewed by a working group of PC representatives in ad- vance of PC meetings, to provide early feedback to countries and also streamline the meetings. Table 1 summarizes this evolution and the role the TAP and the PC working group reviews played, and the decision by the PC meeting regarding funding. Although every country addresses REDD+ within unique environmental, social, economic in its R-PP to launch itself into credible, equitable and institutional circumstances, with 15 R-PPs now REDD+ Readiness preparation. These lessons and developed, the FCPF participants and TAP experts good practices are summarized below for each are beginning to see early lessons and “good prac- R-PP component, to help guide upcoming work tices� about what a country needs to incorporate by REDD+ countries. Box 1: Early Lessons Learned and Emerging Good Practices in R-PP Component 1: Organize and Consult, Stakeholder agriculture, infrastructure, regulatory policies, and Consultation and Participation investments in forestry/conservation if possible. • R-PPs should foster the emergence of continuous • Review of the country’s existing forest law, and multi-stakeholder engagement processes that begin relevant legal and regulatory aspects, should clearly with widely sharing basic information about REDD+ identify any unresolved issues with respect to land and the R-PP process, and then move into full consul- tenure rights. tation and participation by stakeholders over time. These processes need clear objectives and outputs Subcomponent 2b: REDD+ Strategy Options that are widely communicated and incorporated into • REDD+ frameworks are now being designed within a R-PP development. national vision for sustainable resource management, • Information needs to be communicated to stakehold- protection of ecosystems and biodiversity, low-carbon ers in ways they understand, including meetings development, and climate change adaptation. with oral communication, translation into relevant • REDD+ policy actions should be identified by linking languages, and explanations of terms. land use factors driving deforestation/degradation, • Many R-PPs (e.g., Nepal, Tanzania, Ghana) now list and changes in land use, policy or program incentives meetings and consultations, who attended, outcomes that would reduce the impact of these drivers. from the consultations, and next steps. • Regional approaches/programs may be needed in a country with diverse land use practices, drivers of Component 2: Prepare REDD+ Strategy deforestation, or local institutional arrangements for Subcomponent 2a: Assessment of Land Use, Forest managing natural resources. e.g., Nepal’s R-PP. Policy, Governance • Both historical and contemporary dynamics of the Subcomponent 2c: REDD+ Implementation Framework principal drivers of deforestation and forest degrada- • The strengths of established, functioning social and le- tion, and their underlying causes, should be explained, gal institutions should be leveraged wherever feasible, by region. This should be holistic, incorporating rather than relying on the creation of new ones. 14  |  Forest Carbon Partnership Facility 1.3.2 Development of to date, FCPF Participants, Observers, and UN- FCPF REDD+ Readiness REDD Programme staff provided feedback on Instruments ways to improve the R-PP template, with an eye toward developing a single, common format for The R-PP has emerged as a use by both FCPF and UN-REDD countries. In framework for national REDD+ addition, considerable effort and progress were Readiness development. The ex- made to mainstream the World Bank’s Strategic perience gained by participants, Environmental and Social Assessment (SESA) in- the TAP, and the FMT through the strument into the R-PP. In the context of the FCPF, many R-PP reviews, as well as through continued the SESA can help to incorporate environmental exchange of information within the FCPF and with and social considerations into the Readiness pro- other REDD+ initiatives, has greatly improved the cess by assessing the underlying causes of defor- quality of the R-PPs. estation and identifying environmental and social Throughout the year, based on experience risks associated with a country’s REDD+ strategy. • Many countries are assessing whether current laws Component 4: Design a Monitoring System and regulations pertaining to land tenure and owner- • Design and implementation of national MRV systems ship rights to lands and carbon adequately clarify are likely to take several years, so a stepwise approach these issues for REDD+ actions. may be needed. • Many countries are evaluating use of a national • Independent monitoring of national forestry gov- tracking system to manage data on sub-national and ernance can be a valuable element of a country’s national REDD+ activities, ownership and exchange overall monitoring framework. Verification should of REDD+ benefits, and integration with the eventual be the responsibility of an independent third party. MRV system. e.g., Tanzania’s R-PP calls for substantial independent monitoring activities that will need to be blended with Subcomponent 2d: Assessment of Social and government-led MRV programs. Environmental impacts • At PC6, Ghana and DRC presented helpful illustrations Component 5: Schedule and Budget of how they are undertaking SESA activities to assess • R-PP budgets are well above previous estimates— social and environmental impacts. R-PPs of Mexico averaging $13 million for the first 11 R-PPs —but are and Nepal also offer ideas. less clear about how much funding has been secured and how funding gaps would be closed. Component 3: Develop a Reference Scenario • Most countries are developing reference scenarios Component 6: Design a Program Monitoring and based on future reference projections as well as Evaluation (M&E) Framework historical data. Consensus on methods is urgently • A good M&E framework is likely to include: schedule, needed. activities to be conducted and results/outputs to be • Construction of reference scenarios for multiple achieved in each time period, and allocation of funds ecological or political regions within a country allows and personnel to be assigned for each activity. tailoring to deforestation drivers and linking to the • R-PP implementers could monitor their own perfor- monitoring of REDD+ policies specific to sub-national mance and ensure adherence to funding levels and circumstances. schedules. An independent third party may be valu- able for verifying M&E schedules and goals are met. FY2010 Annual Report  |  15 Table 1: TAP and PC Working Group Reviews of Country R-PPs during FY10 FY09 FY10 PC3 PC4 PC5 PC6 REDD+ Country (in Switzerland) (in Washington) (in Gabon) (in Guyana) Argentina Reviewed by TAP Reviewed by TAP, PC working group; allocated funds Costa Rica Reviewed by TAP, PC working group; Latin America & the Caribbean allocated funds Guyana Reviewed by TAP; allocated funds Mexico Reviewed by TAP, PC working group; allocated funds Panama Reviewed by TAP; allocated funds Peru Reviewed by TAP, PC working group Suriname Reviewed by TAP Reviewed by TAP, PC working group DRC Reviewed by TAP, PC working group; allocated funds Ghana Reviewed by TAP Reviewed by TAP, PC working group; allocated funds Kenya Reviewed by TAP, PC working group; Africa allocated funds Madagascar Reviewed by TAP, PC working group Republic of Reviewed by TAP, Congo PC working group; allocated funds Tanzania Reviewed by TAP, PC working group Indonesia Reviewed by TAP; Asia & Pacific allocated funds Nepal Reviewed by TAP, PC working group; allocated funds 16  |  Forest Carbon Partnership Facility photo by Ranjith Menon 1.3.3 Advancing and Exchanging Knowledge on Key REDD+ Issues The FMT and World Bank staff Knowledge exchange activities among REDD+ organized a variety of REDD+ countries continued to gain momentum in FY10. workshops, and the FCPF also co- The FMT and World Bank staff organized a vari- financed several collaborative South- ety of REDD+ workshops, and the FCPF also co- financed several collaborative South-South discus- South discussion opportunities. sion opportunities through a $1 million grant from the Global Environment Facility (GEF) for REDD+ capacity building that was approved in FY09. enable their organizations to have a strong voice These activities emphasized South-South knowl- in REDD+ Readiness preparation strategies and edge exchange to help countries strengthen their programs.5 The IP Program has aimed to support R-PPs and prepare for REDD+ Readiness, as well as more inclusive and accountable national Readi- fostering longer term South-South collaboration in ness processes, and in FY10, supported REDD+ building capacity for REDD+ readiness. capacity building activities to: The FMT also continued its partnership with the World Bank Institute (WBI) Carbon Finance Telapak (Indonesia): Document the problems IPs Assist program and the Alternatives to Slash and in Indonesia face in managing forest lands, and Burn Program of the World Agroforestry Centre to analyze how REDD+ would affect their lands and develop training modules for analysis of the op- livelihoods (see box 2, page 19). portunity costs of REDD+ and to train trainers. Groupe de Travail Climat REDD (DRC): Enhance 1.3.4 Building REDD+ Capacity among capacity of forest-dependent populations to par- Forest-Dependent Indigenous Peoples ticipate in consultations on the national REDD+ and Forest Dwellers strategy. In FY09, the PC allocated a total of one million Organización de Naciones y Pueblos Indígenas dollars ($200,000 per year for FY09–FY13) to an en Argentina (Argentina): Organize workshops Indigenous Peoples and Forest Dwellers Capacity to disseminate information on REDD+, basic con- Building Program (“IP Program�) to help inform cepts of the R-PP, forest management, and the forest-dependent peoples about REDD+ and UNFCCC. 5. More information on the FCPF’s Indigenous Peoples Capacity Building program is available at http://www.forestcarbon- partnership.org/fcp/node/248. FY2010 Annual Report  |  17 Table 2: FY10 Knowledge Exchange Events Financed by the FCPF Event Description Workshop on REDD+ Readiness: Organized by the Coalition for Rainforest Nations, co-financed by FCPF Forests for Climate Mitigation in the with funding from a GEF grant. Focused on addressing current financial Context of National Development and technical needs for REDD+ Readiness in forested countries. Policies (Bonn, Germany, August 2009) Four global dialogues (17 REDD Connected REDD country representatives via video conference to share countries,a throughout FY10) their experiences, opportunities and challenges, with the aim of helping countries strengthen their R-PPs and Readiness preparation. Workshop on SESA (Nairobi, Kenya, Trained representatives of ten African and Asian REDD countriesb on the February 2010) SESA frameworkc as it relates to REDD+ Readiness preparation. Technical Workshop on REDD+: South- Organized by the Terrestrial Carbon Group, co-financed by the FCPF South Cooperation (Bogor, Indonesia, through GEF grant. Senior staff from governments of Indonesia, Brazil and March 2010) DRC met to develop a framework for mutual cooperation among the three largest forest countries. Created “Action Plan for Cooperative Action,� including intentions for technical exchanges on community forestry, the Amazon Fund, and monitoring activities, and a program to facilitate the South-South partnership. Workshop on Forests Communities With GEF financing, supported participation of DRC in a workshop on and Climate Change: Contributions Mexico’s experiences in community forestry and REDD+, to explore the from Mexico to the REDD+ Initiative role community forestry could play in a national strategy. (Washington, DC, April 2010) Workshop of Latin American Countries World Bank and FMT staff and representatives from nine FCPF REDD in the REDD+ Process (Cartagena, countries in Latin America met in the first of a planned series of four Colombia, May 2010) regional workshops, to share experiences and build capacity in both the procedural and technical aspects of Readiness preparation. a. Argentina, Cameroon, Colombia, Costa Rica, DRC, El Salvador, Gabon, Ghana, Guyana, Kenya, Liberia, Madagascar, Mexico, Republic of Congo, Suriname, Tanzania, and Uganda b. DRC, Ethiopia, Kenya, Ghana, Indonesia, Liberia, Mozambique, Nepal, Tanzania, and Uganda. c. See Section 1.4.2, R-PP Template, below for detailed discussion of SESA and its role in the FCPF and Readiness preparation process. 18  |  Forest Carbon Partnership Facility Box 2: FCPF-Financed IP Capacity Building carry out this work. A team worked with 30 institutions Program in Indonesia and NGOs at the national level to collate data on IPs into one central database, and over 100 institutions at According to the Indigenous People Alliance of Ar- the regional level—in Sumatra, Kalimantan, Sulawesi, chipelago (AMAN), an estimated 50-70 million of the Papua and Bali Nusra. Participatory mapping exercises 210 million Indonesians are IPs. However, there is no conducted throughout the country are being digi- systematic database that profiles the IP population, talized, and the overlaying of satellite images based on their land and territories as well as their customary forest classification has created thematic maps de- rights and use of forest resources. scribing the current condition of IPs’ customary forest In FY10, the FCPF’s IP Program supported territory. In addition, the team has also conducted a Telapak—an Indonesian NGO involved in REDD+ review of customary forest territorial conditions of IPs, discussions—to (i) collect data on, analyze, and docu- documenting the challenges IPs are facing. ment the existence of IPs in Indonesia, (ii) scope out Currently, Telapak is finalizing the following prod- their land and territories as they relate to rights and ucts: a documentary on this process, a policy brief livelihoods, (iii) conduct an analysis of the implications explaining their position on REDD+, and making the of REDD+, and (iv) identify the problems they face in database available on various national and international managing the customary forest territory in climate websites. Telapak also plans a national workshop invit- change adaptation and mitigation processes, specifi- ing relevant stakeholders to discuss their findings, with cally REDD+. the aim of influencing the policy dialogue on REDD+ Telapak worked in collaboration with other networks and enhancing their effective participation in REDD+ of IPs such as AMAN and Forest Watch Indonesia to processes. Table 3: Activities of the IP Capacity Building Program from Inception through FY10 Amount Expensed Outstanding Organization Location Committed (US$) (US$) Commitments (US$) Coordinadora de las Ecuador $49,950 $49,950 $0 Organizaciones Indígenas de la Cuenca Amazónica Instituto de Investigación y Panama $62,048 $62,048 $0 FY09 Desarrollo Kuna Yala Indigenous Peoples of Africa Africa $69,246 $69,246 $0 Co-ordinating Committee Total from the FY09 Budget Allocation $181,244 $181,244 $0 Telapak Perkumpulan Indonesia $78,545 $47,127 $31,418 Groupe de Travail Climat DRC $70,000 $35,000 $35,000 REDD de la Société Civile FY10 Organización de Pueblos Argentina $67,317 $6,732 $60,585 y Naciones Indígenas en Argentina Total from the FY10 Budget Allocation $215,862 $88,859 $127,003 Cumulative Total through FY10 $397,106 $270,103 $127,003 FY2010 Annual Report  |  19 1.4 Fund Management and Governance 1.4.1 Fund Participation As a result, there were 11 Donor Participants and four Carbon Fund Participants with signed In FY10, the FCPF Readiness Fund welcomed contribution agreements in the FCPF by June 30, Denmark as a new Donor Participant. Two existing 2010. With the Government of Norway as a Partici- Donor Participants, Agence Française de Dével- pant in both funds, there were 14 distinct financial oppement (AFD) and Australia (AusAID), also contributors to the FCPF overall (Table 4). made supplemental contributions. 1.4.2 Governance Arrangements During FY10, the four meetings of the FCPF’s gov- An “Extraordinary Meeting� of the erning bodies resulted in several actions to main- PC voted to increase the number tain and enhance the efficiency and effectiveness of the FCPF governance structure. of REDD Country and Donor and Carbon Fund Participant members of PA2/PC3. At the annual joint gathering of the Par- the PC from ten to 14 each. ticipants Assembly (PA) and PC in Washington in October 2009, an “Extraordinary Meeting� of the PC voted to increase the number of REDD Country 20  |  Forest Carbon Partnership Facility and Donor and Carbon Fund Participant members of the PC from ten to 14 each, in order to improve representation of the growing number of FCPF participants. The Partnership also continues to benefit from the contributions of six official observers, who help guide the course of the FCPF. Each observer serves a vital role in reaching out to the broader community they represent, to exchange informa- tion on REDD+ and FCPF proceedings, and to en- sure that their stakeholder group’s concerns and perspectives are voiced to the PC. Even though observers do not have a formal right to vote, the principle of reaching decision by consensus in the FCPF Readiness mechanism means observers have levels of influence similar to those of voting members of the PC. In addition to electing the PC, the PA amended the Charter to clarify the amendment process it- self—that future amendments to the Charter can be made only with the prior unanimous consent of Table 4. Financial Contributors to the FCPF as of June 30, 2010 FCPF Donor Participants The four meetings of the FCPF’s AFD (France) governing bodies resulted in several Australia actions to maintain and enhance the Denmark efficiency and effectiveness of the Finland Japan FCPF governance structure. Netherlands Norway the PC, provided that those Participants who are Spain not present for the discussion (or are not members Switzerland of the PC at the time of an amendment adoption) United Kingdom are notified by the FMT and do not object within United States 30 days of the notification. FCPF Carbon Fund Participants PC4—Charter Amendments and Working European Commission Groups. At the fourth meeting of the PC, the PC Germany adopted additional Charter revisions to (1) clarify the responsibilities of the TAP in reviewing and pro- Norway viding guidance on R-PP submissions; (2) specify The Nature Conservancy the PC’s responsibility to develop the criteria and FY2010 Annual Report  |  21 PC working groups immediately preliminary reviews by PC members are valuable additions to the REDD+ Readiness development proved to be a valuable forum for process. discussion, both for the countries PC5 and PC6—Additional FCPF Delivery Part- submitting R-PPs and for PC ners and Programmatic Evaluation. The PC members serving as reviewers. discussed whether to add entities other than the World Bank as additional “delivery partners� to provide services to REDD Country Participants,6 in order to leverage other organizations’ comparative procedures for grant allocation for R-PPs; and (3) advantages and enhance the delivery of services specify the PC’s responsibility to decide on grants to countries. At PC6 the PC established a working provided for the preparation of a Readiness Pack- group to address how to select such partners and age by a REDD Country Participant. clarify their expected activities and responsibili- The PC also decided to expand its role in FCPF ties. The potential expansion to multiple delivery operations by establishing working groups made partners will be discussed at PA3/PC7 in Washing- up of country members tasked to review R-PPs ton, DC in November 2010. ahead of future PC meetings. These working Also at PC6, the PC authorized the start of a groups immediately proved to be a valuable fo- comprehensive FCPF program evaluation, to cover rum for discussion both for the countries submit- the first two years of FCPF operations (June 2008 ting R-PPs and for PC members serving as work- to June 2010) and be completed during FY11. The ing group reviewers. Positive feedback from R-PP objective of the evaluation is to provide insights review group participants suggests that these into the challenges of implementing a REDD+ 6. “Delivery partners� are defined as entities “providing technical support to REDD Country Participants and supervising the Grant Agreements under the Readiness Fund and Emission Reductions Payment Agreements under the Carbon Fund.� Draft Note FMT 2010-11 “Optimizing Delivery to REDD Country Participants� March 13, 2010. http://www. forestcarbonpartnership.org/fcp/sites/forestcarbonpartnership.org/files/Documents/PDF/Mar2010/FCPF_FMT_Note_ 2010-11_Readiness_Fund_Delivery_03-13-10.pdf. 22  |  Forest Carbon Partnership Facility 2. How has the FCPF evolved and made prog- ress vis-à-vis its objectives, in the context of REDD+ developments at the global and national level? 3. How has the FCPF coordinated and collabo- rated with other REDD+ initiatives? 4. Is the FCPF governance structure effective and efficient for REDD+ delivery in countries? 1.4.3 Audits Effective in July 2010, the FCPF Readiness Fund and Carbon Fund shifted from the special audit arrangements outlined in the Facility Charter to the World Bank Group’s Single Audit frame- work. This change means that rather than being handled as an additional and separate exercise, photo by Ranjith Menon the financial audits of the FCPF trust funds will be folded into the umbrella of the World Bank mechanism and suggest ways to enhance support Group’s external audit process, enabling cost to FCPF countries. The evaluation will address four savings over time. While the PC had already ap- key clusters of questions: proved a shift to the Single Audit for FY09, the steps taken by the PC throughout FY10 enabled 1. How does the FCPF add value to REDD+ this shift to be reflected more permanently in processes? adjustments to the Charter. Table 5: Composition of the FY10 FCPF Participants Committee REDD Countries Donor and Carbon Fund Participants Observers to the PC Argentina Agence Française de Développement Forest-Dependent Indigenous Colombia Australia Peoples and Forest Dwellers Costa Rica Denmark International Organizations Democratic Republic of Congo European Commission Non-Governmental Organizations Gabon Finland Private Sector Ghana Germany UNFCCC Secretariat Kenya Japan UN-REDD Programme Mexico Norway Nepal Spain Panama Switzerland Papua New Guinea The Netherlands Suriname The Nature Conservancy Tanzania United Kingdom Vietnam United States FY2010 Annual Report  |  23 2. FY10 Financial Report of the Readiness Fund 2.1 The FCPF Budget Process With two fiscal years of operation now complete, more experience has been gained in planning and budgeting for the work of the Readiness Fund. How- ever, it is evident that the FCPF Readiness mechanism is constantly evolving along with the international REDD+ agenda. The FCPF is providing services to a greatly expanded number of countries compared to the 20 initially envi- sioned, and new challenges (e.g., working with delivery partners, supporting the REDD+ Partnership) also arise in each PC The PC is responsible for approval of the Readi- meeting. Financial planning will need to continue ness Fund budget, usually in June of the preceding to adjust in line with such changes. fiscal year. Since it was not yet operational in FY10, The budgets of both the Readiness Fund there was no formal budget approval for the Car- and Carbon Fund of the FCPF are based on the bon Fund by the Carbon Fund Participants. The World Bank fiscal year and are approved on an an- balance of this financial report therefore focuses nual basis in accordance with the FCPF Charter. on the Readiness Fund unless otherwise noted. As part of approval of the Readiness Fund bud- get, the PC makes decisions on “Shared Costs� for activities that cut across and benefit both the The FCPF is providing services Readiness and Carbon Funds. The Shared Costs to a greatly expanded number of have included the FCPF Secretariat and REDD+ Methodology Support activities such as the work countries compared to the 20 initially of TAPs, the IP Capacity Building Program and de- envisioned, and new challenges also velopment of the R-PP. Pursuant to the Charter, the arise in each PC meeting. Readiness Fund pays 65 percent and the Carbon Fund pays 35 percent of Shared Costs over time, unless the PC decides otherwise. With the Carbon Fund not operational, the PC issued resolutions waiving cost sharing in FY09 and FY10 and instead revised the annual Readiness Fund budgets to cover 100 percent of Shared Costs. The FY10 Readiness Fund budget was ap- proved in June 2009 at PC3 and is presented in Table 6 along with the FY09 budget and outcomes for both years on a cash basis. The FY11 budget of the Readiness Fund was approved in June 2010 at PC6. 24  |  Forest Carbon Partnership Facility 2.2 Funding Sources Table 7, next page, presents the contributions and Readiness Fund in addition to the $53.9 million in public pledges for the Readiness Fund by the end cash received in FY09, bringing total cash contribu- of FY10. Although total signed Donor Participation tions to $86.2 million. This leaves an outstanding Agreements amounted to $123.5 million, several commitment of about $37.3 million from existing of the agreements included a phased contribution signed agreements to be paid into the Readiness into the Readiness Fund spread over a few years. Fund in the coming years. FY10 funding sources In FY10, $32.3 million was received into the also include $821,000 of investment income. 2.3 Funding Uses in FY10 Based on actual expenditures, the FY10 budget increase in the pace and level of disbursements approved at PC3 (Table 6) was a reasonable pro- for Readiness activities compared to FY09, the jection of costs. Notably, there was a considerable first year of operations. This increased spending Table 6. FCPF Readiness Trust Fund Annual Budgets FY09-11 (in US$ thousands) FY09 FY10 Revised FY09 Revised FY10 FY11 Budget Actualc Budget Actualc Budgeta Services to REDD Countries $3,732 $2,037 $4,226 $3,719 $4,213 Country Implementation Support $1,194 $409 $1,734 $1660 $2,025 Country Advisory Services $873 $801 $827 $793 $959 REDD Methodology Supportb $1,665 $827 $1,665 $1266 $1,489 of which Est. Readiness Share $1,229 of which Est. Carbon Fund Share $260 FCPF Secretariatb $1,335 $988 $1,443 $1321 $1,735 of which Est. Readiness Share $1,432 of which Est. Carbon Fund Share $303 Readiness Trust Fund Administration $306 $471 $484 $362 $472 TOTAL READINESS FUND $5,373 $3,497 $6,153 $5,402 $6,117 a. FY11 Budget approved at PC6, Resolution PC6/2010/8. b. FY11 line item activities in italics are for reference only and not in the total est. budget of the Readiness Fund. They reflect PC6/2010/8 on Shared Facility Costs, whereby the Readiness Fund will pay 100% of Shared Costs until the Carbon Fund becomes operational. Once operational, the Carbon Fund will pay 35% of the Shared Costs. An estimated start date for the Carbon Fund of January 1, 2011 is used for illustration. c. In FY09, the Trustee identified a few accounting transactions that needed to be corrected in the budget. Though there was no overall financial impact to the Readiness Fund, the transactions were corrected in Bank accounting systems during FY10 and are presented in this report to accurately reflect expenditures by activity and by fiscal year. FY2010 Annual Report  |  25 Table 7: Commitments and Pledges to the Readiness Fund as of June 30, 2010 (in US$ thousands) FY09 FY10 FY11 FY12 Totalsa AFD (France) $4,600 $600 $5,200 Australia $9,600 $8,000 $17,600 Denmark $5,800 $5,800 Finland $9,000 $9,000 Japan $5,000 $5,000 $10,000 Netherlands $5,000 $15,300 $20,300 Norway $5,000 $16,400 $4,400 $4,400 $30,200 Spain $7,000 $7,000 Switzerland $8,200 $8,200 United Kingdomb $5,200 $5,200 United States $500 $4,500 $5,000 Committed Funding $53,900 $32,300 $32,900 $4,400 $123,500 Japan $4,000 $4,000 Germany $24,500 $24,500 Committed Funding plus Pledges $61,400 $4,400 $152,000 a. Amounts may vary due to exchange rate fluctuations b. United Kingdom’s contribution is provided through the Strategic Climate Fund Table 8: FY10 Readiness Program Expenditures by Activity (in US$ thousands, cash basis) Original Revised Expenses Expense Activities Budget Budget (Actual) Variance rate Services to REDD Countries Country Implementation Support $1,734 $1,734 $1,660 $74 96% Country Advisory Services $827 $827 $793 $34 96% REDD Methodology Support $1,082 $1,665 $1,266 $398 76% FCPF Secretariat $1,443 $1,443 $1,321 $122 92% Readiness Fund Administration $484 $484 $362 $122 75% Total $5,570 $6,153 $5,402 $751 88% 26  |  Forest Carbon Partnership Facility Figure 3. FY10 Budget Performance was the result of the formation of country teams (in US$ thousands) at the World Bank to provide assistance to REDD Country Participants, the increased pace of work in FY10 Revised Budget more REDD countries and additional staff coming FY10 Actual on board to strengthen the capacity of the FMT. Table 8 also reflects expenditures by activity on a cash basis. The revised budget amounted to $6.153 million, while total actual expenditures amounted to $5.402 million, a variance and under $1,734 $1,660 $1,443 $1,321 $1,665 $1,266 run of $751,000. Overall, expenditures stood at $484 $362 $827 $793 88 percent of the revised FY10 FCPF Readiness Fund budget on a cash basis. These numbers do Country FCPF Readiness Country REDD not include, however, contracts which were issued Implementation Secretariat Trust Fund Advisory Methodology throughout the operations of the FCPF and not yet Support Administration Services Support fully expensed (e.g., the IP Program contracts in Table 3), and funding commitments that were made to World Bank country teams supporting REDD+ Readiness in specific countries. As per Figure 3, country implementation sup- Expenses on Country Advisory Services came port expenditures were $1.660 million or at 96 to about $793,000 or 96 percent of the FY10 bud- percent of the budget. These expenditures reflect get for these services, which is in line with FY09 the direct assistance of World Bank county teams costs. The majority of these costs arise from FMT, to REDD Country Participants, including technical forestry and social development staff advice and assistance, grant supervision and assessments guidance to REDD countries on their programs, provided to the PC. including development of the R-PP, SESA and FCPF Secretariat expenses were $1.321 million consultation processes. compared to the budget of $1.443 million, or 92 percent of the budget on a cash basis. This includ- ed costs for program management, organization of Table 9: FY10 Financial Statement annual and PC meetings, and travel costs for REDD for the Readiness Fund Country Participants. The costs also included sup- (in US$ thousands) porting the participation of the IP Observer, host- ing and maintaining the FCPF website and general Item Amount communications to FCPF stakeholders. Readiness Fund Administration costs were Beginning Balance $50,945 $362,000 or 75 percent of the amount budgeted Donor Contributions $32,290 in FY10. These costs reflect the work of World Bank staff in fund management, contributions Investment Income $821 management, accounting, legal and other services required by the Readiness Fund Trustee. The ini- Total Receipts $33,111 tial work of the first evaluation of the FCPF was Expenses $5,402 included in this budget category, however, it has been moved in FY11 to Secretariat services, which Grant Disbursements $959 is a more appropriate budget category given the broader scope of the evaluation work. In FY10, Total Disbursements $6,361 the start-up costs for the evaluation exercise were Fund Balance $77,695 lower than anticipated. FY2010 Annual Report  |  27 An important element of the Readiness Fund from its inception has been that the Fund provides grant funds to countries for their own manage- ment—the grants of up to $3.6 million per REDD Country Participant in support of their own coun- try-led Readiness work. The REDD Country Par- ticipant manages and utilizes the grant for REDD+ activities and expenses, which are reflected as grant disbursements. Figure 2, page 10, provided information on all formulation grant disburse- ments to countries. By the end of FY10, 13 R-PP formulation grant agreements had been signed with $2.6 million in grants fully committed. Nine of the grants were actively disbursing as of June 30, 2010, with $959,000 in grant funding fully pro- With the budget of REDD Methodology Sup- cessed and expensed by REDD countries. Associ- port revised to $1,665,000, total expenditures on a ated expenditures on country services accounted cash basis came to $1,266,000 or 76 percent of the for an additional $5.8 million of support. revised budget. These costs included all expenses In summary, per Table 9 on page 27, at the close (consulting contracts, travel and meeting costs) of FY10, the balance of the Readiness Fund stood related to the independent TAP supporting the at $77.7 million. Total new funds into the account FCPF, considerable work with other REDD+ insti- were about $33.1 million, including the donor con- tutions to coordinate and develop joint tools, such tributions of $32.3 million and investment income as the R-PP template and special programs such as earned on the account balance. Total disburse- the IP Capacity Building Program. A growing focus ments on a cash basis were $6.4 million, with cash on knowledge management and information shar- expenditures of $5.4 million, and expenses by ing, on such topics as REDD+ opportunity costs, REDD Country Participants against their grants of is also reflected in these numbers. approximately $959,000. 2.4 Financial Commitments over the Longer Term In the Charter of the FCPF, the Readiness Fund was commitments (use of funds) made by the PC was established to operate over the long term, with a aligned with the total committed funding (sources closing date in 2020. In order to plan resources of funds) of approximately $123.5 million. The long over this longer time horizon, the PC issues resolu- term business plan includes reserves for operation tions that establish funding priorities and commit- of the secretariat by the FMT and the Trustee role ments for the coming years. These commitments of the World Bank over time. In addition, with new are considered “notional� when the PC has set funding that came in during FY10, the PC was able aside or allocated financial resources of the Readi- to allocate additional resources to support REDD ness Fund that are not yet signed into formal grant Countries at PC6. The PC agreed to provide R-PP agreements or contracts. They are converted to Formulation Grants of $200,000 and associated “full� commitments once the grant agreements (or country services to all REDD Country Participants vendor contracts) are signed by recipients and the that did not yet have access to such funding. This World Bank as Trustee of the Readiness Fund. provision eliminated the previous restriction of At the close of FY10, the long term notional such grants to the first 25 countries selected into 28  |  Forest Carbon Partnership Facility the FCPF. This allocation will actually be made only if the grant agreement is signed by December 31, The PC agreed to provide R-PP 2011 and an appropriate delivery partner can be Formulation Grants of $200,000 and arranged (unless the PC decides otherwise, for example, in the case of extenuating circumstances associated country services to all or a delay that is not the fault of the REDD Country REDD Country Participants that do Participant). not yet have access to such funding. The PC also reiterated that after PC6 all REDD Country Participants will be equally eligible to re- ceive a Readiness Preparation Grant of up to $3.6 million. The grants depend on the PC’s decision countries in their efforts. This brings the total regarding the R-PP, the availability of sufficient notional commitment of the Readiness Fund for committed funding, and regional balance among direct grants and associated country services to grant recipients. $68.2 million at the close of FY10. As shown in Table 10, as of PC6, Readiness Besides the notional commitments outlined Preparation Grants have been notionally com- above, the FMT estimates that there is sufficient mitted to 11 REDD countries. In addition, R-PP funding for the PC to allocate another eight Readi- formulation grants of $200,000 are notionally ness Preparation Grants of up to $3.6 million at committed to an additional 25 countries. Thus, future PC meetings. This will enable up to nineteen thirty-six REDD countries have access to FCPF fully funded Preparation Grants and add $28.8 grants—a considerable increase over the twenty million to the amount of Readiness funding that envisioned when the Readiness Fund started in is available for REDD Country Participants. These 2008. Overall, $44.6 million has been notionally numbers do not include any new resources that committed to these country grants, with $23.6 may come in to the Readiness Fund when pledges million in additional funding to provide the as- are converted to signed contributions, as antici- sociated country services that support REDD pated in the coming year. Table 10: Funds Notionally Committed to Grants and Services for REDD Country Participants (as of June 30, 2010) Commitments Amount per Grants and Country Services country (US$) Number Total (US$) Full Support through Readiness Package Preparation Grants (US$3.6m) $3,600,000 11 $39,600,000 Associated Country Servicesa $811,000 11 $8,921,000 Early Support through R-PP Formulation Formulation Grants (US$200k) $200,000 25 $5,000,000 Associated Country Servicesa $586,000 25 $14,650,000 Total Notional Commitments to Grants and Country Servicesb — 36 $68,171,000 a. Country Services are comprised of an average per country share of REDD Methodology Support and Country Advisory Services, plus direct Country Implementation Support b. 36 REDD Countries, which may include all selected REDD Country Participants except for Tanzania, which is bilaterally funded FY2010 Annual Report  |  29 3. Carbon Fund Development Beyond the work of the FCPF Readiness Fund in assisting countries to prepare for REDD+, the FCPF Carbon Fund also advanced in FY10. This second, but critically important, phase of the FCPF serves as a vehicle through which the FCPF will implement and evaluate pilot incentive programs for REDD+: Partici- pant countries will receive performance-based payments for achieving verified emissions reductions from avoided deforestation and/or forest degradation if they have demonstrated progress in REDD+ specifically, to support REDD+ country Emission Readiness with respect to MRV. The structure Reductions Programs that: of these payments will build on the options for REDD+ that are currently being discussed within • focus on results, namely high-quality and sus- the UNFCCC process or national systems, with tainable emissions reductions including social payments made to help address the causes of and environmental benefits; deforestation and degradation. • are undertaken at a significant scale, for exam- The FMT organized three detailed design dis- ple at the level of an administrative jurisdiction cussions in FY10 with existing and potential Car- within a country or at the national level; • are consistent with emerging compliance stan- dards under the UNFCCC and other regimes; • are sufficiently diverse to generate learning The FMT organized three detailed value for the FCPF and other partners; • use clear mechanisms so that the incentives for design discussions in FY10 with REDD+ reach those who need them; existing and potential Carbon Fund • are based on transparent stakeholder consulta- participants. tions; and • generate emissions reductions at a fair price. The meetings also produced an analogous set of bon Fund Participants, as well as some observers goals and parameters for application of Carbon from REDD countries, with the aim of maximizing Fund resources to sub-national emissions reduc- the utility of the Carbon Fund and addressing any tions programs, for example to ensure linkage to key outstanding issues before the launch of Fund national REDD+ strategies, and minimize the risk operations (September 2009 in London; May 2010 of deforestation and emissions leakage. in Frankfurt; May-June 2010 in Bonn). The meet- In addition to these detailed parameters, ings reconfirmed the Fund’s importance and its meeting participants agreed on several impor- objectives, and made some important refinements tant overarching principles to guide Carbon to its structure. Fund deployment, ensure its linkage and com- First, the discussions resulted in the articula- plementarity with the Readiness Mechanism, and tion of a clear set of aims for the Carbon Fund, to make it sustainable. Participants agreed that 30  |  Forest Carbon Partnership Facility the Carbon Fund should play both a demonstra- the Carbon Fund structure should be designed to tion and a catalytic role in advancing emissions attract private capital. reduction programs; accordingly, Carbon Fund As of the close of FY10, the FCPF continued commitments should be made early enough to its discussions of options for pricing structures of provide incentives to FCPF countries that achieve REDD+ emission reductions assets, and continued significant progress in Readiness preparation. work to recruit private sector Participants for the They also agreed that private capital will be es- Carbon Fund as a key criterion for declaring the sential to make REDD+ sustainable, and thus that Fund operational. FY2010 Annual Report  |  31 4. Conclusions, Insights and the Road Ahead Two years into operation of the FCPF, the resources available for countries to prepare for REDD+ have evolved considerably. The participation, collabora- tion and leadership of the REDD Country Participants are driving progress to- ward the FCPF’s objective of building global capacity to make REDD+ a reality. Meanwhile, the engagement of FCPF Donor and Carbon Fund Participants, its official observers, and independent expert reviewers is ensuring that the lessons learned at each step of the way are identi- questions of control over resource management fied, documented and translated into institutional and the respective decision-making processes. improvements that enhance the FCPF and facili- 4. Promising results are emerging where countries tate knowledge sharing across the partnership. At are combining traditional evaluation of REDD+ the close of FY10, it is apparent that the pioneer- strategy options with newer analytic tools that ing REDD countries have greatly advanced their facilitate making choices among competing individually tailored Readiness preparation strat- options. egies, and have also begun to serve as leaders 5. A bridge has not yet been built between the and key sources of information for fellow REDD wealth of experiences at the local levels in man- countries that have more recently initiated their aging forest resources and land use change, own processes. and REDD+ policy frameworks and incentive Experiences in FY10 revealed a number of les- programs at the national level. sons that can help pave the way in FY11 and be- 6. Early cooperative development on rules for yond, both as countries continue the momentum REDD+ transactions and benefit-sharing are in preparing for REDD+ and in laying the founda- essential prerequisites for broad support and tion for activities under the Carbon Fund. Below the legitimacy of REDD+ programs. are some of the lessons from the point of view of 7. Addressing methodological issues such as the FMT: reference levels and MRV are key entry require- ments for REDD+ programs. In the absence of 1. The cross-cutting nature of REDD+ presents clear policy guidance from the international new challenges in sectoral coordination that level and price signals for REDD+, countries may be solved by embedding REDD+ strate- can embark on a stepwise approach to building gies in overarching policy frameworks (e.g. low- their capacity in these areas. carbon development strategies). 8. Early initiatives to finance REDD+ have illu- 2. Political will is required to create highly quali- minated a paradox: In spite of the high-level fied, cross-sectoral teams capable of resolving international commitments to REDD+ funding, competing interests into a coherent national moving resources to REDD+ countries through plan for REDD+. multilateral agencies requires due diligence 3. Countries are now grappling with how to ensure and safeguards that take time. the inclusion of stakeholders in REDD+ policy 9. Progress on REDD+ will stall if it is cast as a way development and implementation, pointing to to solve all problems. 32  |  Forest Carbon Partnership Facility FY2010 Annual Report  |  33 Carbon Finance Unit The World Bank 1818 H Street NW Washington, DC 20433, USA HelpDesk@carbonfinance.org www.carbonfinance.org www.forestcarbonpartnership.org