Financing REDD: New report from CIRAD recommends “sustained investments”

A recent report by CIRAD (La Recherche Agronomique Pour La Développment) sums up many of the key issues regarding REDD and recommends that instead of performance-based payments for reduced deforestation, sustained investment is needed.

Earlier this year, Alain Karsenty of CIRAD produced a report titled, “Financing options to support REDD+ activities”, for the DG “Climate Action” of the European Commission. Natcha Tulyasuwan (CIRAD), Global Witness and Driss Ezzine de Blas (CIRAD) also contributed to the report, which is based on a literature review of financing options.

The report can be viewed and downloaded below. And the 233-page literature review is available here.

The report provides an excellent overview of the discussions about financing REDD, including a useful history of REDD in the UNFCCC negotiations. It provides a timeline and explains the agreements reached at Cancun and Durban and outlines the concerns that remain to be negotiated if REDD is to succeed.

The report questions the narrow definition of performance commonly applied to REDD, and suggests that most “performances” will need previous “investments” in various sectoral activities to strengthen governance and institutional capacity. The main recommendations arising from this report are therefore to put “sustained investments” at the centre of REDD+ architecture and to redefine performance.

The report explains in detail the problems associated with REDD, such as baselines, permanence and leakage and looks at the various financing proposals for REDD: market-based, a “nested approach” and fund-based approaches. It also covers issues such as lend tenure clarification, governance and the risks of corruption. Several existing models are explained, including the Amazon Fund and the Congo Basin Forest Funds.

The conclusion explains the problems with performance-based payments and why “sustained investment” is needed:

Conclusions and recommendations

The theory of incentives that underlies the REDD+ mechanism suggests rewarding “performance”, leaving the choice of the means to governments. This approach has several shortcomings:

• Performance’ risks being artificially generated by overinflated and/or politically negotiated baselines. In a fund-based system, it would create windfall opportunities for a few governments and divert financial resources from an efficient use to tackle the key drivers of deforestation. In an offset system, it would additionally create more “hot air,” undermining existing commitments, and leading to inefficient and inequitable use of climate finance.

• The theory of incentives does not account for the fact that most governments in REDD+ countries have very limited capacity to implement the measures requested for obtaining the ‘performance’ that determines future payments.

• Financial incentives have little chance to address profitable forest uses such as oil extraction, mining and large-scale industrial agriculture entailing forest conversion at a scale which would make a difference in global emissions. Regulation and engaged civil society actions, possibly combined with financial incentives, are likely to be more effective then financial incentives alone in that respect.

• The main recommendations arising from this report is to put “sustained investments” at the centre of REDD+ architecture and to redefine performance

Future progress in REDD+ will require supporting nation states to develop and carry out legal and policy reforms that lead to long term and sustainable land use and improvements in governance, leading to improved management, use and conservation of forest land. This requires redefining the notion of performance from ex-post results towards results related to sustained investments in structural and long-term reforms that are needed for curbing deforestation and, as they focus on agriculture, tenure and governance, are “no regret” policies. It will also be critical for REDD+ recipient governments to understand that REDD+ benefits are related to capacity building, sustainable use of forest resources and land use that ensures social and environmental progress and secures the sustainable provision of goods and services.

• Sustained Investments and Performance
  “Sustained investments” should be understood as progressive disbursements pending on agreed performance indicators at a scale depending on the respective capacities of developing countries and for a duration that would encourage the swiftest convergence towards a high and sustainable level of forest cover.
  “Performance” should be understood in a broad sense, to encompass a mix of indicators based on the effective and sustained implementation of forest-related policies, with some elements of performance (like forest cover and forest fragmentation) that can be considered as “proxies” for reduced emissions. For example, incentivising government investment to clarify and secure tenure rights and remove the legal incentives to deforest for securing land tenure, would appear as a prerequisite to prevent “land-grabbing” and enable a range of measures targeted at integrated forest and agriculture public policies and sustainable community forestry, potentially linked to “investment-oriented” PES programmes.

Finally, addressing the drivers to deforestation which are under the control of governments of forested countries will not be sufficient to rescue rainforests if in-depth changes in global consumption patterns are not carried out, especially in industrialised countries. Whilst appropriate economic instruments can contribute to solving the problem, the ultimate solution (still) remains in the collective choices and both collective and individual behaviour: forests are not only depleted and cleared to meet basic human needs; they are often converted supporting response to new demands for meat, timber, energy and fibre which – at the end of the day – boils down to the issue of ever-increasing consumption.