Interview with the World Bank in Indonesia: “REDD+ has opened a space for increased dialogue on difficult forest sector policy and tenure issues”

Interview with the World Bank in Indonesia, by email.

REDD-Monitor: Please provide a brief background about the World Bank and its history of involvement in the forests of Indonesia.

World Bank: Indonesia’s forests are a concern of the World Bank because of their social, economic and environmental importance. Forest areas in Indonesia are currently threatened with degradation, fragmentation and destruction. Forest loss undermines rural livelihoods, ecosystem services and Indonesia’s ability to meet poverty alleviation goals. Poor forest governance hurts the investment climate, rural economic potential, and Indonesia’s competitiveness and international reputation. Forest crime diverts public revenues from poverty reduction and development goals. As Indonesia continues to evolve as a middle-income country, there are opportunities to help the government find new ways of managing forest areas in partnership with local communities. Doing so would help contribute to equity, rural sector investment, jobs and growth.

During the early years of the reformasi era, the World Bank helped Indonesia build support for better forest management by providing analysis and advisory work; supporting dialogue processes like the Consultative Group on Indonesia; and supporting partnerships with civil society. These activities are covered in a report called Sustaining Indonesia’s Forests: Strategy for the World Bank, 2006-2009. The World Bank was able to support conservation and environmental awareness efforts through grant funding from the Multi Donor Fund for Aceh and Nias, the Global Environment Facility and NGO partnerships.

After the UNFCCC Climate Conference in 2007, REDD+ moved prominently into Indonesia’s climate agenda. During that time, the World Bank and other development partners supported the Indonesia Forest Climate Alliance to help the Indonesian government prepare early studies, plans and priorities for REDD in Indonesia. We are now working with the government – as well as UN REDD and other bilateral partners – to support Indonesia’s REDD+ readiness and implementation efforts through climate financing mechanisms, like the Forest Carbon Partnership Facility and the Forest Investment Program.

REDD-Monitor: What is the World Bank’s position on REDD and how is the Bank promoting this position in Indonesia? Please include an explanation of the various different World Bank institutions and initiatives that are involved in REDD, including FCPF, FIP, GEF, IFC and so on.

World Bank: The World Bank’s 2010 World Development Report, Development and Climate Change, advocated the need to “act now, act together and act differently on climate change”. In developing countries, we are working to support climate actions in country-led development processes; mobilize additional low cost and innovative finance; facilitate the engagement of all stakeholders; and accelerate deployment of new technologies. The international climate negotiations recognize that efforts to combat climate change must include reducing emissions from deforestation and forest degradation (REDD+) in developing countries. The basic idea is to reward individuals, communities, projects and countries that reduce GHG emissions from forests. Financial transfers – with better governance – can benefit the poor in developing countries and provide other social and environmental gains on top of the climate-related benefits.

Because Indonesia is a major emitter – land use change and forestry accounting for most of those emissions – the World Bank believes that assisting Indonesia to implement REDD+ efforts is a globally significant priority. Forestry and land-use governance issues are complex and challenging. Key issues contributing to deforestation include weak legal and political accountability; policies favoring large-scale commercial activity over small- and medium-sized enterprises; lack of protection for poor and indigenous land users; and corruption. Any scheme to change practices or reduce deforestation needs to be understood in this wider context of upstream institutional, governance, and incentive issues that cause downstream outcomes on forest and peat land. Progress on forest governance is essential for performance on a national REDD+ program.

The World Bank’s REDD+ finance efforts work through global partnerships and bilateral support to assist developing countries in their efforts to reduce emissions from deforestation and forest degradation. Many development institutions – including UNDP, UNEP and FAO through the UN-REDD Programme, the Global Environment Facility and bilateral development assistance agencies – are contributing to REDD+ development, implementation and financing. Individual developing countries are also using their own resources to finance necessary policies and investments. The World Bank manages the following multi donor funds that assist developing countries with REDD+ development and implementation.

• The Forest Carbon Partnership Facility (FCPF) is a global partnership focused on reducing emissions from deforestation and forest degradation, sustainable management of forests and conservation and enhancement of forest carbon stocks, which provides assistance for countries to become ready for REDD+ and performance-based payments.

• The Forest Investment Program (FIP) supports developing countries’ REDD+ efforts by providing scaled-up financing for readiness reforms and public and private investments, identified through national strategies.

• The Global Environment Facility (GEF) is an independent financial organization that provides grants to developing countries for projects related to biodiversity, climate change, international waters, land degradation, the ozone layer, and persistent organic pollutants.

• International Finance Corporation (IFC), a member of the World Bank Group, fosters sustainable economic growth in developing countries by financing private sector investment, mobilizing capital, and providing advisory services. IFC’s Indonesia Sustainable Forestry Program supports the creation of viable forest plantations on degraded lands, by working with forest plantation firms, sub-national governments, NGOs, local communities, and the broader forestry sector. IFC is also one of the partner agencies involved in the Forest Investment Program (FIP).

REDD-Monitor: How many people does the World Bank have working on REDD in Indonesia?

World Bank: About 5 people work substantially on REDD+ issues. The World Bank in Indonesia has 10 staff working in the environment unit which is supported by World Bank headquarters staff and the global partnerships.

REDD-Monitor: Please provide details of the REDD projects that the World Bank is involved in in Indonesia.

World Bank: A description of climate change, environment and forestry activities of the World Bank in Indonesia can be found on the environment page of the Bank’s website. The World Bank Environment Unit in Indonesia covers climate finance, forest and REDD+ issues; climate policy, finance and green economy issues (including control of global pollutants); biodiversity protection, including marine, coral, and terrestrial; engagements with civil society; and safeguard analysis and support.

REDD-Monitor: How does the World Bank work with local communities and indigenous peoples on REDD in Indonesia? Please give examples of how this work is carried out.

World Bank: Improved forest management can contribute directly to better quality of life for communities in terms of access to clean water and non timber forest products that contribute to health, shelter and nutrition. Better forest governance and revenue management can also improve the government’s ability to serve poor communities and indigenous groups through improved tenure, livelihoods support, and participation in decision making processes. In Indonesia, discussion of REDD+ has opened a space for increased dialogue on difficult forest sector policy and tenure issues. At the global level too, REDD+ and climate finance vehicles are creating opportunities for civil society groups to exchange information on how to engage forest dependent communities and indigenous peoples in decision-making and on how to pilot REDD+ related initiatives. In Indonesia, we are supporting a Strategic Environmental and Social Assessment, financed under the FCPF, that will assess potential impacts from national REDD+ programs and policies, formulate alternatives and mitigation strategies, and enhance the decision-making process.

The World Bank also strives to ensure that CSOs and indigenous peoples’ organizations actively participate in consultation forums and learning events. We employ specific safeguards policies and instruments to ensure that implementation of future REDD+ programs will not cause adverse impacts and will maximize benefits for local communities and the environment. Grant funding from FCPF and other funds is also being used to support CSO partners, like Telapak, to conduct studies on, and build the capacity of, indigenous communities. Most REDD+ efforts are at design and preparation stage, not at implementation. The National Community Empowerment Program (PNPM) provides an example of how the World Bank works with local communities in a community-driven development approach.

REDD-Monitor: I understand that the World Bank requires free, informed consultation but not free, prior and informed consent (as described in the UN Declaration on the Rights of Indigenous Peoples – and referred to in the Cancun agreement on REDD). Could you please explain the difference between consultation and consent and why the World Bank appears to be using safeguards that are weaker than those in the Cancun agreement.

World Bank: World Bank projects that affect Indigenous Peoples will not be approved unless it is found that there has been free, prior and informed consultation of the Indigenous Peoples leading to their broad community support. World Bank safeguard policies, especially the Indigenous Peoples policy, explains in detail how that is achieved and documented. The Cancun negotiators chose to take note of the Declaration, but not to include “free prior and informed consent,” which does not yet have a universally accepted definition. The World Bank has also taken note of the Declaration and we find that our policy is substantially equivalent with respect to the consultation standard.

REDD-Monitor: More generally, how does the World Bank anticipate that it will deal with any differences between the safeguards agreed by the UNFCCC and those of the World Bank?

World Bank: Given that our safeguards regime covers the Cancun safeguards we do not foresee any differences.

REDD-Monitor: According to Andrew Steer, the World Bank’s special envoy for climate change, there are 200 full-time staff working on carbon markets at the Bank. Carbon markets are currently at a standstill (as the Financial Times put it in September 2011), yet the World Bank seems to be relying on carbon markets to finance REDD. Could you please explain how you see the development of forest carbon trading.

World Bank: Carbon finance of about US$25 billion has leveraged US$125 billion in new investments that reduce emissions. This is a significant global achievement, considering that emission reductions are a highly regulated good dependent on agreement among countries, and the participation of thousands of individual investors, regulators and businesses. Many developing country clients have benefited significantly from this financial support, new technologies were introduced and several sectors made great progress towards more sustainable practices. Building on lessons learned, UNFCCC negotiations are now seeking to make carbon markets more efficient, more predictable and more able to deliver developmental and social co-benefits. With the first commitment period ending, markets have been weakening since 2010, but at the same time we see a longer term trend of businesses shifting to greener approaches in anticipation of future demand for cleaner goods and services. UNFCCC negotiators are also striving to develop a REDD+ framework through which developed country resources can help forested developing countries reduce emissions. As mentioned above, most of the Bank’s REDD+ programs are based on bilateral overseas development assistance, not carbon markets. A forest carbon market may develop in the future and there will be adjustments along the way.

REDD-Monitor: Currently, there is no global agreement on reducing greenhouse gas emissions and REDD is one of the few areas of progress at the UNFCCC level. Yet REDD as a carbon trading mechanism cannot possibly work unless we find ways of limiting the burning of fossil fuels. (There are two problems: 1. Very large areas of the forests are likely to be destroyed by climate change; and 2. Without a cap, trade cannot work, because without a cap there is little or no demand for carbon credits). How is the World Bank working to ensure that the UN climate negotiations include targets for a meaningful reduction in emissions from fossil fuels?

World Bank: Although the World Bank is not a party to the UNFCCC climate negotiations, we do have a strong interest in the outcomes because our developing country clients are most vulnerable to the impacts of climate change. The World Bank is supporting climate change activities in some 130 countries. We also seek to bring low cost financing and new technologies to developing countries to help curb emissions. Carbon finance is only one out of several climate finance tools to be used to achieve the desired development goal of our client countries in reducing emissions.

REDD-Monitor: Indonesia recently signed an agreement on illegal logging with the EU. What do you think that the lessons learned from the attempts to stop illegal logging might be for implementing REDD in Indonesia?

World Bank: There are certainly lessons for REDD+ implementation. The Voluntary Partnership Agreement (VPA) signed with the EU – and the prerequisite timber legality verification system (SVLK) – required development of legality standards and performance criteria, development of new Indonesian regulatory approaches, new institutional arrangements with third party monitoring and certification of inspectors, cooperation of government, business, civil society, and international development partners – and years of negotiation, technical assistance and partnership.

REDD-Monitor: Norway is the biggest REDD player so far in Indonesia. What is the relationship between the World Bank and Norway relating to REDD? How do the various aid agencies involved in REDD coordinate their activities?

World Bank: Indonesia’s agreement with Norway has accelerated preparation of a national strategy for REDD+, pilot province, moratorium, REDD+ task force and other actions. World Bank-supported operations in Indonesia are in line with the REDD+ Strategy and the Government’s REDD+ implementation efforts. The World Bank also provides analysis and technical assistance and shares global knowledge on REDD+ in response to Government requests. Development partners involved in REDD+ in Indonesia meet regularly and share information about their activities and plans. Norway also invests in global climate instruments, including FCPF and FIP, where the World Bank either acts as the trustee or implementing agency.

REDD-Monitor: What does the World Bank see as the biggest risks associated with REDD? How is the World Bank attempting to address these risks? Is there one single thing that if it happened, it would, in your view, make REDD better, or more likely to succeed in Indonesia?

World Bank: Important benefits can be derived from a robust national REDD+ initiative. Beyond the emissions reductions, REDD+ can lead to policy reform, performance-based incentives, improvements in livelihoods and sustainable environmental practices, and strengthened collaboration among local, national and international development partners. REDD+ can be seen as an opportunity to tackle governance issues in a meaningful way. Already, significant progress can be seen on these issues, with support from the highest political level, as well as a wide range of civil society and private stakeholders. However poor governance is a key risk for the implementation of REDD+, in many forested countries. Without the proper governance framework and safeguard, vulnerable people, in particular among indigenous peoples and local communities, may be harmed. The World Bank addresses risks through internal review, safeguards policies, project supervision procedures, governance and anti corruption plans, policy reform recommendations, and regular dialogue with a range of stakeholders. We envision a range of actions contributing to success across a range of institutions, both inside and outside the forestry sector.

REDD-Monitor: While there has been a great deal of talk about REDD in Indonesia and several REDD projects are at various stages of development, the rate of deforestation remains extremely high. The moratorium on forest concessions (part of Norway’s US$1 billion REDD deal) only runs for two years and is a long way from the moratorium on forest clearing that many observers hoped for. President Yudhoyono’s promise of reducing emissions by 41% by 2050 against business as usual has not yet made any difference to Indonesia’s greenhouse gas emissions. Corruption remains an enormous problem in Indonesia. Nevertheless, the World Bank remains optimistic about REDD in Indonesia. Please explain why.

World Bank: We see REDD+ as an important opportunity to tackle the underlying causes of deforestation. Indonesia has made very real achievements in a relatively short period. These include developing a national REDD+ strategy with broad consultation; a two-year moratorium on new forest cutting licenses; strengthened dialogue between community groups and the Government on land tenure reform; and an increasing number of local government heads taking the lead on local REDD+ initiatives. Forest cover data analysis shows that the rate of deforestation has been reduced, though still reaches about a million hectares per year. We believe it is realistic to expect continued progress and we are committed to further assisting the Indonesian government and all stakeholders that support REDD+ and governance improvements.

---

This interview is the first in a series of interviews with key REDD actors in Indonesia.