This material is developed to support the Report of the informal working group on interim Finance of REDD

Key messages: If we want to reach a 450ppm pathway (and hence have a reasonable chance of limiting warming to 2 degrees) the world must emit 17Gt less CO2e in 2020 than would otherwise be the case (and 35Gt less by 2030). This is tough and it requires action now 4

, Key messages: G8 and MEF leaders recently agreed to limit warming to 2 degrees – working back from that implies that we would need to reach at least a 450ppm pathway (the middle green line) to achieve that target. Project Catalyst analysis is grounded in the 450ppm pathway and what it takes to reach that pathway This analysis is from the IPCC 4th report – it estimates that a 450ppm pathway (with an overshoot) provides a 40-60% chance of limiting warming to 2 degrees

Key messages: Here is the good news – it is possible. The cost curve shows that 17Gt is possible – total of c.18.5 Gt at <€60/t – but that all countries will have to act, across all sectors. The GHG abatement cost curve ranks different abatement levers by cost (cheapest on left, most expensive on the right) and shows abatement potential from implementation of each lever (the width of the bar). The costs shown are incremental costs per ton of CO2e abated relative to the reference case, high carbon, alternative. It is based on detailed, bottom-up modeling of c.200 abatement levers Left hand side is mostly energy efficiency which actually pay back – i.e., in the self interest of countries. But, these are typically not easy to capture (agency issues etc.) Middle is mostly land use (inc. forestry) and power mix. Right hand side is new technologies (e.g., CCS). Capturing these opportunities requires new technologies to be driven down the learning curve In the short run (by 2020), over half of the opportunities lie in terrestrial carbon – not power as one might think. Terrestrial carbon and land use – deforestation is concentrated in developing countries and provides an opportunity for quick changes

Key messages: 5 Gt abatement potential below EUR 60/ton is available in the developed world. 12 Gt of further reductions need to be made to reach the 450ppm pathway. Further potential in the developed world have low potential and carry very high costs - ~1 Gt of additional abatement is known and available below EUR 100/ton - ~2 Gt potential from imposing behavioral changes such as reducing travel, shifting from road transport to rail, reducing heating/cooling and appliance use, reducing meat consumption. Opportunities in the developing world are larger and available at a lower cost - ~6 Gt from forestry - ~8 Gt in all other sectors

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5 Key messages: Developing forest countries with different national circumstances will need different amounts of support and time before they can achieve emission reductions. The incentive system therefore needs to be part of a wider, flexible and phased approach. The concept of a phased approach to REDD+ is under discussion in the UNFCCC negotiations, and the interim REDD+ partnership must adapt to an eventual UNFCCC definition of phases It is important to note that the interim period is only likely to cover phases 1 and 2 with phase 2 component (b) representing the keystone of the interim REDD+ financing proposal For each phase, incentives would increase, because both the finances needed for the necessary activities and the ensuing incentive payments for emission reductions (i.e., payment per tonne) would rise. There would thus be a built-in incentive for countries to increase their efforts and improve their monitoring systems, both desirable features of a well-functioning mechanism. Specific eligibility requirements for accessing all phases of REDD+ support will need to be determined by the UNFCCC. Whilst this is being developed, it is reasonable to assume that all developing forest countries that have shown a national commitment to developing a REDD+ strategy should be able to access funds for this purpose during the interim period. To enter phase 2, in addition to receive support under component (a), a country would need to demonstrate robust plans to address the key drivers of deforestation and degradation; demonstrate that the REDD+ strategy was developed through an inclusive and transparent multi-stakeholder consultation process and involve national stakeholders in the ongoing implementation of the national REDD+ strategy; demonstrate the existence of forest monitoring capability of sufficient quality for proxy based measurements that also safeguards the conservation of biological diversity and adhere to a set of internationally accepted safeguards for the handling of funds and application of internationally agreed social and environmental measures. To receive payments under component (b), a country would also need to demonstrate performance against agreed reference levels. 11 11

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Key messages: The results-based incentive structure relies on 3 supporting elements The first component is access to the relevant knowledge, including technical support in developing REDD+ strategies and broader low-carbon development strategies. The second component is access to sufficient investment capital for the development of sustainable agricultural and forest industries, and the use of innovative financial instruments for that purpose. The third component is measures to promote sustainability in the global agricultural and forest sectors.

Key messages: Addressing deforestation and forest degradation through interim REDD+ will require substantial financial flows to developing forest countries in addition to developing countries’ own efforts. As outlined above, two broad categories of international financing will be needed: Financial support including grants for budgeted activities including capacity building and enabling policies (phase 1 and phase 2, component (a)). REDD+ payments for emission reductions and/or removals to incentivize economic choices and sustainable development consistent with forest conservation and growth (phase 2, component (b), and phase 3). In addition to these two types of financing, and directly related to a functioning incentive structure, debt capital from public, private and bi- and multilateral development banks will be needed for investments in, for example, sustainable production in the forest and agricultural sectors to support forest-based mitigation and ensure long-term sustainability through low carbon economic development. 14

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3 Key messages: EUR 15-25 billion of funding is required to achieve a reduction of 25% in global deforestation rates in 2015. The funding need ramps up from EUR 1.2 bn in 2010, and increases to EUR 5.3 bn in 2015. There are three components of the payments of which the majority (~90%) is payments for emission reductions: Readiness costs, EUR ~2 billion. Supporting strategy development and implementation in developing forest countries REDD+ incentive payments, EUR ~15 billion. Payments based on actual results and assuming reaching 25% reduction in deforestation rates by 2015 Peat emission reduction payments, EUR ~3 billion. Based on 25% reduction in peat emissions by 2015. 16

7 Key messages: This analysis compares emission reduction potential from an interim REDD+ partnership with alternative approaches to abatement. Interim actions on REDD+ is relatively more cost effective and has a higher emission reduction potential in the short term.

Key messages Implementing REDD+ in an effective and credible manner – ensuring environmental integrity of results, fiduciary transparency, and appropriate social and environmental safeguards – will require a set of rules and institutions to coordinate efforts, support implementation, verify performance, and resolve potential conflicts The discussion on institutional set-up for climate change in general and REDD+ in particular is ongoing and lively. Regardless of the set-up, it would be highly desirable could interim provisions for REDD+, as well as institutions to deliver it, be agreed at Copenhagen. No effort should be spared to make the UNFCCC mechanism successful. 19

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