Update on the Forest Carbon Partnership Facility Steering Committee Meeting Paris, July 9, 2008

… Make REDD Happen A Partnership to …

Guiding Principles  Partnership  Developing (“REDD”) countries have equal voting rights with donors and CF participants on Participants Committee ( Observers)  Voluntary & country-driven  Neutral to climate change negotiations  Capacity building  Various kinds of performance-based financial approaches will be tested  Catalyst  $300 million will not save the world’s forests  Private sector is needed for scaling up  National  National strategies for REDD  National reference scenarios  Projects within national accounting approach  “National” does not mean “governmental” only  Test, learn and disseminate

Readiness Fund (Bank as Trustee) Readiness Fund (Bank as Trustee) Carbon Fund (Bank as Trustee) Carbon Fund (Bank as Trustee) FCPF Governance Participants Committee (PC) Facility Management Team (Bank) Facility Management Team (Bank) Ad Hoc Technical Advisory Panels Carbon Fund Participants Committee Carbon Fund Participants Committee Participants Assembly All Eligible REDD Countries, Donors and Buyers - Forum for exchange of information - Meets at least annually - Opportunity for ‘subgroups’ to meet and discuss experiences, elect their representatives Primary decision making body, including all policy issues Decision making on specific carbon transactions Observers

Two Mechanisms Readiness Mechanism READINESS FUND Capacity Building (2008-?) Carbon Finance Mechanism CARBON FUND Payments for Emission Reductions (2009-?) ~$100 million~$200 million

Incentive Payments for REDD Reforms & Investments for REDD Readiness FLEG, alternative livelihoods, alternative agribusiness investments, intensification of agriculture and cattle ranching, improved infrastructure planning, reforestation,etc. Reference scenario, REDD strategy, Monitoring system Value ≥ Cost FCFP Readiness Fund Inter alia Forest Investment Fund Inter alia, once operational FCPF Carbon Fund Inter alia Readiness + Investments + Payments

39 Requests for Participation & 24 R-PINs South America (7):  Argentina  Bolivia  Colombia  Ecuador  Guyana  Paraguay  Peru Meso America (7):  Costa Rica  El Salvador  Guatemala  Honduras  Mexico  Nicaragua  Panama SE Asia & Pacific (8):  Indonesia  Lao PDR  Malaysia  Papua New Guinea  Philippines  Thailand  Vanuatu  Vietnam Africa (15):  Cameroon  Central African Republic  Dem. Republic of Congo  Ethiopia  Gabon  Ghana  Kenya  Liberia  Madagascar  Republic of Congo  Senegal  Sierra Leone  Sudan  Tanzania  Uganda South Asia (2):  Nepal  Pakistan + 3 Brazilian states (Acre, Amazonas, Mato Grosso)

Contributions Announced and Formalized as of July 9, 2008

Steering Committee REDD Countries  Bolivia  Gabon  Ghana  Lao PDR  Liberia  Madagascar  Mexico  Panama  Vietnam Donors  AFD  Australia  Finland  Japan  Norway  Spain  Switzerland  United States (United Kingdom)

Timeline  October 2006: Start of consultations  December 2007: Announcememt in Bali  June 2008:  June 25: FCPF declared operational  Internal and external reviews of country submissions (Readiness Plan Idea Notes)  July 2008:  July 8: Technical Advisory Panel Meeting with 18 REDD Countries to discuss R-PINs  July 9-10: Steering Committee meeting to select initial countries in Readiness Mechanism  July 31: deadline for submitting R-PINs for second round  September 2008:  (September 17-19): Organizational Meeting

 Reference Scenario  Historical emissions  How many years and data points?  Future emissions?  Adjustment coefficient applied to past emissions?  Based on national development policy?  Estimation of carbon stocks  Forest inventory  Test various methodologies based on IPCC Good Practice Guidance and Guidelines Readiness Mechanism (1)

 National REDD Strategy  In the countries interested in REDD, how will emissions be reduced?  Where?  When?  At what cost?  Economic analysis  National or sub-national implementation?  Policies or projects?  How will investment costs be financed?  Who will participate in REDD activities?  How will they be able to participate?  Information, consultations, capacity building  Who will be allowed to sell?  Legal framework  How will additional social and biodiversity benefits be recognized?  Valuation, monitoring?  Sector strategies (environment, forestry, energy, transport, etc.) are the basis for the national REDD strategy, but the focus is the resulting emission reductions  The strategy must be national  Public sector  Private sector  Civil society  Indigenous peoples Readiness Mechanism (2)

 National Monitoring System  System design + implementation  National accounting of emissions  Link sub-national projects with national system  National registry including sub- national/private accounts Readiness Mechanism (3)

R-PIN Selection  3 chances to have R-PIN approved  July 2008  (September) 2008  (January 2009)  An R-PIN not selected can be improved based on TAP and SC comments and resubmitted  One TAP reviewer to check that comments have been taken into account  Participants Committee to reconsider R-PIN

Carbon Fund: What Would Be Created and Paid For?  Emission Reduction (ER) generated by reducing deforestation and/or degradation  ER = all rights, titles, and interests attached to a ton of CO 2 e of emission reduced  ER delivered to the FCPF when verification report is received  Performance-based payments  Carbon + other benefits  ERs distributed to Carbon Fund Participants through internal registry

ER Creation  High quality standards, set in accordance with IPCC Good Practice Guidance and Guidelines Emerging UNFCCC modalities Guidelines from Participants Committee  Quality control & enhancement ER Program based on REDD Strategy from “ready” country Selection among competing ER Programs by Carbon Fund Participants Committee, aided by Technical Advisory Panel World Bank’s due diligence Ex ante assessment by third party Ex post verification by third party

Other Work: Economics of REDD  3 seminars on the costs of REDD:  3 rd seminar (May 27, 2008):  Attended by leading economists + 60 Bank staff + 20 visitors.  Papers and presentations posted at  Consensus paper on different methods to estimate costs will be produced in August  Study being launched in Peru  Valuation Note for FCPF Carbon Fund being updated  Discussion on April 1, 2008  CF Price Advisory Committee

REDD Cooperation Example of Panama: R-PIN to FCPF Requested 8 Areas for Support Methods Issues in BLUE REDD Need: Panama in R-PIN to FCPF FCPFUNDP, UNEP, FAO Other Partners 1) Ensure methodology used in forest inventory allows estimating C stocks 2) Support implementation of SFM at national level 3) Assess historic emissions from deforestation and degradation: define technical requirement and how far back to assess 4) Projection of deforestation emissions into future 5) Revision of national REDD strategy: links bet. current development and REDD strategy 6) Design system to monitor emissions and emissions reductions from deforestation 7) Implement the monitoring system 8) Design of system for targeted financial incentives for REDD

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