1. Forest Carbon Partnership Facility Participants Committee Meeting (FCPF PC3) Montreux, Switzerland, June 16-18, 2009 Sources and Uses of Funds in the Readiness Fund of the FCPF 1

2. At March meeting the PC requested the FMT to present a note on resolving the funding gap (Res PC/2/2009/1) To include: – Sources and uses of funds – Assessment of R-Plan (R-PP) progress Note already provided to PC (Note FMT 2009-4-rev) Introduction 2

3. Provide reminder of situation in March Explain current funding situation and the funding gap based on different scenarios Outline projected R-PP review timing Project when cash shortages could occur Clarify World Bank Trust Fund policy on commitment authority Explain different options and present recommendations of the FMT PC to discuss and reach agreement on a resolution Objectives 3

4. Funding Gap March 2009 4

5. Sources June 2009 No additional contributions or additional donors since March 2009 Increase from US$107 million only as a result of exchange rate fluctuations 5

6. Sources and Uses: Current Commitment (20+5) Deficit of US$2 million not a concern given several assumptions in the projections Indicates decreasing costs over time but difficult to project 6

7. Costs include estimates of full support to all 25 countries Costs include some support to final group of 12 REDD Country Participants (Round 3) – All costs of attending meetings – Some review costs – NOT Country Implementation Support costs Current Commitment (20+5) 7

8. Sources and Uses: Committed Funding only 8

9. Sources and Uses: Committed Funding plus Pledges 9

10. 10 R-PP Progress - 1

11. 11 R-PP Progress - 2

12. Previous targets may be slightly over- optimistic 3 R-Plans (R-PPs) reviewed at this meeting Possibly 4 to be reviewed in October 2009 Difficult to predict beyond that but – projecting 20 reviews in March 2010 – remainder (10) in June 2010 12 R-PP Progress - 3

13. Sources and Uses: 37 countries, Committed Funding only 13

14. Sources and Uses: 37 countries, including pledges 14

15. Standard basis of commitment is cash Readiness Fund already operating on non-standard basis of signed unconditional Donor Participation Agreements FCPF therefore has considerable flexibility relative to other World Bank managed Trust Funds But, unable to treat Germany’s pledge as a commitment Under World Bank Trust Fund policies No disbursements in excess of cash on hand World Bank Trust Fund Policies: Commitment Authority 15

16. Not mutually exclusive, can be combined Sources of Funds Option a: Additional Contributions from Donor Participants Option b: Additional Conditional Contributions from Donor Participants Uses of Funds Option c: ‘First Come, First Served’ Option d: Grant Plan Resolving the gap: 4 Options for the PC’s Consideration 16

17. Example 1: Funds drawn only if a certain number of countries (greater than 20) obtain approval for a Total Grant by a certain date Example 2: Another donor could guarantee German pledge – PC could commit Total Grants to 25 countries Option b: Additional Conditional Contributions from Donor Participants 17

18. Currently first 20 countries have priority Without additional funding, delays experienced by this first group of 20 countries can hold back Readiness Fund Equal eligibility after March 2010 previously discussed, but no resolution agreed Exception – immediate substitution in first group of 20 countries Remains an option – but when? Option c: ‘First Come, First Served’ 18

19. Planning grants on the basis of formal public pledges and conditional grants Requires formal public commitments Currently could plan for another 5 Total Grants Actual signature of grant agreement conditional on signed PA Reputational risk – for the FCPF and the Bank Difficulties over provision and cost of Country Implementation Support Option d: Grant Plan 19

20. Other sources of funding already available for REDD Country Participants Bilateral assistance to particular REDD countries by Donor Participants Whilst recognizing that to date all countries have indicated they would apply for a Total Grant (except Tanzania), if only 32 countries required a Total Grant: funding gap would be US$27 million Additional Considerations 20

21. 1. Reiterate call for additional contributions (US$63 million) 2. Invite conditional contributions 3. Institute ‘First Come, First Served’ after March 2010 (with exceptional substitution possible immediately) 4. Consider use of a grant plan on a select basis where it adds value to the current situation FMT recommends a combination of all options 1 to 3 Conclusion and Recommendation of FMT 21

22. Thank you www.forestcarbonpartnership.org 22