1. GCF Working Group 2: Coordination & Accounting Governors’ Climate & Forests Task Force Aceh Meeting – May 18-19, 2010 Tony BrunelloCalifornia Department of Natural Resources William BoydGCF Secretariat & University of Colorado Law School

2. Overview Update on WG 3 status and activities Update on WG 3 status and activities Key issues Key issues Update on 2010 activities Update on 2010 activities Report from Sacramento technical workshop on REDD regulatory design Report from Sacramento technical workshop on REDD regulatory design GCF action items for 2010-2011 GCF action items for 2010-2011

3. Working Group 2 - Update Mato Grosso was lead in 2009; California is current lead; GCF secretariat has been supporting – need additional support Mato Grosso was lead in 2009; California is current lead; GCF secretariat has been supporting – need additional support Sacramento Technical Workshop on REDD Regulatory Design generated options paper and recommendations for WG 2 consideration Sacramento Technical Workshop on REDD Regulatory Design generated options paper and recommendations for WG 2 consideration Beginning work on nesting & reconciliation of projects-level activities with state/province performance – need more private sector input Beginning work on nesting & reconciliation of projects-level activities with state/province performance – need more private sector input Exploring models for multi-stakeholder processes and safeguards Exploring models for multi-stakeholder processes and safeguards

4. Working Group 2 – Key issues Crediting pathways Crediting pathways State-level accounting State-level accounting Nesting & reconciliation of project activities with state/province accounting Nesting & reconciliation of project activities with state/province accounting Monitoring, reporting & verification (MRV) Monitoring, reporting & verification (MRV) State-level performance State-level performance Nested project performance Nested project performance Safeguards Environmental Protection of interests Benefit sharing Multi-stakeholder processes Enforceability Linkage agreements

5. C REDITING PATHWAYS T WO POTENTIAL PATHWAYS Credits issued by approved state/province REDD programs based on performance relative to crediting baseline and accepted into compliance systems Credits issued by approved state/province REDD programs based on performance relative to crediting baseline and accepted into compliance systems Direct crediting by compliance system to nested projects that are reconciled with state-level accounting – need more clarity on nesting architecture and reconciliation Direct crediting by compliance system to nested projects that are reconciled with state-level accounting – need more clarity on nesting architecture and reconciliation

6. S TATE /P ROVINCE B ASELINES S TATE /P ROVINCE B ASELINES Emissions reference level – starting point based on historical data (5 to 10 years) with adjustments for stocks to account for different circumstances Emissions reference level – starting point based on historical data (5 to 10 years) with adjustments for stocks to account for different circumstances Crediting baselines – X% reductions from emissions reference level by 2020 with additional requirement to maintain a certain percentage of stocks Crediting baselines – X% reductions from emissions reference level by 2020 with additional requirement to maintain a certain percentage of stocks

7. M ONITORING, R EPORTING, V ERIFICATION (MRV) Regulations should not be too prescriptive Regulations should not be too prescriptive Regulations should articulate key principles/criteria for MRV (and baseline determination) Regulations should articulate key principles/criteria for MRV (and baseline determination) Consistent with IPCC guidance and guidelines Consistent with IPCC guidance and guidelines Use of spatially explicit remote sensing Use of spatially explicit remote sensing Quantification of uncertainty + conservative approach that uses bottom of uncertainty range Quantification of uncertainty + conservative approach that uses bottom of uncertainty range Nested project MRV handled through approved third-party methodologies - Regulations establish some high-level criteria for nested REDD projects Nested project MRV handled through approved third-party methodologies - Regulations establish some high-level criteria for nested REDD projects Accounting for leakage at both state/province and nested project levels Accounting for leakage at both state/province and nested project levels

8. S AFEGUARDS : P RINCIPLES & C RITERIA Need to take account of principles & criteria already under development via stakeholder processes in states/provinces Need to take account of principles & criteria already under development via stakeholder processes in states/provinces Environmental: Environmental: Maintain flexibility to deal with other REDD+ activities if/when they become eligible Maintain flexibility to deal with other REDD+ activities if/when they become eligible Protection of interests: Protection of interests: Focus on ensuring due regard for rights/interests and full/effective participation in activity design and implementation Focus on ensuring due regard for rights/interests and full/effective participation in activity design and implementation Look to ongoing efforts under REDD+/CCBA; UN REDD; FCPF; etc. Look to ongoing efforts under REDD+/CCBA; UN REDD; FCPF; etc. Benefit sharing: Benefit sharing: Benefits not limited to credits/revenues from REDD activities Benefits not limited to credits/revenues from REDD activities Focus on generating direct benefits; participation; transparency on how REDD flows are managed; institutional mechanisms as part of state/province REDD programs Focus on generating direct benefits; participation; transparency on how REDD flows are managed; institutional mechanisms as part of state/province REDD programs

9. Safeguards: Operational Regulations require MRV for all safeguards; MRV also on the revenue flows (public and private) Regulations require MRV for all safeguards; MRV also on the revenue flows (public and private) Need certainty on review process – too much uncertainty will inhibit investment Need certainty on review process – too much uncertainty will inhibit investment Regulations identify safeguards that satisfy regulatory principles and criteria and invite third-party standards organizations to submit standards for approval Regulations identify safeguards that satisfy regulatory principles and criteria and invite third-party standards organizations to submit standards for approval Regulations then require independent third-party certification of nested projects and/or programs against the approved standards Regulations then require independent third-party certification of nested projects and/or programs against the approved standards

10. Enforceability Focus on reversal risk Temporary crediting problematic Liability on covered entities problematic For sector-based crediting require credit buffers as part of linkage agreements + residual liability rules (liability on state/province issuing credits?), insurance, etc. For nested projects – potential reversals could be managed under project accounting standard or under sectoral accounting framework

11. WG 2 – Key Objectives for 2010-2011 Further elaboration of design of subnational REDD programs Further elaboration of design of subnational REDD programs Developing recommendations on nesting and reconciliation of project-level activities with state/province performance Developing recommendations on nesting and reconciliation of project-level activities with state/province performance Developing model linkage agreement to link state/province REDD programs with compliance markets Developing model linkage agreement to link state/province REDD programs with compliance markets Further elaboration of safeguards and benefit sharing frameworks Further elaboration of safeguards and benefit sharing frameworks Enhancing stakeholder input and participation; developing models for multi-stakeholder processes that can be adapted to different jurisdictions Enhancing stakeholder input and participation; developing models for multi-stakeholder processes that can be adapted to different jurisdictions

12. Working Group 2 Recommended Action Items for Aceh Meeting Compile design recommendations for subnational REDD programs in report for review and approval at GCF September 2010 meeting to be finalized as GCF Report for COP 16 Compile design recommendations for subnational REDD programs in report for review and approval at GCF September 2010 meeting to be finalized as GCF Report for COP 16 Initiate private sector sub-working group on nesting and reconciliation of project-level activities with state/province performance with report ready for September 2010 GCF meeting Initiate private sector sub-working group on nesting and reconciliation of project-level activities with state/province performance with report ready for September 2010 GCF meeting Initiate process to develop model linkage agreement (2010-2011) Initiate process to develop model linkage agreement (2010-2011) Initiate process to develop lessons and recommendations from multi-stakeholder processes Initiate process to develop lessons and recommendations from multi-stakeholder processes