1. Reducing Emissions from Deforestation and Forest Degradation Forest Carbon Partnership Facility Participants Committee Meeting Panama, March 11-13, 2009 Carbon Fund Status & Treatment of Shared Facility Costs

2. Outline of today’s discussion I.FCPF Carbon Fund Status II.Background on the Carbon Fund Budget III.Shared Facility Costs  Preview of decision to be taken by PC in June 2009 IV.Next Steps on the Carbon Fund Outline / Overview

3. Current Commitments I.FCPF Carbon Fund Status (March 2009)

4. Overview of funding I.FCPF Carbon Fund Status  Very pleased to note that we have signed an additional Participation Agreement for the Carbon Fund, with the European Commission now joining us as a full Participant.  Since the UK contribution was provided to the Bank in February 2009 through the Strategic Climate Fund – the Carbon Fund has now raised more than $50 million.  With this level of finance, the Carbon Fund can enter into carbon transactions to pay for emission reductions from a program of a REDD Country Participant whose Readiness Package has been approved by the PC.

5. Funding Prospects I.FCPF Carbon Fund Status  Regulatory uncertainty and the current financial crisis pose challenges in fund raising, especially from private entities. However, the prospects of the fund over the medium term appear strong.  It will take some time for even the most advanced REDD countries to go through the readiness process. As they do, we expect to have more regulatory clarity on REDD under the UNFCCC.  Many private and public entities continue to show strong interest in REDD transactions and in the Carbon Fund of the FCPF.  While we are already in a good position to pilot and test carbon transactions, we are also confident that as countries are declared ready by the PC, we will be able to raise more funds for carbon transactions.

6. The Budget process per the FCPF Charter  FCPF budgets – for both the Readiness Fund (RF) and Carbon Fund (CF) – are approved annually.  Both the RF and CF budgets are based on the World Bank fiscal year, with FY09 = July 1, 2008 through June 30, 2009.  The PC approves the annual RF budget, which includes ‘Shared Costs’ of running the FCPF; the FY09 RF Budget was approved in October 2008.  After the CF is declared Operational, the Carbon Fund Participants will separately approve the budget for operation of the Carbon Fund. II. Background on the Carbon Fund Budget

7. Activities that cut across both the Readiness Fund and Carbon Fund The FCPF Secretariat  Overall program management and expenses related to maintaining partnerships among the many stakeholders of the FCPF  REDD Country Participation in Annual and PC Meetings  Participation of the Indigenous Peoples’ Observer REDD Methodology Support  Work of independent Technical Advisory Panels (TAPs) in support of FCPF Participants, advancing global topics such as valuation of emission reductions and reference scenarios  TAP review of R-PINs, R-Plans, readiness packages, etc.  Ensuring adequate FCPF liaison with international teams developing REDD methodologies  Indigenous Peoples capacity building program III. Shared Facility Costs Handling of Shared Costs (1)

8. III. Shared Facility Costs Handling of Shared Costs (2)  Consistent with the Charter, the Carbon Fund would assume 35% of these costs over time unless otherwise decided by the PC; the Readiness Fund would assume 65% of the costs.  It was noted in October that appropriate phasing of the Shared Costs borne by the Carbon Fund will be proposed for decision in this PC Meeting.  However, since the Operational date of the Carbon Fund is not yet set, the decision on Shared Costs is better handled in the next PC meeting; at that time, another detailed budget discussion for the RF will also take place.

9. III. Shared Facility Costs  The FMT will make proposals to the PC before the June meeting, to suggest how the Shared Costs may be phased into the Carbon Fund.  The objective of ‘phasing in’ the costs was to ensure that early movers on the FCPF Carbon Fund do not cover a disproportionate share of administrative costs  creating a disincentive to CF Participation.  Thus, as a preview, the FMT proposals may include the following options:  Including the Secretariat costs in the Shared Costs for FY09; the shared costs of REDD Methodology Development would be added to the Carbon Fund in FY10; or  Phasing in all Shared Costs (both Secretariat and REDD Methodology Support) into the FY10 budget of both Funds. Handling of Shared Costs (3)

10. Next Steps  Proposed options for handling the Shared Costs of both FY09 and FY10 will be presented to the PC prior to the June 2009 meeting, and will be considered within that meeting’s budget discussion for the RF.  Presentation and discussion of the Carbon Fund’s administrative budget is proposed for the FCPF Annual Meeting in October 2009.  The FMT will consult with Carbon Fund Participants on strategic directions of the CF before the October meeting.  The FMT also proposes to convene a Carbon Fund Participants Meeting during the Annual Meeting of the FCPF in October. IV.Next Steps on the Carbon Fund

11. Thank You! www.forestcarbonpartnership.org