– World Bank Country Rep
‘…we are looking forward to supporting the government in implementing the LCDS and to make Guyana a best practice for the rest of the countries in the FCPF’ – Giorgio Valentini GUYANA is leading a group of 37 countries around the world that stand to benefit from the World Bank’s Forest Carbon Partnership Facility (FCPF), a Multi-Donor Trust Fund (MDTF) administered by the World Bank, according to the Bank’s Guyana Country Representative, Mr. Giorgio Valentini.

The participation in the FCPF is an initiative of the Guyana Government following President Bharrat Jagdeo’s approach to the international community for Guyana to get compensation from its forest value to future carbon markets.

As this is an initiative driven and owned by Guyana, the country is also likely to be the first to benefit from the FCPF’s Readiness Mechanism Phase grant of US$3.6M to help prepare the necessary environment to participate in the Carbon Finance Mechanism (or Carbon Fund) of the FCPF, he told the Sunday Chronicle in an interview.

At the FCPF Participants’ Committee (PC) meeting on June 16-18, 2009 in Montreux, Switzerland, the PC cleared the proposals for Guyana, Panama and Indonesia for funding under the Readiness phase (i.e. Total Grant, $3.6M), subject to compliance with safeguards and other Bank due diligence.

The FCPF was launched at the 13th session of the Conference of the Parties to the United Nations Framework Convention on Climate Change (UNFCCC) in Bali , and became operational in June 2008.

As of April 2009, 37 countries from Africa, Asia-Pacific and Latin America are participating in the FCPF, and 13 donors or contributors from both the public and private sectors are supporting the FCPF financially.

Valentini said a World Bank mission was here two weeks ago to discuss the Bank’s overall social and environmental safeguards policies, as well as good practices for stakeholders’ consultation and participation, and how these standards are likely to apply to FCPF operations.

The expert team came up with a “very positive assessment,” and the grant may be approved in the next few months, he said.

The Guyana Forestry Commission (GFC) did a superb job in documenting the issues for the Bank’s Readiness Preparation Plan (R-PP, formerly known as R-Plan) and Guyana is the only country cleared at the PC meeting that is undergoing the due diligence of the World Bank for approval of the FCPF’s grant, he said.

This means it will probably receive the grant before Panama and Indonesia, the other two countries that are at a similar stage of readiness, he said.

Valentini has apprised President Jagdeo of the findings, saying that “it’s a very good indication that Guyana is moving in the right direction.”

“I am a supporter of the climate change agenda of the country, and the proposed LCDS (Low Carbon Development Strategy) provides a very good entry point into the preparation mechanism for the FCPF and the future carbon fund mechanism. The President has well illustrated the benefits of Guyana’s forest to the world and the potential for improving Guyana’s socio-economic development. On this, we are looking forward to supporting the government in implementing the LCDS and to make Guyana a best practice for the rest of the countries in the FCPF,” he told the Sunday Chronicle.

“It’s a very unique opportunity, if you think about Guyana being the first of 37 countries worldwide in this,” he said.

He explained that the preparation phase to be supported by the grant involves a baseline and historical assessment of the forest to understand the rate of deforestation, changes in the forest, and the drivers of deforestation.

The grant is to prepare the country to move into the Carbon Fund Phase, which remunerates selected countries with Performance-Based Carbon Payments from carbon markets and/or funds, with a certain baseline, including a monitoring and verification system by which international organisations can monitor the forests for deforestation, the impact of mining and other factors, he said.

“Guyana can become the best practice after this is done…something that Guyana can be proud of and that can provide long-term sustainability to improvements in the social and economic sectors,” he said.

Valentini said the World Bank mission also discussed the consultation process for the draft LCDS.

He said the initial three-month period for consultation was a positive move by the government, and that it appears to follow a good consultation framework that includes good documentation of the activities and information through, amongst others, the LCDS’s website.

“The consultation process, compared to other countries, is much better (and) more informed…it could be improved like everything else.”

Valentini noted that President Jagdeo has indicated that the consultation will be ongoing.

“We met the President and he was very keen to hear our assessment; it is very important for him that both the FCPF and LCDS could be a driver for other things — more transparency, governance — and the mission was very pleased to hear his full support on improving the current consultation process necessary for moving forward with the agenda for climate change and collaboration with the World Bank,” he said.

FCPF background
DEVELOPING and industrialised countries asked the World Bank to develop a facility for demonstrating activities that reduce greenhouse gas emissions from deforestation and forest degradation in developing countries (REDD).

In response, in the summer of 2006, the World Bank began consultations on a proposed initiative with a number of countries and organisations, including environmental NGOs. These consultations highlighted the value of developing the facility in partnership with a broad range of actors — an approach that can balance the interests of potential donors and buyers, recipients and sellers and other stakeholders.

The discussions gained momentum in June 2007, with the G8 summit in Heiligendamm, Germany .

As part of the preparations for the summit, the G8 began a high-level dialogue with developing countries on reducing emissions from tropical deforestation.  The Summit Declaration supported the World Bank’s endeavour to form a global forest carbon partnership: “The World Bank, in close cooperation with the G8, developing countries, the private sector, NGOs and other partners, [is encouraged] to develop and implement such a forest carbon partnership as soon as possible.”

The World Bank said it can play a critical role in assisting developing countries by providing access to new funding, including private capital, to tackle deforestation and forest degradation and promote sustainable development.

A brochure on the FCPF on its website says:

“The World Bank Group has demonstrated its commitment to protecting the world’s forests through an active lending programme that has grown steadily from US$53 million in fiscal year 2004, to US$224 million in fiscal year 2008.

“Other relevant World Bank initiatives include the Forest Investment Programme, now in the design process, in addition to a large number of carbon finance projects that focus on land use, land-use change and forestry.

“The World Bank has considerable experience in designing pilot activities that pioneer carbon finance, attracting private and public monies to capitalise carbon funds, and creating new carbon assets.

“The Prototype Carbon Fund (PCF) began operations in 2000 — well before the Kyoto Protocol came into force — with US$180 million in capital and the participation of seventeen companies and six governments. Subsequently, the Bank continued to contribute new methodologies and approaches to carbon emission reductions through the bottom-up procedures of the Clean Development Mechanism (CDM) of the Kyoto Protocol.

“The Community Development Carbon Fund (CDCF) has, for example, been implementing carbon finance projects with specific community and poverty reduction outcomes in which carbon finance is used to leverage the concept of output-based aid.

Over the past nine years, carbon finance activities at the Bank have grown to include 12 carbon funds and facilities with a total capitalisation of over US$2.3 billion. These funds cater predominantly to parties seeking to comply with obligations in the first Kyoto commitment period (2008–2012).

“One of these funds, the BioCarbon Fund (BioCF), has been pioneering afforestation and reforestation activities under the Kyoto Protocol at the project scale, including new baseline and monitoring methodologies for calculating carbon sequestration and new approaches to development benefits for rural populations. The BioCF has also acquired experience beyond Kyoto with forest protection activities generating emission reductions at the project level, currently financing three pilot projects in Colombia , Honduras and Madagascar .

“The BioCF has developed a specific methodology for REDD projects, peer-reviewed by world experts in forestry. The FCPF builds on the BioCF experience for its future operations, but scales up to the national level in its approach, in order to address concerns about leakage from individual projects and to address economy-wide drivers of deforestation and forest degradation.

“In addition, the FCPF supports countries in ‘docking’ their forest protection projects to a national monitoring, reporting and verification system for REDD.”

It said the FCPF is designed to set the stage for a large-scale system of incentives for reducing emissions from deforestation and forest degradation in developing countries, providing a fresh source of financing for the sustainable use of forest resources and biodiversity conservation, and for the more than 1.2 billion people who depend to varying degrees on forests for their livelihoods.

The facility builds the capacity of developing countries in tropical and subtropical regions to reduce emissions from deforestation and forest degradation and to tap into any future system of positive incentives for REDD.  In some of these countries, the FCPF will also help reduce the rate of deforestation and forest degradation by providing an incentive per ton of carbon dioxide of emissions reduced through specific Emission Reductions Programmes targeting the drivers of deforestation and forest degradation.

The FCPF consists of two separate mechanisms, Readiness and Carbon Finance, each with its own trust fund for which the World Bank acts as Trustee:

The Readiness Mechanism, in which Guyana is being evaluated from the World Bank for participation, is assisting 37 tropical and sub-tropical developing countries in preparing themselves to participate in a future, large-scale, system of positive incentives for REDD.

This includes: (i) Preparing a REDD strategy and/or complementing the country’s existing strategy and policy framework for forest and environmental management, including answering questions of carbon ownership and benefit-sharing mechanisms;

(ii) establishing a reference scenario for emissions from deforestation and/or forest degradation, based on recent historical emissions and, possibly, an assessment of future emissions. The reference scenario is the reference against which countries will reduce emissions; and

(iii) establishing a national monitoring, reporting and verification system for emissions and emission reductions to calculate the reductions in emissions against the reference scenario.

Each country participating in the FCPF is addressing the challenges of deforestation and forest degradation in its own way and contributing valuable experience to the partnership.

In this way the FCPF is maximizing its learning value, by testing various approaches.

The Carbon Finance Mechanism
FEW countries will be selected to participate in this mechanism, through which the Facility will implement and evaluate pilot incentive programmes for REDD, based on a system of compensated reductions.

The selected countries, having (a) demonstrated ownership on REDD and adequate monitoring capacity; and (b) established a credible reference scenario and options for reducing emissions, will receive payments for reducing emissions below the reference scenario.

The structure of these incentive payments will build on the options for REDD that are currently being discussed within the United Nations Framework Convention on Climate Change (UNFCCC) process, with payments made to help address the causes of deforestation and degradation.

Within the Carbon Finance Mechanism, payments will only be made to countries that achieve measurable and verifiable emission reductions.

Together, these two mechanisms seek to learn lessons from first-of-a kind operations and develop a realistic and cost-effective large new instrument for tackling deforestation, to help safeguard the Earth’s climate, reduce poverty, manage freshwater resources, and protect biodiversity.

However, it is important to note that the Facility itself is not a panacea to “save the world’s forests.” Rather, it seeks to create an enabling environment and garner a body of knowledge and experiences that can facilitate development of a much larger global programme of incentives for REDD over the medium term (5-10 years).

The targeted volume of the facility is approximately US$385 million.