WRI Publications Feed: Governance & Access

Environmental and Social Policies in Overseas Investments: Progress and Challenges in China

Sarah Parsons — Wed, 08 May 2013 16:57:41 -0400

Summary

Like other countries that invest overseas, China—through the projects it finances and executes—can bring great benefit to the countries and communities in which it invests (“host countries”). However, investments can pose challenges and risks to host and investor countries. Effectively tailored environmental and social policies can identify and mitigate not only unanticipated environmental and social harm, but also some of the investment risks that can undermine the long-term financial success of a project.

Even in the midst of the 2008–09 global financial crisis, China’s outward foreign direct investment (OFDI) continued to grow.1 Between 2008 and 2009, China’s OFDI flows grew nearly 8 percent, while total world OFDI flows during the same period decreased nearly 40 percent (Unctad Stat 2012). In both 2009 and 2010, the Export-Import Bank of China and the China Development Bank together lent more than the World Bank did to developing countries (Dyer, Anderlini and Sender 2011).

Environmental and Social Policies in Overseas Investments: Progress and Challenges for China examines trends in China’s overseas investments and considers how social and environmental policies can reduce investment risks and enhance the positive impacts of China’s OFDI. We focus on three major forces in China’s OFDI: the central government, financial institutions, and centrally owned state-owned enterprises (SOEs). Although a variety of institutions are involved in overseas investments, the majority of Chinese OFDI originates from centrally owned SOEs, and its OFDI growth is fueled largely by the strong lending capacity of its financial institutions, especially the China Development Bank and the Export Import Bank of China. Aid, trade, and other types of financial interest that may be associated with overseas economic interests are not addressed here, nor are overseas investments by collectively or privately owned companies.

As China continues to expand overseas investments, understanding and managing the environmental and social impact of these investments in host countries can help it build mutually beneficial relation-ships with host countries. Already, methods to address environmental and social issues in overseas investments are emerging in China. Chinese regulatory authorities are creating guidelines in their areas of jurisdiction, and individual financial institutions are developing and refining their own policies. International experience with environmental and social risk mitigation offers a useful context for Chinese investors and policymakers to consider as they continue to develop these overseas investment policies.

Moving forward, China faces several challenges, not the least of which is a lack of understanding of the regulatory and legal environment in host countries. Attention to host countries’ regulatory and legal environments must be ratcheted up if investment risks are to be reduced. Supervisory challenges and coordination among ministries should also be prioritized. Finally, even though governments, financial institutions, and corporations have produced multiple guidelines and policies to guide more sustainable overseas investments, implementation remains a major challenge. Sufficient resources should be directed toward implementation to overcome barriers such as cost, coordination of resources, and time.

While these challenges are real, China’s rapid economic growth and global presence also create opportunities that offer insight for a global audience. China can shape the direction and return of its OFDI to maximize positive impact and achieve “win-win” relationships with host countries. As an experienced recipient of OFDI, China can now apply those lessons as it invests abroad. In addition, China can step into facilitator and leadership roles in the international agenda of promoting sustainable cross-border investment, especially in developing countries.

This issue brief is the first in a series of WRI publications by the International Financial Flows and the Environment (IFFE) project that examine the role of environmental and social policies in overseas investments. Future publications will look at the “business case” for adopting stronger environmental and social policies, and will include case studies of overseas investments from China and other countries.

Putting the Pieces Together for Good Governance of REDD+: An Analysis of 32 REDD+ Country Readiness Proposals

Sarah Parsons — Wed, 17 Apr 2013 14:05:45 -0400

Executive Summary

Developing countries are receiving new financial and technical support to design and implement programs that reduce emissions from deforestation and forest degrada¬tion (referred to as REDD+). Reducing emissions from forest cover change requires transparent, accountable, inclusive, and coordinated systems and institutions to govern REDD+ programs. Two multilateral initiatives— the World Bank-administered Forest Carbon Partnership Facility (FCPF) and the United Nations Collaborative Pro¬gramme on Reducing Emissions from Deforestation and Forest Degradation in developing countries (UN-REDD Programme)—are supporting REDD+ countries to become “ready” for REDD+ by preparing initial strategy proposals, developing institutions to manage REDD+ programs, and building capacity to implement REDD+ activities.

This paper reviews 32 REDD+ readiness proposals sub¬mitted to these initiatives to understand overall trends in how eight elements of readiness (referred to in this paper as readiness needs) are being understood and prioritized globally. Specifically, we assess whether the readiness proposals (i) identify the eight readiness needs as relevant for REDD+, (ii) discuss challenges and options for addressing each need, and (iii) identify next steps to be implemented in relation to each need. Our analysis found that the readiness proposals make important commit¬ments to developing effective, equitable, and well-governed REDD+ programs. However, in many of the proposals these general statements have not yet been translated into clear next steps.

Key Findings:

Discussions of stakeholder participation, non-carbon monitoring, and cross-sectoral coordination are the strongest in terms of the number of readiness proposals that identify issues as relevant for REDD+, discuss key challenges and options, and propose clear next steps (e.g., studies, processes, institutional support costs).
Few REDD+ countries consider specific design op¬tions or challenges related to REDD+ benefit sharing, conflict resolution, or revenue management systems, although most include plans to address these issues as readiness activities move forward.
Relatively few readiness proposals identify specific next steps to address land tenure challenges or estab¬lish mechanisms to coordinate with local institutions during REDD+ planning and implementation.
Cross-cutting issues such as vertical coordination of REDD+ programs and coherence of proposed new REDD+ bodies with existing forest sector institutions have not been explicitly considered in most readiness proposals to date.

Delivering on the commitments made in the readiness proposals will be crucial to building stakeholder confidence and scaling up financial support for REDD+ programs. We make three recommendations that can help countries make short-term progress on REDD+ objectives and ultimately develop effective and equitable REDD+ programs:

REDD+ countries, donors, and civil society stakehold¬ers should consider gaps identified by our analysis and work to ensure that readiness activities promote comprehensive and integrated approaches to designing REDD+ strategies, systems, and institutions.
REDD+ countries should improve efforts to prioritize and sequence readiness activities to enhance transpar¬ency on how readiness financing is allocated to differ¬ent readiness needs.
REDD+ countries should develop transparent and ac¬countable domestic systems for tracking progress on readiness activities to ensure that readiness proposal commitments to well-governed REDD+ programs are carried out in practice.

Mobilizing Climate Investment: The Role of International Climate Finance in Creating Readiness for Scaled-Up, Low-Carbon Energy

Sarah Parsons — Fri, 22 Feb 2013 15:20:51 -0500

Executive Summary

Between now and 2050, developing countries need an estimated $531 billion per year of additional investment in energy supply and demand technologies in order to limit global temperature rise to 2° C above pre-industrial levels. To achieve this scale of investment, developing country governments and custodians of international public finance will need to deploy limited public finance in ways that leverage an unprecedented volume of private sector investment. Despite growing global investment in low-carbon energy and falling costs, it will be difficult to achieve the scale and urgency of investments needed without the appropriate policy, institutional, industry, and financial conditions. Governments and their international partners need to undertake “readiness” activities designed to put in place the conditions that attract scaled-up investment and enable a transformation toward low-carbon energy development pathways.

Drawing on six developing country case studies, this report identifies a set of key lessons and insights for readiness. The report develops a framework to identify and prioritize readiness activities that will require public financial support to create the conditions necessary to scale up investments in renewable energy and energy efficiency (collectively referred to as low-carbon energy). The report discusses the implications of the findings for international climate finance and draws a number of recommendations for the Green Climate Fund (GCF). It targets international public funds and institutions looking to accelerate investment in low-carbon energy, as well as developing country governments looking to identify and prioritize activities for funding.

Enabling conditions for scaling up investment

We identify a number of policy and institutional, industry, and financial sector conditions that can attract scaled-up public and private investment in low-carbon energy. Policy and institutional conditions include plans and targets for low-carbon energy, institutional capacity to effectively implement climate change and energy policies, laws supporting investment in low-carbon energy, and regulatory and fiscal instruments to implement laws. Industry conditions include the capacity of developers to prepare bankable projects, information on renewable resource availability or options to conserve energy, engineering capacity, and the presence of a support industry and enabling infrastructure. Financial conditions include a stable financial sector with the capacity and range of financial products needed to support low-carbon energy.

In six case studies, we analyze the role that enabling activities have played in promoting scaled up investment in low-carbon energy, and the role that international public finance has played in supporting such activities. These case studies examine energy efficiency in Thailand, wind power in South Africa, solar water heaters in Tunisia, geothermal power in Indonesia, wind power in Mexico, and energy efficiency in India. Taken together, the case studies suggest two overarching determinants of success in scaling up investment: government leadership and effective responses to pricing distortions. When government leadership is strong, a commitment to policy and institutional reform and implementation of stated goals usually follows. This in turn strengthens the investment climate and increases investor confidence. In cases where market failures severely distort the market in favor of carbon-intensive energy sources, it has been more difficult to create the conditions that attract investment in low-carbon energy.

Lessons learned for the design of readiness activities

The case studies also reveal a number of lessons about the design of readiness activities and the role of international partners in supporting them.

Small amounts of long-term funding for enabling activities can help scale up investment

In each case study, small investments in enabling activities—from several hundred thousand dollars to several million dollars—helped pave the way for scaled up private and public investments by supporting the creation of conducive policies and market conditions. International support has been most effective when sustained over five or more years. Technical support can also be more effective if international advisors are integrated into national institutions and report to national, rather than international, authorities.

International support is likely to be more effective if it identifies and targets a few critical barriers to investment. In countries with comparatively few enabling conditions for investment, attempts to simultaneously surmount all investment barriers may result in resources being spread too thin to achieve a significant impact. Chapter 4 presents a framework that can aid governments and their international partners in identifying activities to support.

Strengthening the enabling environment should not end when investment begins. In each case study, readiness activities and larger investment took place simultaneously. Even in cases where the investment climate was already strong, there was still scope for additional enabling activities to address specific gaps.

Integrated, inclusive planning processes and policy and institutional reform are key to attracting investment

The integration of low-carbon energy into a broader development agenda can enhance coordination and alignment between different sectors of the economy. Civil society and private sector actors can bring valuable expertise and experience to the planning process, and play important roles in ensuring that low-carbon energy policies and plans are realistic, robust, and tailored to the needs of the country. International support should be aligned with national plans and priorities for effective and sustained outcomes, and should be flexible enough to respond in a timely manner to evolving priorities.

Changes to the policy and regulatory environment proved crucial to attracting investment on a significant scale in the case studies. International support for the design of policies is likely to be effective only if it is demand-driven and not seen as infringing on national sovereignty. Countries that have set up their own financial mechanism to support low-carbon energy projects are well positioned to implement their objectives effectively and independently, thereby reducing their reliance on international partners to finance their low-carbon energy needs.

Having the appropriate institutions in place to develop, implement, and regulate policy reforms—and empowering them with the mandate and resources to carry out their functions effectively—helped ensure that policies were coherent and consistent, which increased investor confidence.

In key institutions, strengthening the capacity of staff and management to carry out their functions is an important readiness activity that often requires international funding support. The case studies suggest that capacity-building support is most effective when carefully targeted to address particular skills gaps.

Tackling information barriers and strengthening industry and financial sector capacity can unlock investment

Public support for broad-scale renewable resource assessments or exploration can provide information on resource availability that is key to attracting investor interest. Similarly, measures to familiarize industry and other actors with low-carbon energy options—such as training centers, awareness campaigns, and seminars and workshops that bring together stakeholders—can strengthen industry knowledge of and capacity to implement renewable energy projects, and raise awareness of the potential cost savings from energy efficiency.

International support plays an important role in facilitating learning and demonstrating new financing models for renewable energy, as well as strengthening industry’s capacity to develop and implement low-carbon energy projects. In some cases, international support to strengthen the capacity of small and medium enterprises (SMEs) and improve their access to financing for low-carbon energy projects has helped unlock investment by this sector of the market.

Financial institutions can play a key role in opening the market for low-carbon energy technologies. However, some financial institutions lack knowledge of and experience with these technologies. Strengthening the capacity of financial institutions to support renewable energy and energy efficiency projects, including through pilot financing programs, has been important in scaling up domestic sources of finance for low-carbon energy in several cases. In some cases, the high risk—real or perceived—of investing in low-carbon technologies without a proven track record in the country has deterred domestic financial institutions. Mechanisms that carefully allocate risks to those best placed to manage them can help attract financing from domestic banks and other financial institutions.

A framework for guiding readiness support for low-carbon energy investments

Building on the experiences of the six case studies, we propose a framework to guide governments and their international partners in determining how best to provide readiness support to countries with low-carbon energy sectors in different stages of development. The framework describes some of the activities required to strengthen the enabling policy and institutional environment for investment. In the early stages of development, these include support for assessing energy options, engaging stakeholders in the energy planning process, capacity building for government agencies and civil society, technical support for developing plans and strategies, and outreach activities. In later stages, activities include support for designing and implementing regulations and fiscal instruments, and targeted capacity building for government agencies, including local governments.

The proposed framework also describes some of the activities needed to strengthen the enabling industry and financial conditions for investment. In early stages of development, these include renewable resource assessments and energy conservation awareness campaigns, capacity building for project developers and financial institutions, support for technology transfer and localization, feasibility studies and environmental and social impact assessments, and support for financial sector reform. At later stages, activities include strengthening engineering capacity for low-carbon energy projects, supporting ancillary industries (such as upgrading grid infrastructure), and supporting financial institutions to assess and finance low-carbon energy projects.

Recommendations for the Green Climate Fund

The six case studies illustrate different approaches that various international partners have used to support readiness activities. The lessons learned are intended to inform the recently established GCF as it attempts to identify how best to support a paradigm shift toward low-emission and climate-resilient development pathways. Although the GFC’s detailed operational modalities are not yet defined, it could take a number of approaches to support readiness. These include supporting readiness directly or partnering with existing institutions; establishing distinct channels and allocations for readiness or integrating enabling activities into existing channels and allocations; and supporting readiness through the private sector facility.

Implementation Strategies for Renewable Energy Services in Low-Income, Rural Areas

Sarah Parsons — Sun, 10 Feb 2013 10:10:46 -0500

Executive Summary

This issue brief is the first in a series of three that focus on expanding the delivery of affordable, renewable energy in developing countries. It describes the core business strategies employed by a group of socially oriented energy enterprises and organizations working to provide distributed, renewable energy services to low-income, rural communities and provides examples of how these strategies were implemented.

The enterprises and organizations described here promote the social, economic, and environmental benefits of delivering clean energy services to individuals and communities that are not well served by traditional energy providers. Their business models combine social and environmental objectives with entrepreneurship. Although these enterprises function across different countries and contexts, they are characterized by a common focus on clean, affordable, accessible, and scalable energy solutions. Millions of underserved people in 11 countries around the world have benefited from the work of the enterprises highlighted here.

This series is rooted in a three-day workshop held by the World Resources Institute (WRI) and the DOEN Foundation in March 2012 as well as follow up interviews that gathered the experiences of 25 socially oriented energy enterprises, organizations, and financiers who understand the energy needs of low-income consumers in developing countries.

Over the course of the workshop and interviews, participants identified four core strategies common to their business models: (1) understanding consumer needs, preferences, and capacity to pay; (2) demonstrating the value of a new technology or energy service delivery model; (3) building and maintaining consumer trust in the product and the supply chain; and (4) designing financing and payment schemes that fit within consumer energy budgets.

This brief examines each of these strategies, first through exploring its rationale and then by considering specific examples of its implementation. Although the energy access solutions discussed still face obstacles for scale up, several socially oriented energy enterprises and organizations have proven that with the right delivery mechanisms, and effective and efficient financing, many consumers can access affordable, cleaner energy services.

Summary of Developed Country ‘Fast-Start’ Climate Finance Pledges

Maggie Barron — Mon, 26 Nov 2012 15:41:50 -0500

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Reiterating a pledge made in Copenhagen in 2009, the Cancun Agreements of December 2010 formally commit developed countries to collectively provide resources “approaching USD 30 billion for the period 2010 - 2012” to support developing countries’ climate efforts. This so-called “fast-start” finance will help developing countries, particularly the poorest and most vulnerable, mitigate (reduce) their greenhouse gas emissions, and adapt and cope with the effects of climate change. These pledges also present an opportunity to build trust between developed and developing countries in the international climate arena, in turn fostering progress towards a comprehensive post-2012 international climate agreement.

WRI has synthesized available information on countries’ pledges and measures they have taken to make the pledged resources available to developing countries. The accompanying table sets out both the amounts and the mechanisms by which funding would be delivered. WRI has also looked at how countries indicate whether their pledges will provide “new and additional” funds compared to what they provide as official development assistance. In-depth analysis on a subset of countries’ fast-start finance contributions is available separately.

This table will be continuously updated as more information becomes available.

Q&A on this Analysis

(Updated on November 26, 2012)

Have developed countries met their fast-start finance pledge?

Based on our research, as of November 26, 2012, 23 developed countries and the European Commission have publicly announced their individual fast-start finance pledges, in addition to the European Union’s collective pledge. These pledges total USD 33.92 billion. While this represents a significant step in the right direction, the extent to which these pledges are consistent with internationally agreed principles for fast-start finance is unclear. The Cancun Agreements mandate that fast-start funds have a “balanced allocation between adaptation and mitigation,” be “new and additional,” be “prioritized for the most vulnerable developing countries, such as the least developed countries, small island developing States and Africa,” and include “forestry and investments through international institutions.” Because the details of this mandate have not been defined, it is not clear that developed countries’ fast-start finance contributions fulfill these criteria.

Finally, ensuring that pledges are actually delivered will be essential. According to reported information of the pledged funds, USD 28.06 billion has been requested and/or budgeted by the executive bodies of the countries during the fast-start period. In some cases, the legislative bodies have also approved these requests. The actual delivery and implementation of the finance, however, can be complicated to track, and is generally not documented in countries’ fast-start finance reports.

Do the funds have a “balanced allocation between adaptation and mitigation”?

Countries often specify the general objective that their fast-start funds will support. For example, of the USD 1.58 billion mobilized for fast-start by Germany in 2010 and 2011, 48 percent will support mitigation, 28 percent will support adaptation, 21 percent will support REDD+, and 3 percent will support multipurpose activities. In its 2010 fast-start finance report, Germany highlighted the challenges of identifying suitable adaptation projects as the reason for this, and recognized the need to adjust the allocation of funds across the three areas of mitigation, adaptation and REDD+. In the case of both Japan and the United States, a large majority of fast-start finance supports mitigation objectives. The grant-based portion of their contributions, however, gives more balanced consideration to adaptation. Several countries involved in the Interim REDD+ Partnership — a process created parallel to the UNFCCC to ensure effective and sustainable REDD+ (reduced emissions from deforestation and forest degradation) actions over the next few years — have also specified that at least 20 percent of their funds will support REDD+. However, there is no agreed-upon definition among countries of what constitutes a “balanced allocation.”

Are the pledged funds “new and additional”?

“New” funding represents an increase relative to pledges or allocations from previous years. A number of pledges include restated or renamed commitments already made in the past. For example, Japan’s Hatoyama Initiative is a restructuring of the previously announced Japanese Cool Earth Partnership, with some new resources included in the Initiative. Countries such as the United Kingdom and the United States are counting previous commitments to the Climate Investment Funds (CIFs) as part of their fast-start finance pledge. The United States also counts its annual contribution to the Montreal Protocol Fund, a long-standing commitment that dates back more than two decades.

Funds that are “additional” ensure that their delivery does not result in the diversion of funds from other important development objectives. In other words, climate mitigation and adaptation funds should be additional to development aid. Parties to the UNFCCC have not yet achieved consensus on a clear and specific definition of ‘additionality’ that can be applied uniformly to developed country financial pledges. As a result, countries have proposed a variety of methods for defining the additionality of their fast-start finance.

Do the pledges include “investments through international institutions”?

Countries are channeling investments through a mix of multilateral, bilateral, and public-private institutions. Several countries, including Japan and the United States, are channeling a considerable amount of their funds through export credit agencies and other public-private channels. The Climate Investment Funds(CIFs) and the Global Environment Facility (GEF) are the primary multilateral institutions of choice through which other funds will be channeled. The governance of the funds has implications for the effectiveness and perceived legitimacy of the overall climate finance architecture. Developing countries generally prefer that institutions governing finance ensure developing country ownership of funded activities and prioritize funding for climate vulnerable countries. Developed countries tend to emphasize the need to minimize bureaucratic costs and ensure the effective use of resources.

Why is fast-start finance “prioritized for the most vulnerable developing countries, such as the least developed countries, small island developing States, and Africa”?

Countries under the Convention recognize that developing countries are highly vulnerable to climate change impacts because they have fewer resources to adapt to the effects of climate change, which can include increased droughts and floods, rising sea levels, and greater uncertainty in the agricultural sector. Least developed countries (LDCs) and small island developing States (SIDS) in particular are recognized as needing special consideration due to their extreme vulnerability. For these reasons, developed countries have pledged to prioritize fast start funds for the “most vulnerable countries.” Several countries are channeling their fast start finance through the Least Developed Countries Fund or the Adaptation Fund, many are channeling finance directly to SIDS and LDCs, and Australia in particular states that it will channel about one third of its fast-start finance to SIDS and about one quarter to LDCs.

What types of financial instruments are countries using?

There are several different types of financial instruments countries are using to deliver their fast-start finance, including grants, loans, equity, loan guarantees, insurance, and private investments. Many countries have provided some information on the type of financial instruments used. For example, the US reported providing USD 4.7 billion in grants through Congressional appropriations, USD 2.7 billion in development finance and export credits, which mostly take the form of concessional loans. Norway reports that all of its fast-start finance will be grants. Meanwhile, Japan’s fast-start finance includes grants and loans that meet ODA standards, finance in the form of ‘other official flows’, and may also count leveraged private finance, though this is ambiguous. However, reporting on the type of financial instrument used is neither comprehensive nor consistent. For example, little information is reported on the concessionality of the loans when used.

What are the next steps to ensure clarity on the delivery of climate finance pledges in the future?

The UNFCCC system for developed countries to report on the delivery of climate finance faces several challenges, which limit the utility of available data. For example, countries currently use multiple methods for reporting and often provided insufficient information even where requested. To address this, the Cancun Agreements mandate more frequent reporting by developed countries using an enhanced common reporting format.

While these enhanced reporting provisions will be essential for successful tracking of developed country climate financial flows, they will not be ready in time to provide guidance for reporting on the short-term, fast-start finance. In the meantime, the Cancun Agreements invited developed country Parties to submit information to the UNFCCC secretariat, for compilation, on the resources provided to fulfill their fast-start finance commitment by May 2011, 2012, and 2013. Nine developed countries and the EU submitted their reports on or around the most recent May 2012 deadline. While the Cancun Agreements include reporting provisions for fast-start finance, it does not provide guidance on what these reports should include, resulting in reported information that is neither fully comparable, transparent, nor complete, as is demonstrated by the gaps in information in WRI’s fast-start table, the Open Climate Network’s fast-start finance assessments, and in a report by IIED assessing the transparency of the May 2011 fast-start finance reports. The UNFCCC secretariat hosts a fast-start finance module on its finance portal that enhances the comparability of the reports but it remains limited to information provided by developed country Parties. It also does not capture information available on the faststartfinance.org website or on individual donor or recipient websites, or other sources such as NGOs, the private sector or multilateral development banks.

To build trust with developing country counterparts, developed countries should improve their fast-start finance reporting in the future, for example, by including more comprehensive, comparable and transparent information on the following seven elements in their annual fast-start finance reports: scale, method for determining that the money is “new and additional,” channeling institutions, objective, geographic distribution, status of the pledge, and type of financial instrument.

Athena Ballesteros, Emily Chessin, Kirsten Stasio, and Remi Moncel contributed to earlier versions of this Q&A.

Safeguarding Forests and People: A Framework for Designing a National System to Implement REDD+ Safeguards

Sarah Parsons — Mon, 26 Nov 2012 13:41:12 -0500

Executive Summary

Background

Around the world, members of governments, civil society, and the private sector are grappling with how to design and implement initiatives that reduce greenhouse gas emissions by slowing, halting, and reversing forest loss. These efforts have been spurred at least in part by the agreements onlong-term cooperative action (LCA) that Parties to the United Nations Framework Convention on Climate Change (UNFCCC) have made since 2007 in Bali, Cancun, and Durban. In these agreements, Parties stated that reducing emissions from deforestation and forest degradation, conservation and enhancement of forest carbon stocks, and sustainable management of forests in developing countries should be recognized as mitigation actions. Parties also agreed that these actions should be at least partially supported by Annex 1 countries. This series of actions, and the related global mechanism for recognizing and supporting them, comprise the global initiative known as REDD+.

REDD+ has attracted significant attention from governments, the private sector, and civil society, with particular interest in its potential for increasing the resources available for protecting forest ecosystems and promoting sustainable development.

However, to contribute to the sustainable management of forests, REDD+ actions will need to be implemented effectively, equitably, and sustainably. In a 2010 UNFCCC Conference of the Parties (COP) in Cancun, Parties recognized the importance of good governance to successful implementation of REDD+ actions. The Parties agreed on seven UNFCCC REDD+ safeguards, among them transparency, participation, protection of biodiversity, and protection of the rights of local people. If implemented correctly, the UNFCCC REDD+ safeguards can help ensure that REDD+ does not inadvertently harm communities and ecosystems by exacerbating existing inequalities.

The UNFCCC REDD+ safeguards provide broad guiding principles. It is now up to those designing, funding, and implementing REDD+ initiatives to determine how those principles should be put into practice. One option is to put in place a system at the national level. A national system to implement the UNFCCC REDD+ safeguards brings opportunities to strengthen the rules and institutions that currently govern forested lands. These opportunities, however, come with challenges and will require balancing of different costs and benefits. This report lays out a framework to help REDD+ countries develop a national system to implement the UNFCCC REDD+ safeguards. The framework presented here does not provide a ready-made solution, but it does provide a roadmap for navigating some of the choices that can arise during the design and implementation of national systems. The report also provides examples of how Brazil, Indonesia, and Mexico are progressing along this path.

A Framework for Designing a National System

The framework laid out in this report comprises four components: goals, functions, rules, and institutions. Safeguard goals define what the safeguards are meant to achieve. Safeguard functions are the processes by which those goals are achieved. A complete safeguard system supports each goal by:

anticipating potential risks and opportunities associated with national and/or subnational REDD+ actions, such as REDD+ strategies, activities, and projects;
planning to avoid harm and produce benefits to ecosystems and people by addressing social and environmental considerations in the design of REDD+ actions;
managing REDD+ actions by implementing safeguard plans and procedures that will help ensure desired social and environmental goals;
monitoring REDD+ processes and outcomes to demonstrate the achievement of goals, make course corrections, and deal with unanticipated impacts; and
responding to problems and grievances related to the social and/or environmental effects of REDD+ actions.

Safeguard rules and institutions ensure that safeguards are put into practice. A safeguard system’s rules outline the parameters of the system by defining what should or should not occur. In addition to ensuring that the parameters are designed in a transparent and participatory manner, the system’s institutions also ensure that they are thoroughly followed.

Creating a National REDD+ Safeguard System

If a REDD+ country chooses to develop a national system, the UNFCCC REDD+ safeguards provide an initial set of goals for that system. Governments, in collaboration with stakeholders, can add to these goals to meet national needs. They will then need to define how their established goals should be implemented. This task will necessitate defining the rules and institutions responsible for ensuring that all functions of the system are met, including everything from anticipating risks to responding if something needs to be changed.

Before putting in place new rules and institutions for a national system, a government should, together with stakeholders, (a) assess the degree to which existing rules and institutions already provide for the goals and functions of a REDD+ safeguard system and (b) assess risks to achieving safeguard goals given current gaps. After gaining an understanding of existing rules and institutions, a government and stakeholders can determine how to best fill those gaps. As part of any initial assessment, it may also be beneficial to consider the safeguard policies of potential funders in order to enhance coordination and coherence.

Many options are available to fill any gaps identified—in some cases, assessments may show that reforming existing rules, or empowering and strengthening existing institutions, may be the best solution. Alternately, new rules and institutions may need to be developed. Under that scenario, new national laws or policies could be created, new regulations put in place, or new procedures instituted by government agencies. Rules can be specific to REDD+ or apply more broadly. In terms of institutions, new government agencies or new positions within existing agencies could be created, or new responsibilities could be given to nongovernmental or private actors. Responsibility for implementing several of the functions of the safeguard system can be consolidated with one body, or spread out across multiple institutions.

Choices related to rules and institutions come with different sets of costs and benefits. For example, putting in place a new law may provide more long-term stability and greater buy-in from multiple sectors. However, new laws can take time to be approved or require a level of political support in the legislature that does not exist. Consolidating responsibility with one agency can help ensure effectiveness by reducing the need for coordination between agencies, but it may place too heavy a burden on one player and reduce the political buy-in often obtained by having multiple government agencies involved.

The right choice of rules and institutions for implementing the UNFCCC REDD+ safeguards will depend on a nation’s circumstances and may change over time. Evaluating options strategically in a transparent and participatory manner can help actors better utilize resources and plan for the future.

Conclusion

A national system for implementing the REDD+ safeguards can help ensure that all REDD+ activities within a country are covered by adequate safeguard policies. It can be more sensitive to unique national circumstances. It can help national governments coordinate REDD+ activities and their associated safeguard policies. While there will be many, sometimes difficult, decisions to be made by governments and stakeholders about how to design and implement a system that builds trust between all the actors involved in REDD+, the value of undertaking such a process will have benefits well beyond REDD+. This is perhaps the most important reason to invest the time and energy in designing a national system to implement the REDD+ safeguards. Many governments and stakeholders have already expressed the intent to go down this path, supporting them is the intent of this document and hopefully will lead to further enthusiasm and interest in exploring the options for developing national systems.

Promises Kept: Ensuring Ambition and Accountability through a Rio +20 “Compendium of Commitments”

Kevin Lustig — Thu, 29 Mar 2012 09:59:56 -0400

Introduction

In an effort to ensure that the UN Conference on Sustainable Development (Rio +20) generates meaningful outcomes, governments and other stakeholders increasingly support using the Conference to announce specific and time-bound commitments, and to agree on a “framework” to hold each other accountable for results. This so-called “Compendium of Commitments” has been criticized as suggesting a “bottom up”, “pledge-and-review” approach that will lead to business-as-usual outcomes that don’t meet the sustainable development challenges ahead of us. In the few months remaining, proponents of the Compendium of Commitments will have to demonstrate that this approach will lead to ambitious actions and that the accountability framework is sufficiently robust to incentivize and track performance. Rio+20 participants can learn from the range of experiences with past pledge-and-review initiatives and focus on ways to improve the quality of the content of pledges and of the institutions and procedures designed to review them.

Background

Rio +20 takes place in the context of a wider debate on the future of multilateralism and on the role of international law and international institutions in addressing global environment and development challenges. The 1992 Rio Earth Summit generated a variety of internationally agreed guidance and principles (Agenda 21, the Rio Declaration on Environment and Development), spurred the adoption of three major, binding multilateral environmental agreements (MEAs) (the UN Framework Convention on Climate Change (UNFCCC), the UN Convention to Combat Desertification, and the Convention on Biological Diversity (CBD)).

The 2002 World Summit on Sustainable Development (WSSD) focused on “implementation and compliance” rather than the development of new binding rules and obligations. To this end, it provided a platform for announcing “public private partnerships,” negotiated “bottom up” among interested parties (Brack 2000; Speth 2002; WRI 2004). But few of the more than 300 partnerships launched at WSSD have survived and the vast majority never resulted in significant change, due, at least in part, to the lack of any meaningful process for monitoring and review of performance.

The international climate change negotiations have, until recently, marked a similar trend away from “top down” treaty obligations contained in the 1997 Kyoto Protocol, towards “pledges” proposed by each party in the 2010 Cancun Agreements. Others suggest that the more recent (2011) agreement by climate negotiators in Durban to aim towards a “protocol, another legal instrument or an outcome with legal force” means that an interest in negotiated, binding commitments remains. They also point to recent international agreement on new binding protocols to the CBD, and progress on a treaty to reduce mercury emissions.

In any case, it has been clear from the onset of the current negotiations that this Rio process is unlikely to lead to a new set of legally binding treaties. Until recently, it has, however, been unclear what alternative form of outcome would justify holding a global conference on sustainable development at time of heightened concern about the future of the planet.

Yet there is some promise in the concept of pledges. Paragraph 128 of “The Future We Want - Zero Draft of the Outcome Document” states:

We welcome the voluntary commitments made at Rio+20 and invite the Secretary-General to compile them in a registry/compendium that will serve as an accountability framework.

A process that invites participants to come forward with “voluntary commitments”, rather than negotiating them collectively, raises a set of design challenges that will confront proponents of a compendium in Rio:

How do we ensure a common level of quality of commitments to be specific, time-bound, measurable, and ambitious beyond business as usual?
How do we ensure that commitments related to challenges requiring collective action, involving transboundary pollution, damage to the global commons, equitable access to scarce resources, are ambitious enough, in the aggregate, to make the needed difference?
How do we ensure that commitments that address fundamental rights and basic needs, such as information, participation and justice, and clean water, food, shelter, and health, are ambitious enough to respect individual human dignity?
How do we ensure that, in the absences of the force of law, there is an accountability framework robust enough to hold participants accountable to their constituencies and to each other to fulfill their commitments?

Getting Ready: A Review of the World Bank Forest Carbon Partnership Facility Readiness Preparation Proposals

admin — Fri, 23 Mar 2012 10:43:01 -0400

The World Bank administered Forest Carbon Partnership Facility (FCPF) and the UN Collaborative Programme on Reducing Emissions from Deforestation and Forest Degradation in Developing Countries (UN-REDD Programme) are two leading multilateral efforts currently supporting developing countries to become ―ready‖ to reduce emissions from deforestation and forest degradation and enhance carbon stocks (REDD+).

This working paper is the eighth in a series of regular updates reviewing the Readiness Preparation Proposals (R-PPs) submitted by REDD+ Country Participants to the FCPF and the National Programme Documents (NPDs) submitted by UN-REDD Programme countries to the UN-REDD Programme. The analysis is based on a desktop review of each R-PP and NPD in order to understand how countries are considering fundamental issues of forest governance during the readiness phase. We assess whether the documents identify major governance challenges contributing to forest loss, and whether principles of transparency, accountability, participation, and coordination are being applied in the development of REDD+ institutions, systems, and plans.

The 7th meeting of the UN REDD Programme Policy Board and the 10th meeting of the FCPF Participants Committee will be held in Berlin, Germany, from 13-14 October and 17-19 October, respectively. This paper evaluates R-PPs from Central African Republic and Colombia submitted for formal consideration by the FCPF Participants Committee. Draft R-PPs from Guatemala and Mozambique were submitted for informal review, but are not analyzed in this paper. We also review Nigeria’s NPD, which will be considered for funding by the Policy Board.

Map of SBSTA Submissions: REDD+ Safeguard Information System

Kevin Lustig — Tue, 07 Feb 2012 09:27:01 -0500

Summary

In December 2010, the 16th Conference of the Parties (COP 16) to the United Nations Framework Convention on Climate Change (UNFCCC) requested the Subsidiary Body for Scientific and Technical Advice (SBSTA) to develop guidance relating to paragraph 71(d) of the Cancun Agreements in time for COP 17 in Durban, December 2011.

Paragraph 71(d) speaks to a system to provide information on how the safeguards in Annex 1 of the Cancun Agreements are being addressed and respected (termed the “safeguard information system” or SIS).¹

In June 2011, SBSTA discussed the development of a guidance document on the SIS, and invited Parties and accredited Observers to submit their views on such guidance.² Submissions were welcomed on: characteristics; design; provision of information; potential barriers, if any, to providing information on addressing and respecting safeguards; and other relevant issues.

SBSTA received 26 submissions in total, 14 from Parties and 12 from Observers. Several submissions represent the view of more than one Party or Observer. While most submissions followed the structure suggested by SBSTA in June, they often covered substantively different topics under each heading. In an effort to bring greater clarity to discussions surrounding the SIS, ClientEarth and the World Resources Institute (WRI) have divided the information in the submissions into four categories:

The Role of the Safeguard Information System
The Type of Information that Parties Should Provide
How to Collect and Provide Information
Other Elements of the International Safeguard System

A summary of our key findings for each category is provided below. Tables of the specific language from Party submissions make up the rest of the document. In some cases it was difficult to be certain of the exact meaning of the language included in the submissions.³ Every effort has been made to accurately reflect, in this abbreviated format, the views contained in the submissions. ClientEarth and WRI regret any misrepresentation of those views that may have occurred in an effort to achieve brevity, clarity and comparability.

This paragraph speaks to “a system for providing information on how the safeguards referred to in appendix I to [the Cancun] decision are being addressed and respected throughout the implementation of the activities referred to in paragraph 70 above, while respecting sovereignty.” ↩
SBSTA also invited input on other elements of REDD, including reference levels and MRV. Please note that document only reviews submissions related to the safeguard information system. ↩
For example, it was sometimes difficult to know when reading the submission if Parties/observers envisaged activities (like reviews) happening at the national and/or the international level. ↩

Grounding Green Power: Bottom-Up Perspectives on Smart Renewable Energy Policy in Developing Countries

Maggie Barron — Tue, 24 May 2011 12:51:13 -0400

Watch the summary interview with Lead Author Lutz Weischer

This paper was published by the German Marshall Fund of the United States in cooperation with the Heinrich Boell Foundation and the World Resources Institute.

Developing Countries in the Renewable Energy Transformation

In order to meet the intensifying climate challenge, the global energy system must undergo a fundamental transformation, with a rapid increase of renewable energy worldwide. Developing countries are at the forefront of this challenge, since they are expected to add around 80 percent of all new electric generation capacity worldwide in the next two decades.

The deployment of energy from renewable sources is accelerating in developing countries, and already accounts for a higher percentage of electricity generation than in the developed world. In 2008, non-OECD nations generated 21 percent of their electricity from renewable sources including large-scale hydroelectric power (compared with 17 percent in OECD countries), according to International Energy Agency (IEA) statistics. However, this figure must more than double by 2035, to 46 percent, in order to meet the IEA’s “450 scenario,” which outlines a climate friendly pathway for meeting global energy demands.

Transforming the energy system on this scale will require significantly increased support from developed countries, channeled through both bilateral assistance and multilateral institutions, as well as philanthropic initiatives. Our conclusions, derived from a series of case studies and a comprehensive review of existing literature, suggest that donors should deploy financial support more effectively by moving beyond a project-by-project approach to one that creates the right environment for investments in scaled-up, nationwide deployment.

This working paper seeks to assist in this process, by identifying key components of smart renewable energy policy in developing countries, focusing on the power sector. It also provides recommendations for maximizing the effectiveness of international support for deployment of renewable energies, drawn from these on-the-ground experiences in developing countries.

About this Working Paper

Chapter 1 introduces the approach and methodology taken in this paper and describes the key concepts we address. The second chapter discusses what developing countries are already doing to deploy renewable energy sources, and how they can be supported in scaling up such efforts. It also introduces a set of principles of smart renewable energy policy to propel such a transformation, developed by the World Resources Institute. These are based on insights drawn from case studies of existing renewable energy policies in 12 countries in Africa, Asia, and Latin America as well as from existing literature.

The following five chapters each examine one key element of smart renewable energy policy, discuss lessons learned, and identify needs for international support. These cover planning and strategy (Chapter 3), well-designed generation-based incentives (Chapter 4), an enabling policy and regulatory framework (Chapter 5), attractive financing conditions (Chapter 6), and the necessary technical environment (Chapter 7). Our findings and recommendations are summarized in Chapter 8.

Principles of Smart Renewable Energy Policy

We define smart renewable energy policy as the set of rules, regulations, and government actions that lead to an increased share of renewables in total electricity consumption in line with a country’s development objectives. Smart renewable energy policy encourages private investment, achieves its objectives in a cost-effective way, promotes continuous innovation, and is designed through transparent, accountable, and participatory processes.

Presentation

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