Governance of Rainforest Resources: Trade-off or Rip-off

I had indicated in last week’s column that I would treat with three particular aspects of global climate funding (aid) as I wrap up for now, my analysis of the LCDS, the Guyana – Norway Agreement and associated arrangements, as well as several environmental topics related to global warming and climate change. The first of these aspects (the likely impact of the current global financial and economic situation on the flow of climate funds from the global North to the poor countries of the South, particularly the poor rainforest ones) was considered last week. This week I shall complete this discussion and proceed to the second aspect namely, the role of governance of forest resources in inducing flows of climate funds (aid) to the global South (again, particularly poor rainforest ones).

Wrap-up: A bigger problem

Previously, I have argued that the global economic and financial crisis, which started in the last quarter of 2007 is still so much with us that there can be no realistic expectation for anytime soon that there will be sustained flows of climate funds (aid) from rich to poor countries. The question which follows from this observation is: how likely is global economic recovery over the near-to-medium term and therefore, the reversal of this tendency? In my view, whether global economic recovery takes place this year or over the next two years, a bigger problem is looming on the horizon, which will dampen support for the flow of climate aid.

What is this bigger problem? Briefly, the recent global financial and economic crisis occasioned the largest internationally coordinated anti-cyclical public expenditure programme the world has ever known. Huge public deficits were incurred to finance these stimulus expenditures. So much so that the IMF projects by 2014, five of the seven leading developed economies would have debt-to-GDP ratios in excess of 100 percent. Presently, all members of the European Union’s Euro-zone have violated their Treaties related to allowable budgetary deficits and in several instances by amounts greater than multiples of four (4). Indeed, deficit – spending above 10 percent, for all countries, now equals 40 percent of global GDP!

Not surprisingly, in developed economies such massive anti-cyclical stimulus spending has generated a sea-change reaction in favour of fiscal austerity, strict control of government expenditure, and a halt to bailouts for private financial institutions and businesses. The concerns most frequently expressed are: “too much government control” of the economy, inflation, currency crises, and sovereign-debt crises based on private markets rejecting anti-cyclical stimulus-spending excesses.

Regrettably, this can only mean one thing: over the near-to-medium term we can anticipate very limited appetite for governments to take on new and additional public resource commitments, particularly to support poor foreign countries. In fact, the danger is such spending, including that already committed, will, in this sort of environment become expendable.  

Forest Resources Governance

The second aspect of climate aid to consider is the role of rainforest resources governance in its delivery. In truth, governance is a critical consideration. It has led to the imposition of rigid conditionalities, with which poor rainforest countries must comply before funding is dispensed. To cover this up, it is usual practice to term these as: “performance-based payments”. Thus the Guyana-Norway Agreement proclaims: “Norway would provide performance – based payments for avoided deforestation of up to US$250 million by 2015”.

What are these conditionalities (termed performance-based payments)? The Guyana – Norway Agreement exemplifies them, especially in regard to the “enabling activities” stated in the Joint Concept Note. These have to be satisfactorily executed in order to trigger performance – based funding from Norway. Thus, overall, the Government of Guyana is required to provide Annual Progress Reports, with the first of these covering the year 2009. This has been formally done and placed on the LCDS Website in April of this year. There it remained open for public comments for two weeks.

For readers convenience the enabling activities, which had to be met, include:

• An Outline of Guyana’s REDD+ Governance Plan
• Initiation of a Monitoring, Reporting and Verification System (MRVS)
• Establishment of a Project Management Office (PMO) and Office of Climate Change (OCC)
• Activation of a Multi-Stakeholder Process
• Annual Verification by Neutral Experts of the Completion of the REDD+ Enabling Activities
• Annual Assessment by Neutral Experts of Funds due to Guyana based on REDD+ Governance Indicator
• Establishment of an Independent Forest Monitoring System
• Engaging with the Extractive Industries Transparency Institute (EITI) and the EU Forest Law Enforcement, Governance and Trade Body (FLEGT)
• Establishment of the Guyana REDD + Investment Fund (GRIF)

Results-based indicators:
Trade-off or Aid

Most analysts writing from the perspective of poor countries view these results – based indicators as overly stringent conditionalities Next week I shall take up the discussion from this observation.