REDD+ Finance – is the money reaching the forests?

In recent years the transfer of climate finance has emerged as a policy response to equitably addressing climate change mitigation and adaption in developing countries. Much attention has been given to setting up the multilateral or bilateral mechanisms needed to classify, transfer and disburse the funds pledged by donor countries. Of those that have sprung up, thirteen out of the twenty-four major funds focus on REDD+ as the sole or a major objective.

For some observers it has been difficult to keep track of the progress made by the new funds, not least because all thirteen emerged in the space of three years. Nevertheless, using the UK government’s recently commissioned analysis of existing REDD+ targeted funds as a springboard, some preliminary analysis on the progress made by the REDD+ targeted funds can be carried out.

What is being financed?

As a starting point, progress can be defined as the stage at which the most funding for REDD+ has been applied. The three phases that denote the proximity of a country to full implementation of REDD+ based emission reductions are readiness, demonstration and roll out at scale.

At present there has been very little funding applied beyond phase one, with only three countries – Norway, Australia and the USA – targeting phase two, and one country – Norway – targeting the final phase. Rather than an inherent unwillingness to fund beyond readiness, however, this is likely a result of the fact that both the bilateral and multilateral mechanisms have a strategic focus largely on the first two phases.

How much has been spent?

The level of disbursement at each phase perhaps gives a greater insight in to the progress being made. For the multilateral funds the disbursement has a range from zero to twenty per cent of the funds committed, with the Global Environment Facility at zero and the UN-REDD programme at twenty per cent, with all other multilateral funds lying in-between.

The multilateral fund to which the largest amount has been pledged, the Forest Investment Programme, has disbursed a total of £2 million or 3% of the total £335 million pledged. The World Bank’s flagship REDD+ fund, the Forest Carbon Partnership Facility, with its Readiness Fund dedicated to investing in phase one and the Carbon Fund dedicated to investing in phases two and three, has spent 11.4% of its Readiness Fund and none of its Carbon Fund as of FY10.

When considering the rates of disbursement, it is worth remembering that disbursement does not necessarily mean expenditure. As an example, take the UN-REDD programme. Funds are disbursed to the forest country offices of the United Nations Environment Programme, Food and Agriculture Organisation and United Nations Environment Programme, who then administer expenditure on behalf of the UN-REDD programme.

The move away from multilateralism

Possibly in response to the slow progress made by multilateral mechanisms, or perhaps due to domestic political motivations, bilateral approaches seem to be emerging as the preferred funding channel for REDD+. According to the UK government’s analysis, to date 67% of committed REDD+ funding has passed through bilateral mechanisms.

The implementation of phases II and III also appears to be moving ahead much quicker through bilateral mechanisms. Take Norway’s Internal Climate and Forest Initiative as an example: it’s currently developing a results-based payment scheme whereby the government of Guyana can receive up to US$250 million over 5 years from 2010 for REDD+ based emissions reductions.

Scratching at the surface

The reasons for low funding levels and the move towards bilateralism are unclear. Multilaterals often cite poor forest governance and a difficulty in establishing clear monitoring, reporting and verification (MRV) guidelines as the prime reasons for the low funding follow through. The move away from multilaterals is often attributed to ill-equipped organisations with anachronistic disbursement procedures.

However, the greater speed of implementation of phases II and III through bilateral mechanisms, the apparent preference for bilateral funds and the slow progress made by multilateral funds suggest that the reasons above only scratch at the surface. Moreover, they hint towards the idea that determining the real reasons may require some introspective analysis by the funds themselves.

A comment of a reader:

Ruthi
26 July 2011