The World bank's strategy on forests and climate change

Gerhard Dieterle (World Bank Forest Advisor), Civil society event at the World bank spring meetings 2009, 24 April

By 2050 it is believed that 75% of fiber will be grown in fast growing plantations.
There are opportunities in this for developing countries, however the revenues must stay in the countries to be beneficial.

Mexico is the first to take out a climate related Environmental Sustainability Development Policy Loan (DPL).
There is a large gap in climate financing, particularly in areas like SADC, west Africa and South Asia.
30-40 countries might benefit from REDD. However, a large number of countries won’t benefit. Most funding will go to 5-6 countries, medium to large countries with large forests. Africa is the region which will benefit least. Small island states and some of the least developed countries will also not benefit.

IFC hasn’t funded any natural management projects in the last 25 years because of risks related to issues like land tenure, Indigenous Peoples rights, governance, etc.
There is also an investment gap in restoration of degraded forests in addition to a lack of funding for reforestation or aforestation of dry lands.

Forest Investment Program (FIP, Coments)— This is a pilot project under the World Bank’s climate investment funds.

There are phases of a REDD mechanisms:

1. REDD readiness (FCPF, UN REDD)
2. Reforms and Investments (UN-REDD, FIP
3. Global REDD fund/ market (UNFCCC)

A readiness plan (r-plan) is a technical assistance program focused on how to plan what it would take to have more climate-friendly forest management.

The forest Investment Program (FIP) falls between the REDD readiness level and the REDD market level. Its purpose is:

• Provide up front bridge financing for readiness reforms and investments identified through national REDD readiness strategy building efforts.
• Serve as a vehicle to finance large scale investment to implement policies and measures.
• Promote transformational change
• Pilot replicable models to leverage additional and sustained resources for REDD
• Incorporate a special initiative for Indigenous Peoples and local communities

Country eligibility for the program would be based on ODA eligibility and having an active multi-lateral development bank in the country. The criteria for program selection would based on a) the potential to contribute to FIP objectives and b) the country’s preparedness and ability to carry out plans.

The financial target for the FIP is $500 million. Several donors have expressed interest or pledged money. Among those who have pledged are Australia, the UK and Norway. The US, Denmark, Germany and possibly Finland are considering pledging

Governance

The idea is to focus on scaled-up investments rather than small grants. However, there will be another design meeting May 4-5th in which it is hoped that the design of the FIP will be finalized. Ghana and Norway are chairing the FIP design process.
The FIP will probably only be able to choose 5-10 countries. There will be winners and losers, so governance is important

The governance structure of the FIP is still being debated. There will be 6 donor country representatives and 6 recipient country representatives. Initially the recipient country representatives will be chosen through a regional consultation process to nominate a representative form that region. However, once a country has been chosen for a FIP project from that region, that country would be rotated in to the FIP Trust Fund Committee.

What is being debated is if other stakeholders like civil society, the private sector and Indigenous Peoples groups would each be given 2 representatives that would be a part of decision-making. The other option would be for these representatives to not formally be a part of the governance structure, but rather to be active observers.

Donor countries are more interested in having these groups as observers and including a good disclosure policy instead of having them be a part of decision-making.
The question for the FIP design committee is if civil society will walk away from the table if they are not given this more active governance role.

Safeguard policies: Once countries are chosen for FIP, the World Bank’s safeguard policies will apply.

Relationship to UN Process: The FIP would be subject to a sunset clause, meaning it would be phased out once there
Was UNFCCC architecture in place. However, there is still a window open, as far as the Bank has expressed it, in case the UN chooses to keep the Bank’s climate investment funds or transform them into something else.

Links to other Bank lending: A civil society representative during the meeting pointed out that a Clean Technology loan to Mexico was just 1 million, but then opened up the country for larger loans, reaching up to $1billion. She therefore asked if the FIP envisaged as being linked to larger world Bank funding.

The Bank’s response focused on the fact that the FIP is separate from the World Bank in that it isn’t the Bank itself making decisions about loans, but rather the Trust Fund committee. The Bank is an observer.

Nonetheless, there is currently a discussion with the International Finance Corporation (IFC), which has come up with a forest strategy. IFC thinks there needs to be an enabling framework for these types of forest investments to be effective and that the Bank is better at creating that framework, so they will collaborate.
This answer would lead o to believe that it is expected FIP loans will be seen as a way to leverage larger World Bank Group loans from both the private and public sector lending.

Forest Carbon Partnership Facility (FCPF) Update

Three countries have been chosen to develop readiness plans: Indonesia, Guyana and Panama. It is expected these r-plans will be finished by June and will allow these countries to access up to $3.6 million for their r-plans. This helps them leverage funding through other sources for readiness activities.

As with the FIP, the World Bank is presented as a facilitator and a trustee, but it has a committee which is the decision-making body.

After looking at these three r-plans FCPF may decide to revise the r-plan process. There will be an external review of the process of each of these countries, which will be synthesized into a single report. This synthesized report will eventually be made public.

The r-plans have nine components, which must be included. This includes how a country plans to manage environmental and social issues. As a bare minimum FCPF is requiring information on land use and forest policies as well as an outreach and participation plan.
Countries may not have the answers to all of the problems that are identified in the r-plan process, but they have to have identified those problems.

37 countries are on board with the FCPF. The goal is to get $185 million for r-plans. $50 million of this will be in a carbon fund. Currently the FCPF has $105 million. The FCPF hopes to be operational in one year, but no decision has been made yet.

Harmonization

FCPF has a draft set of guidelines as does UN REDD. There are currently discussions taking place, trying to harmonize the approach between the FCPF and the UN REDD program since they have some countries in common. The UNREDD basis for consultation is the UN’s Indigenous Peoples Declaration. FCPF is talking about ways it might harmonize with UNREDD on this.

There however are some complications foreseen as to the overlap between the programs. UNREDD focuses on readiness, but has expressed interest in investment. This could create complications in its overlap with the FCPF.

Civil society participants in the meeting highlighted that many countries are overburden and have weak institutional frameworks in their countries. Therefore there is a need for the application of Paris Declaration principles of donors cooperating and harmonizing their programs with one another.