Economic Development livelihoods Conservation Forest values Biodiversity Protected areas Poverty reduction REGIONAL INVESTMENT FORUMS WEST AND CENTRAL AFRICA TROPICAL FOREST INVESTMENT FORUM Global Forest Alliance (GFA) and the Forest Carbon Partnership Facility (FCPF) Gerhard Dieterle Forests Adviser, The World bank Accra, Ghana August 28-30, 2007

ESSD Forests A Portfolio Approach for SFM Financing Adopted in UNFF-NLBI April 2007

ESSD Forests The Evolution of SFM Financing

ESSD Forests Why worry about deforestation?  Lost income and deteriorating livelihoods for 1.2 billion people  20% of global emissions  2nd leading cause of global warming  “avoided deforestation”  Forests contain 80% of the World’s biodiversity; deforestation causes losses at rate of >0.5% per year  Negative impact on hydrological functions and other forest environmental services

ESSD Forests Integrate forests into sustainable economic development Bank Forest Strategy Three equally important and interdependent objectives Harness the potential of forests to reduce poverty Protect vital local and global environmental services and values

ESSD Forests Challenges => Poverty Reduction Protect safety nets Ensure equitable benefits and access at the local level (communities, households) => Economic Development Sustainable production and resource use Strengthen FLEG initiatives => $15 billion in revenue lost per year to Bank client due to illegal logging Create enabling environment at the macro level that facilitate sustainable investment in the forestry sector (particularly by communities, smallholders, and SME) => Environmental Services Value forest environmental services Facilitate frameworks for benefit transfers of PES

ESSD Forests World Bank DIRECTIONS FOR THE FUTURE Emerging proposals for a GLOBAL FOREST ALLIANCE Objectives:  To foster improved collaboration between the Bank other donors, leading forest conservation agencies and private sector investors  To assist Bank client countries in adopting forest strategies and policies that will help to accelerate progress towards the Millenium Development Goals, UNFF-NLBI, UNFCCC and Bank Forest Strategy  Access new and innovative funding sources for SFM following UNFF Portfolio Approach  Complement and scale up existing tools of the World Bank Group

ESSD Forests Proposed Global Forest Alliance Targets Scale-up with partners to achieve four bold targets by 2015 (tentative) (MDGs 1&7, Bank Forest Strategy) Improve and sustain the livelihoods of [500 million] poor, forest dependent people by supporting sustainable forest management and agro-forestry based farming systems Conserve [1 billion ton of CO2] by engaging in avoided deforestation initiatives Bring [300 million] ha of production forests under independently certified sustainable management Create [50 million] ha of new protected areas and bring [120 m ha] of existing areas under improved management

ESSD Forests The Forest Carbon Partnership Facility  The objective is to demonstrate and pilot mechanisms that generate lasting forest emission reductions and that can be scaled up for REDD  The objective is not to save the world’s forests with $ million  Several developing countries have expressed interest in a World Bank initiative to provide financial incentives for REDD  BioCarbon Fund: Pioneers the Forest Carbon Market since 2004, including for avoided deforestation at project level  “Avoided deforestation” excluded from the Clean Development Mechanism

ESSD Forests FCPF Strategy Prepare for a system of positive incentives post-2012 that includes REDD through  Capacity building: readiness for a future system  Pilot performance-based payments Readiness: $50 m Pilots: $200 m > $1 b

ESSD Forests FCPF Pilot Purchases  Price Carbon ≥ Opportunity Cost of land  Pick low-hanging fruit first ha Cost per ha of forest saved Enforce Protected Areas Prevent Conversion to Ranching/Food Crops Prevent Conversion to Soy/Palm Oil $2,000 $500 $100 Clarify Land Tenure Control Fires

ESSD Forests FCPF Some Principles  Several sellers  Several buyers  The market may not be the only way to set the price  Is there a “market” (with private sector competition)?  Countries may be more interested in using ODA at first, then rely on market  Test various incentive systems in different countries with similar rigor, e.g.  Costa Rica: market, PES  Brazil: donations  Congo Basin, Liberia: forest certification, conservation concessions  Incentives for avoided deforestation and degradation  Payment on delivery (some upfront)

ESSD Forests Investor Purchaser Carbon Purchases $200 million Readiness $ 50 million IBRD, GEF, IFC, donors others Host Country Investments Carbon purchase guarantee Carbon ERs

ESSD Forests FCPF Governance  Developing countries have meaningful role  Other stakeholders must also be represented  Civil society, private sector, international organizations  Proposal:  Trustee (World Bank)  Partners’ Committee  Developing countries, contributors, civil society, private sector, international organizations  Investor’s Meeting (contributors)  Advisory Group  Nesting into GFP governance structure

ESSD Forests Mutual support of GFA and FCPF  A successful implementation of FCPF requires  Capable institutions and good governance  A favorable legal and regulatory environment  Answers to concerns about distribution and equitability issues  Reliable baselines  GFA addresses these issues by creating and enabling environment through  Capacity building  Analytical work  Piloting initiatives in support to sustainable management of natural resources  Promoting law and governance issues  … and by reinforcing the Bank’s focus on rural poverty

ESSD Forests The GFA Work Program The World Bank Forest Strategy Harness Potential of Forests to Reduce Poverty Integrate Forests in Sustainable Economic Development Enhance Global Environmental Services Implemented by 3 GFA Work Programs Sustainable Rural Development Sustainable Forest Management and Markets Environmental Services and Innovative Financing Engaging in Core Activities (examples)  Ecosystem landscape- based approaches  Sustainable forest-based livelihoods  Increased adoption of agroforestry by smallholders  Access of local communities to markets  Community/smallholder partnerships with private sector  Sustainable & legal trade, independent certification  Exploit domestic and export market opportunities  Zoning, land tenure and land rights  Protected area and forest management planning  Community-based management  Sustainable plantation development  Forest Carbon Partnership Facility => REDD  BioCarbon Fund (reforestation)  PES for services other than carbon  Alternative financing for protected areas Supported by cross- cutting enabling and knowledge services Forest Law Enforcement and Governance (FLEG) National and regional governance (FLEG) action plans and processes Program on Forests – PROFOR Analytical Products (ESW), Toolkits and Knowledge Management Governance Governed by a multi-stakeholder council (WBG, Govs, GEF, NGOs, private sector, international organizations, other) with participation of recipient countries and beneficiaries

ESSD Forests Priorities for Bank Group Action Global SMALL SCALE ENTERPRISES  Support community and private forest ownership  Innovative financial / economic incentive mechanisms  Develop markets for certified products: Group certification  Mobilize resources for capacity building  Facilitate Enabling Environment (ease regulations & administration) LARGER SCALE COMPANIES  Transparent secure concession contracts  Political risk insurance mechanisms  Independent certification : market access  Strengthen forest governance (i.e. FLEG processes)  Promote adoption of environmental safeguard policies by financial institutions  Outsource fiber supply to local communities and small holders Environmental Service  Take advantage of emerging mechanisms to pay for environmental services especially carbon: Support reliable monitoring procedures.

ESSD Forests Priority Areas of World Bank Group Investments Africa Region  Involvement of communities in forest management (PA & SFM)  Technical Assistance support to smaller scale forest based enterprises  Fostering of mutually beneficial partnerships between companies and communities / private households  Further expansion of an emerging network of sustainably managed Production Forests  Support to forest law enforcement and governance (FLEG) processes  Improving and enhancing the markets for certified forest products  Support to governments in mobilizing international grant funding for international PES mechanisms (protection of biodiversity, carbon sequestration through afforestation & avoided deforestation  Support investment in larger scale forest industries (IFC) PRIORITIES FOR BANK AND IFC GROUP INVESTMENT IN AFRICA REGION: