Uma Lele Former Senior Advisor, Independent Evaluation Group, The World Bank Special Advisor, M.S. Swaminathan Research Foundation, India American Evaluation Association Session on Climate Change and Avoided Deforestation: Challenges of Evaluation, November 13, 2009

Evaluation Challenges:  Old Development Issues in Evaluating Reduced Deforestation (e.g. Evaluation of the World Bank’s 1991 Forest Strategy)  New Carbon Related Evaluation Issues  Complex political economy ranging from the global to local levels  Evaluation Framework of Inputs, outputs, outcomes, impacts and sustainability challenged by  Factors External to the Forest Sector  Risks and Uncertainty,  Measurement Issues  Assessing Causality

Comparisons of Forest Carbon Sequestration With Other GPGs Child Immunization—  Once and for all immunization calls for  Effective Delivery of affordable vaccines,  Information to parents, teachers,  Public health delivery system consisting of trained people  Easily measurable and visible benefits and impacts TB Control—-DOTS treatment regime for a fixed period calls for  TB Detection,  Supply of TB drugs,  Information  Effective Public and private delivery systems HIVAIDS Control-Needs Permanent Change in human behavior,  International agreements on the production and trade in generic drugs,  Effective delivery of affordable drugs for life to HIV positive individuals Malaria-Vaccine for Malaria? In the interim  Environmental Control of Mosquito,  Public Information  Effective delivery of affordable bed nets and their regular use,

"Context and Challenges of Carbon Trade  Deforestation Believed to be Second Leading Cause of Global Warming  Reducing Rates of Deforestation and Degradation (REDD) will achieve GHG Emission Reductions and slow speed of global warming  Cost of achieving unit of GHG Emission Reductions from REDD is less than Equivalent Reductions in Developed Countries  –e.g. the current price of carbon per ton of $3 to $5 in developing country compared to $ 25 to $ 30 in the U.S.  Gains from Trade in Emission Reduction Certificates  “Carbon Finance” a new instrument to provide incentives to developing countries to achieve REDD  New Forest Regime--Whether Trade in Emission Reductions or Aid not to cut existing forests or plant new trees not yet determined

What is Cap and Trade?  Declining cap on total emissions over time, while allowing trading of pollution permits  Challenges in Cap and Trade  Fossil fuel energy remains cheaper than clean energy  Hence incentive to introduce clean energy technologies does not always exist calling for subsidies  Carbon offsets ( financial instrument aimed at a reduction in greenhouse gas emissions in metric tons of CO2 equivalent ) —are indispensable to keep cap and trade affordable. greenhouse gas  Offsets are meant to be additional reductions beyond those legally required  Determining Additionality can be a challenge

Issues in Cap and Trade  Equity in Pricing –  Local cost and benefits vary among countries depending on alternative land uses  Price paid for emission reductions has been different among countries depending on opportunity cost of land –under CDM projects  Burden Sharing  Poorest countries are offering to reduce emissions more than the more advanced countries, e.g. in the Forest Carbon Partnership Fund  Whether to focus only on polluters --reward those who emit most, e.g. Brazil and Indonesia? OR,  Whether to reward countries for their good behavior, e.g., China, Vietnam and India ?  Free Rider problems And Risk of No Real Decline in Emissions  Those with lower preference for emission reductions may trade more without changing their own behavior. E.g. U.S. vs. Norway, Sweden and Denmark

Towards Including REDD in Carbon Finance Instruments  Currently No regulatory instrument under UNFCCC (the United Nations Framework Convention on Climate Change ) to compensate Emission Reductions from REDD as carbon payments.  Parties to the UNFCCC agreed to creating such an instrument in the future.  Negotiations at COP 13 agreed to explore variety of options leading to lots of experimentation, e.g. World Bank’s various carbon funds as input into Copenhagen and beyond?

Global Forest Cover by Basins

Complex Political Economy of REDD  Forests  Provide Livelihood for 1.2 billion poor /only a small share are in forest rich tropical countries  Are Rich in Biodiversity  Provide Environmental Services, e.g. Watershed Protection  Are Source of formal and informal Revenue for industrialization and trade  Face Huge Governance Issues—  Ambiguous and contested property rights  Corruption and weak or non-existent rule of law  Factors outside forest sector more powerful than those within in causing forest loss—agriculture, bio-fuels, population growth, urbanization, globalization

Mitigation Is Focused on Highly Forested Countries  Highly Forested Carbon Rich Tropical Regions Contain Some of the Richest Biodiversity  Contain Small Share of Global Poverty  REDD through Trade potentially benefits both developed and developing countries

Adaptation Focuses on Forest Poor Countries  Forest Poor Countries Contain Rich Biodiversity and Poverty  Greatest adverse impacts of climate change are on the poor in Forest Poor Countries.  Measures for Climate Adaption help poor countries and poor people –with no obvious gains from trade  Adaptation issues are difficult to disentangle from regular development challenges and development assistance  Both Mitigation and Adaptation raise questions of whether to compensate only for Carbon, Or For Other Environmental Services—Biodiversity and Watershed Protection?  How to Determine Different Values of Environmental Services?

Global Incidence of Forest Biodiversity and Poverty

Emergence of Global Partnerships in Forest Carbon Finance  Carbon Finance Being Made Available by Developed countries to  design and implement Performance Based Pilot REDD schemes through international partnerships  International Organizations have new forest carbon finance programs of Technical Assistance and Carbon Financing  Collective Action Underway At Various Levels  Global Rule setting and Financing, e.g. Copenhagen and Kyoto— Partnerships Across Developed and Developing Countries  Regional—Programs of investment, TA and Trading  National Programs—Partnerships Among Different Stakeholders  Sub-National (Provincial or State level) Programs  Local Projects

REDD Readiness Strategy: Analytical and Policy Capacity Issues  Information on Forest Cover—  which is poor  No agreement on degradation—numerous concepts and definitions  Preparing a baseline of forest cover  Sources and Causes of Deforestation and Degradation  Agriculture production, agricultural and forest trade, mining, transport, urbanization  “Reference Scenario”  Recent historical data on Emissions from deforestation and/or forest degradation, and  Estimated Future Emissions from forest carbon stock changes which will occur if there are no additional positive incentives for REDD;

REDD Readiness : Governance and Legal Framework Role of national, state/regional and local jurisdictions Assessment of formal and informal land rights Consultations with stakeholders – indigenous and other forest dependent poor, private sector and other stakeholders Environmental and Social Assessment – benefits and risks to stakeholders in meeting the World Bank’s 10 different Safeguards  Transparent and Fair Rules for distribution of benefits among potential beneficiaries  Develop Pilot schemes  Determining Short and Long Run Carbon Finance Needs

Monitoring, Measurement and Verification  Area of Forest Saved or destroyed with and without positive incentives  Extent of Forest Carbon Emission Reductions=  Risks and Uncertainty about  $ Price of Carbon per ton-current and future  Exchange Rates  Issues of Permanence of Forest “saved”.  Leakages—forest lost elsewhere—domestically or internationally  Spill-overs—potential poverty reduction and economic growth forgone, e.g., as a result of lack of growth linkages from agricultural development.

REDD Readiness 2  Monitoring and Verification;  how external reviews/audits would actually work in terms of mandate, methodologies, reporting process, publicity, periodicity  Whether Monitoring and Verification would cover carbon and non-carbon benefits,  The use/sharing of REDD benefits  How information will be made available to the public;  How civil society and forest communities will actually be involved in the planning and implementing of the monitoring, reporting and verification system  The nature of the country’s existing forest policy and changes needed in it  Implementation schedule  Clear responsibilities and milestones and  Communications and outreach plan.

Production and Markets For Forest Carbon Emission Reductions Differ Substantially from International Development Assistance Carbon Markets for Climate Change  Contracts to deliver Independently Verified Emission Reductions Performance Agreements (ERPAs) in return for regular periodic payments  No emission reductions= no payment for environmental services  Other Less Binding Payment for Environmental Services Program (PES) Programs Some of the Development Assistance Motivations  Outcomes are hoped for but not always sought or delivered  Generosity of the rich to help the poor  Self Interest  Fill gaps in international capital market failures  Recent Performance Based Conditional Cash Transfers for easy to measure immediate benefits  Assistance is either  Relief (Temporary),  Rehabilitation (Temporary)  Reconstruction (Temporary)  Development (Long Term) but Not permanent

Challenges in Evaluating Forest Carbon Emission Reductions 1: What Is Required  Global Governance  Credible and Simple Universally Understandable Internationally Agreed Regime—current CDM rules re too complex for most countries to adhere to. Regional and National Governance  National mechanisms to design, implement, monitor, evaluate and refine multi-sectoral and multi-level programs  Broadly shared and enforceable voluntary or non voluntary standards, norms and values with regard to respect for law, forest management, rights of disenfranchised and the poor, among others.  Unambiguous Property Rights of Publicly Held and Common Property Lands and Related Natural Resources,

Challenges in Evaluating Forest Carbon Emission Reductions 2:  Political Will  International and national financing mechanisms to address losers—  will it have to include payments to corrupt stakeholders who tend to get control of resources  Ways to Address Summation Challenges— What if developed countries do not fulfill their obligations in other sectors?  Assessing Risks and Uncertainty in all decision making

Challenges in Evaluating Forest Carbon Emission Reductions 3:  Capacity—A big challenge  Ways to address Rapidly Expanding Global Markets, for Agricultural, Energy, and Forest Products and for Currencies  Rights and Voice of Forest Dependent Poor  Enforcement Capacity of Governments to address issues of publicly owned and common property open access natural resources  Measurable impacts of changes in deforestation on climate, soil, water and biodiversity  Ways to Assess Free rider Problems