Avoided Deforestation as an IPES Opportunity Annah Peterson, Duke University Louise Gallagher, UNEP ETB David Huberman, IUCN Ivo Mulder, The Dutch Fund

Outline Background Example of a REDD project in voluntary markets Structure of non-profit implemented REDD projects Structure of for-profit REDD projects Exploring how for-profit REDD projects can bundle payments for reduced emissions and biodiversity conservation

Reduced Emissions from Deforestation and Degradation (REDD) REDD = an emission abatement mechanism whereby greenhouse gas emissions are reduced by decreasing deforestation and land degradation. REDD focuses specifically on the conservation of existing carbon stocks in biomass and is distinct from afforestation and reforestation which aim to sequester carbon from the atmosphere through tree planting and growth.

Practical Issues with REDD Interpretations of REDD vary greatly (Many different country submissions). Implementation is very difficult! (Establishing baselines, measuring leakage, ensuring permanence) Ensuring additionality and preventing perverse incentives concerning protected areas. It is very unclear what the future of REDD will look like (National vs. project level approaches; voluntary vs. regulatory markets). Issues with local livelihoods and ensuring equitable outcomes.

Noel Kempff Climate Action Project Protects 832,000 hectares of tropical forest in Bolivia Offsets awarded to the Bolivian Government to be sold on Chicago Climate Exchange Revenue earned will go to park protection, community development and climate change capacity building InvestorsContribution (Million US$) Offsets to be Assigned (tCO2e) The Nature Conservancy2.60 Private Investors (AEP, BP, Pacificorp) ,427 Government of Bolivia0506,743 Total10.851,034,170

Non-Profit REDD Projects BC Investors Third Party Verifier RE VERs $ Non- Profit Org $$ RE = Reduced Emissions VER = verified emission reductions BC = Biodiversity Conservation Project Area

For-Profit REDD Projects CI BC $$ REVERs Third Party Verifier Positive Externality ? Project Area RE = Reduced Emissions VER = verified emission reductions BC = Biodiversity Conservation

Third Party Verifier CI BC REVERs $ $ $$ ? CI BC $$ REVERs Third Party Verifier Positive Externality Project Area ? A Cost-Sharing Approach to Investment in REDD

2 Types of Biodiversity Beneficiaries General A globally diffuse set of actors who demand general conservation efforts for the option and existence values they provide Specific Groups that benefit from the conservation of biodiversity within a specific area (non-profits, pharmaceutical companies, ecotourism companies, research institutions, governments, communities) Fund Partnership 2 Possible Payment Mechanisms

Fund Fund Per hectare subsidy offered to only high biodiversity REDD projects PROS Addresses the public goods nature of biodiversity conservation CONS Quantifying biodiversity Defining threshold Deciding subsidy amount Diverting financing Partnership Partnership matching of carbon investors with biodiversity investors in a virtual marketplace PROS No quantifying biodiversity, defining thresholds, deciding subsidy amounts or coming up with financing necessary CONS Limited application – there are only so many specific biodiversity demanders

In Summary… 1)The ability to bundle payments for ecosystem services is crucial for effective conservation finance through IPES. 2)The next frontier of IPES thinking should involve brainstorming different potential ways for bundling payments for ecosystem services. 3)This chapter begins this brainstorming process by highlighting options for bundling payments for both reduced emissions and biodiversity conservation into one investment in REDD. 4)Practical issues of determining beneficiaries also need to be addressed.