Joint Statement released on UN International Day of Forests: IETA/CMIA warns of private sector investment confidence waning.
Recent international climate negotiations in Warsaw were hailed by many as a success for their progress in establishing a policy framework to reduce emissions from deforestation and forest degradation (REDD+).
Indeed, the “Warsaw Framework for REDD+” provided technical guidance for REDD+ implementation and elements that will enable results based financing. $280million in funding was pledged to a new initiative of the World Bank BioCarbon Fund (BioCF).
While the Warsaw Framework for REDD+ achieved incremental progress on these elements, IETA and CMIA are increasingly concerned that the Framework did not make clear the important role of the private sector in a future REDD+ regime, nor did it acknowledge that early actions will be recognized. Given these shortcomings, the private sector are becoming ever more disenfranchised with REDD+, and if anything are scaling back, not scaling up, their activities in this area.
With Warsaw only agreeing some of the rules for what might happen in 2020, the private sector does not have the confidence to invest in REDD+ at scale, both financially and through implementation support.
However without the private sector we will not achieve the aims REDD+ set out to reach.
The scale of total finance needed for REDD+ makes the need for private sector finance beyond doubt. But it is not just finance that is needed from the private sector. Innovations in technology, for example those needed for MRV, and in forestry and agricultural practices, are needed too. REDD+ will also need to draw on the strengths of the private sector in the provision of goods and services, in training workers, communicating with consumers, managing supply chains, insuring business activities and in many other areas.
A recent report highlights that given the lack of a strong policy signal for private sector involvement “there is currently no source of demand that will pay for medium to long-term emission reductions from REDD+ in the period between 2015 and 2020”. Indeed the report estimates that the supply of emissions reductions from forest and land-based activities is “between 3 and 39 times larger than potential demand”.
And so without an incentive that allows the private sector to invest, parties are at risk of limiting predictable funding to developed governments only, whereby scale is not adequate to limit harmful emissions from deforestation and degradation of lands.
So what is needed?
In order to scale up private sector funding quickly in the short term, we recommend:
1. Concrete acknowledgement by the international community that there will be a market for REDD+ credits that can be earned and traded by private actors as part of the 2015 climate change agreement;
2. Recognition that actions taken now by the private sector under specified conditions will count in a future REDD+ market; and
3. Use existing pledged public funds for REDD+ to leverage additional private sector investments; for example through advance market mechanisms or public-private partnerships.
These policy signals are necessary to encourage private sector funding and contribute to the anticipated funding need estimated at between “US$4bn and US$48bn in the interim period .”
The private sector is ready to act and support REDD+ at scale, however we need clear medium and long-term incentives to put ambitions to limit climate change to 2oC within reach.
Christopher Webb, on behalf of CMIA says that “The voluntary carbon markets, the current main mechanism for the private sector to support REDD+, have to date ensured the management of 26.5 million ha of forest – a fantastic achievement. This shows how an incentive based mechanism can work to deliver real action on the ground. What we need now is a greater scale of incentive for the private sector, which also provides more certainty over the longer term, if we are to save the worlds rainforests.”
Sophy Greenhalgh, from IETA, added “The scale of the transition required to reduce deforestation is vast. The private sector, working alongside governments and communities, now needs confidence that investment makes good business sense.”
Chair IETA REDD+ working group
Chair CMIA REDD+ working group
CMIA is an international trade association representing companies that finance, invest in, and provide enabling support to activities that reduce greenhouse gas emissions. CMIA solely represents organizations that provide services to and invest in the environmental sector. This results in a unique advocacy platform with emphasis on the environmental and social integrity of market mechanisms and climate change policies.
Our membership embraces more than forty international investment banks, law firms, venture capitalists, project developers, technology providers, consultancies and verifiers, spanning six continents. CMIA has been actively engaged on issues relating to REDD+ for a number of years. We act as private sector observers to the World Bank Forest Carbon Partnership Facility (FCPF) and Forest Investment Programme (FIP).
The International Emissions Trading Association (IETA) is a non-profit business organisation created in June 1999 to establish a functional international framework to reducing greenhouse gas emission reductions.
Our membership includes leading international companies from across the carbon market cycle and comprises of around 130 international companies from OECD and non-OECD countries. IETA has several partnerships including the World Bank and World Business Council for Sustainable Development (WBCSD). IETA is an official observer under the UNFCCC and is actively engaged in the development of REDD+ since its concept inception.