Forest communities hold the key for every form of REDD+ finance

30 November 2011

RECOFTC

Arriving on a stormy Durban Sunday I dropped in on the International Institute for Environment and Development (IIED)’s ‘REDD+ poverty reduction and sustainable development’ workshop, where the theme of the day was ‘cost-effective REDD+ pro-poor options’. An impressive number of people turned down their Sunday morning lie-ins to attend – can’t say I usually find myself talking social safeguard information systems before 8:00am! Despite the jet-lagged haze, a recurring message came through to me clearly: whichever way you finance REDD+, local people will always make or break it.

REDD+ financing needs to move beyond the debate between a public fund or carbon market linked mechanism to reduce carbon emissions for two reasons. First, the financial crisis and the inability to meet even the modest ‘fast-start’ climate finance targets for 2012 show that public finances alone are not the answer. Second, the lack of appetite for a binding post-Kyoto deal leaves the prospects of an international compliance REDD+ market on the distant horizon.

The negotiations on REDD+ finance are likely to reflect this reality, and as Philippines negotiator Antonio La Viña mentions in his recent CIFOR blog REDD+ needs to follow multiple tracks for financing – with a heavy emphasis on the private sector, not necessarily linked to the carbon market (yet). Other tracks for financing include the growing consumer and shareholder demand for sustainable commodities. REDD+ can incentivize the agricultural industry to reduce its impact on forests in exchange for a price-premium. Much of this will be achieved by including local small-scale producers in the supply chain and providing them with the support to cultivate on already degraded/cleared land rather than converting forest.

Another slice of the financing pie may come from extra tax revenues associated with improving forest governance. Governments across the tropics lose billions of dollars each year in foregone tax revenue from illegal logging. With the right capacity building support (e.g. through FLEG-T) this could provide a long term incentive for forestry departments around the world to engage in REDD+. Again, the success of this approach relies on local people, and the willingness of communities to monitor and reduce illegal logging.

With a shortfall in public funds for REDD+, more private sector funding is needed. But the prospect of investing in the forestry sector in many REDD+ nations is already risky enough to deter mainstream investors. Add on the prospect of reputational damage from community displacement or the mismanagement of products along the supply chain due to poor forest governance and the risk rises to an untenable level.

If the REDD+ financing decisions at Durban favor increased private sector investment, then the ‘pro-poor’ and community benefits become even more important. This includes the recognition of customary rights, secure land tenure for participating communities and improved forest governance. If this can be done, then REDD+ may attract more investors interested in demonstrating positive social and poverty alleviation outcomes from their investments.

To wrap up - if the Durban agreement sketches out the structure for a plurality of financing streams for REDD+ this will be cause for optimism. But the long term success of every financing stream rests on the people who live in and around the forests.

This blog was contributed from Durban by Jim Stephenson, RECOFTC's Program Officer for People, Forests, and Climate Change. Read more about RECOFTC’s presence at Durban on our website, and check back for more blogs from the conference!