The prospect of gaining carbon credits by acquiring land to implement REDD+ has caught the eye of the private sector. In many countries, including Papua New Guinea and Republic of Congo, there are reports of a carbon rush. In Mozambique, private investors have expressed an interest in acquiring more than 22 per cent of the country’s land for REDD+. But Mozambique, like many developing countries, is still in the early stages of preparing a REDD+ strategy. This briefing warns that encouraging private sector involvement before the country has the right policies and institutions in place to safeguard local environments and people risks undermining the potential of REDD+ for sustainable development.

Delivering REDD+ finance has taken more preparatory work, capacity and tailoring than initially envisaged. Multilateral institutions financing REDD+ have made significant progress, and experience to date will inform and facilitate future implementation. Alongside this, Annex II countries are providing increasing volumes of finance through bilateral channels. There remains very little transparency around these bilateral arrangements. It is essential to ensure that the lessons learned through experience with multilateral institutions and participating stakeholders inform bilateral financing. The large number of multilateral and bilateral engagements in forest countries creates major coordination challenges. There is an urgent need for more capacity and expertise on the implementation and management of REDD+ within contributor countries, recipient countries, and intermediaries. Creating and maintaining momentum to implement REDD+ requires credible commitments of long-term finance from Annex II countries. Finance should be directed to REDD+ strategies with political buy-in and stakeholder support. Early experience demonstrates the difficulty of balancing core objectives. For example, speedy disbursement through streamlined processes can conflict with the need for rigorous due diligence and comprehensive application of safeguards. Similarly, there are tensions between national ownership, sovereignty, and contributor country input. If REDD+ is to be sustainable, it will need to deliver real development benefits equitably at the individual as well as the country level. With limited public resources available, Annex II countries are trying to balance climate and development objectives, and most REDD+ finance is directed through development assistance budgets. The use of ODA budgets to deliver climate finance has been questioned, but this approach does provide the opportunity to support integrated solutions if potential trade-offs between co-benefits can be navigated.

This new report from Earth Economics features a new modeling tools for quantifying ecosystem service benefits in the urban-built environment.

The United States needs many different types of forests: some managed for wood products plus other benefits, and some managed for nonconsumptive uses and benefits. The objective of reducing global greenhouse gases (GHG) requires increasing carbon storage in pools other than the atmosphere. Growing more forests and keeping forests as forests are only part of the solution, because focusing solely on the sequestration benefits of the forests misses the important (and substantial) carbon storage and substitution GHG benefits of harvested forest products, as well as other benefits of active forest management.

Forests and global climate are closely linked in terms of carbon storage and releases, water fluxes from the soil and into the atmosphere, and solar energy capture. Understanding how carbon dynamics are affected by stand age, density, and management and will evolve with climate change is fundamental to exploiting the capacity for sustainably managed forests to remove carbon dioxide from the atmosphere. For example, even though temperate forests continue to be carbon sinks, in western North America forest fires and tree mortality from insects are converting some forests into net carbon sources.

Expanding forest biomass use for biofuels and energy generation will compete with traditional forest products, but it may also produce benefits through competition and market efficiency. Short-rotation woody crops, as well as landowners' preferences—based on investment-return expectations and environmental considerations, both of which will be affected by energy and environmental policies—have the potential to increase biomass supply.

Unlike metals, concrete, and plastic, forest products store atmospheric carbon and have low embodied energy (the amount of energy it takes to make products), so there is a substitution effect when wood is used in place of other building materials. Wood used for energy production also provides substitution benefits by reducing the flow of fossil fuel-based carbon emissions to the atmosphere.

The value of carbon credits generated by forest carbon offset projects differs dramatically, depending on the sets of carbon pools allowed by the protocol and baseline employed. The costs associated with establishing and maintaining offset projects depend largely on the protocols' specifics. Measurement challenges and relatively high transaction costs needed for forest carbon offsets warrant consideration of other policies that promote climate benefits from forests and forest products but do not require project-specific accounting.

Policies can foster changes in forest management and product manufacture that reduce carbon emissions over time while maintaining forests for environmental and societal benefits. US policymakers should take to heart the finding of the Intergovernmental Panel on Climate Change in its Fourth Assessment Report when it concluded that “In the long term, a sustainable forest management strategy aimed at maintaining or increasing forest carbon stocks, while producing an annual sustained yield of timber, fibre, or energy from the forest, will generate the largest sustained mitigation benefit.“ A rational energy and environmental policy framework must be based on the premise that atmospheric greenhouse gas levels are increasing primarily because of the addition of geologic fossil fuel-based carbon into the carbon cycle. Forest carbon policy that builds on the scientific information summarized in this article can be a significant and important part of a comprehensive energy policy that provides for energy independence and carbon benefits while simultaneously providing clean water, wildlife habitat, recreation, and other uses and values.

One of the key questions that has arisen in the context of the REDD+ debate surrounds which actors have the right to exploit the benefits of GHG emissions reductions and removals in REDD+, and the associated rights to international payments. Because carbon is stored in trees and land, in many cases the answer will entail an understanding of rights over the resources and services they provide. These concepts are often included in the widely used but normally poorly defined term ‘carbon rights.’

There are many reasons why forest-based mitigation should be interesting to the private sector generally and financial institutions specifically (for more information, please refer to REDDy Set Grow - Part 1).

However, in order to mobilise this private sector capital at the required scale, it is paramount that policymakers (i) offer avenues and formats for the private sector to invest and engage in the protection, rehabilitation and creation of forests; (ii) increase the financial competitiveness and attractiveness of forest-based climate mitigation investments and (iii) reduce the investment risks involved. While a global framework for forest protection, conservation and enhancement is now a top priority in the international climate change negotiations, there is no consensus yet that a framework agreed upon at this political level will (i) aim to involve and (ii) be effective in involving the private sector at scale and unlock the required volumes of investment and finance.

It is therefore essential that:

(i) Financial institutions fully understand the nature of the commercial opportunities, and potential investment avenues in the area of forest-based climate change mitigation; as well as the public mechanisms and risk-mitigation instruments available for such investments.

(ii) Policymakers, including in particular UNFCCC negotiators, understand the needs, priorities and views of private sector investors, lenders and insurers in relation to the specific characteristics of forest-based mitigation opportunities, so as to facilitate their involvement. Without such involvement, it seems likely, for reasons outlined in this report, that the effective implementation of forest-based climate change mitigation at the needed scale seriously risks remaining an idea rather than becoming a reality.

Improving the understanding, along these lines, of both stakeholder groups is the fundamental objective of the two parts of these UNEP Finance Initiative publications.

Indonesia was one of the first developing nations to commit to reducing its greenhouse gas emissions (GHG) by 2020. Three quarters of Indonesia’s emissions result from deforestation and land degradation, so meeting this commitment will require major changes in how it manages its forests. Indonesia is developing a national strategy for REDD+ which includes respect for rights of indigenous peoples and local communities including the right to Free, Prior and Informed Consent (FPIC). Implementing commitments on the rights of indigenous peoples, in terms of rights in forestry issues as REDD+ plans are developed and implemented, will be a major challenge as land use planning, forestry licensing and agriculture policies and norms do not currently respect community rights.

Some 40 pilot projects and demonstration activities for REDD+ are under development around the archipelago, but none have completed negotiations with affected indigenous peoples and local communities. Most are still in the early stages of discussion with affected communities on potential benefits and costs, even though permits for REDD+ projects are already being issued by national and provincial governments.

Every day forests provide benefits vital to life on Earth and to the quality of human life in particular. Currently, some 410 million people are highly dependent on them for subsistence and income, and 1.6 billion people depend on forest goods and services for some part of their livelihoods.1 In a more general sense, the entire global population depends on forests for their carbon-sequestering services. Forests have always been crucial to human life and economies, and they will become increasingly significant as the global human population grows by another 30 per cent – to 9 billion people – by mid-century. At the same time, our forests face many threats as a result of unsustainable use. As we move forward, our forests must play a critical role in supporting the growth of a global green economy.2 Innovative solutions, however, must be found to ensure sustainable forest management in the face of the many threats at hand.

In this review paper, we assess the economical, governance, and technical conditions that shape forest management in tropical Latin America with particular regard to efforts to reduce forest-based carbon emissions. We provide a framework for discussions about ways to improve forest management that achieve environmental objectives while promoting local and national development and contributing to local livelihoods. We argue that many management practices that lead towards sustainability are only likely to be adopted where there is good governance backed by financial incentives for effective enforcement of management regulations. We propose some policy interventions designed to lower net greenhouse gas emissions by decreasing rates of forest degradation and increasing carbon stock recovery in logged-over or otherwise degraded forests. Implementation of REDD+ could provide critical compensation to forest users for improved management practices in the absence of, or in combination with other economic incentives.

A number of countries have instigated programmes that aim to build the capacity to initiate REDD+ based emissions reductions and attract investment. The two largest – in terms of expenditure rates and transfers rather than deposits – are the UN-REDD+ programme and the Forest Carbon Partnership Facility (FCPF).

This article discusses the current state of financing achieved for REDD+ programmes through the FCPF and the UN-REDD programme, how the state of these REDD+ programmes will affect the implementation of REDD+ and consequent impacts on multilateral efforts to reduce emissions.