I’ve followed the UN climate negotiations for four years with particular attention to an emissions mitigation policy framework called “REDD” (reducing emissions from deforestation and forest degradation). Below are my thoughts on one of the most controversial aspects of REDD — transparency of bilateral financial arrangements to reduce deforestation in developing countries such as Indonesia.
I have chosen Indonesia, the country where I have lived and worked for almost four years (I am originally from Chile). Living here has been one of the most fascinating episodes of my life. This southeast Asian country is a first-class case study. Indonesia is the world’s third largest emitter of greenhouse gases (GHGs) and holds the second highest deforestation rate after Brazil. Additionally, it is the largest economy in southeast Asia and a member of the G-20. Finally, and most significantly, Indonesia has become a REDD policy “laboratory” where several pilot projects, schemes, strategies and new regulations are being tested.
What happens with REDD in Indonesia will have enormous repercussions in many less-developed countries with ambitions to implement REDD policies and projects.
Like it or not, we need to understand REDD. For much of the developed world, REDD is being viewed as a cheap and quick mechanism to reduce global GHG emissions. At present, developed nations and regions (e.g. U.S., Canada, Australia and EU) are facing severe economic and political roadblocks to implementing concrete emissions reduction targets through domestic legislation. Therefore, the only choice they have left is to support, by means of short-term commitments, emerging nations to reduce their GHG emissions.
This explains why Norway, Japan, Canada, U.S., U.K., France and Australia pledged $3.5 billion in short-term funding for REDD at the UN climate negotiations in Copenhagen last year. A lot of money is flowing to developing countries, such as Indonesia, and major international environmental organizations to implement REDD projects.
In my opinion, it is difficult to see REDD becoming part of a binding agreement under UN Climate Change Framework during the upcoming meeting in Cancun. Rather, I see REDD becoming a mitigation tool in overseas development assistance projects or implemented through bilateral initiatives negotiated between developing and developed countries.
My prediction is that REDD will rapidly move forward over the next three to four years with encouragement from developed nations and developing countries that view REDD as a faster vehicle to control deforestation and GHGs, as well as a source of economic incentives to tackle illegal logging and forest fires. REDD will particularly be embraced by countries experiencing systematic troubles with forest governance and management, including Brazil, Indonesia, Sudan, Zambia, Congo, Myanmar, Zimbabwe and Guyana, among many others.
With all this attention being focused on REDD, there has not yet been any global consensus on how REDD is to be financed over the long-term and what arrangements will be needed to make the mechanism operational. For the moment, REDD is being financed in an ad-hoc manner through seed funds set up by developed nations and though private sector voluntary carbon markets.
For example, Indonesia and Norway signed a letter of intent in May 2010 in which the government of Norway pledged the sum of US$1 billion in funds in exchange for Indonesia’s commitment to cut emissions from deforestation and forest degradation.
The letter of intent is expected to be transformed into a legally binding bilateral agreement by the end of this year. If the main goal of the agreement is to pay for “reduced emissions results,” that include concrete reforms in policy and laws, enhanced technical assistance, increased enforcement, reduction of forest crimes, effective implemented institutional frameworks and capacity building, so far small progress has been made since the signing of the LoI.
Now, after the proposed binding agreement is signed, Norway must provide initial funds to the government of Indonesia according to a schedule of payments provided by a third-party financial institution or “trustee.” The details of this arrangement are still under negotiation and relate to the REDD Trust Fund. The REDD funds are subject to the Indonesian Climate Change Trust Fund (ICCTF). The ICCTF aims to facilitate overseas development assistance and financial support for different climate change programs and activities. Furthermore, not only Norway, but the U.K., U.S., Australia and the Netherlands have committed funds to the ICCTF. The U.K. alone has allocated 10 million pounds to the Fund.
Despite this significant investment, there is very little transparency as to how these funds have been or will be spent.
Recent negotiations between the two countries in Jakarta failed to reach an agreement on a financial scheme, with Indonesia’s Government insisting that it wants the funds to be managed by a local bank, which has created uncertainty about the level of international scrutiny, transparency and governance that will be given to the operational financial arm of REDD in Indonesia.
Moreover, aware of its role as G-20 member and “climate change hotspot”, the government of Indonesia appears a bit reluctant to be subject to any international or foreign financial supervision and has passed legislation that allows an “interim” international agency to temporarily provide oversight assistance until a national entity takes over ICCTF.
In exchange for substantial economic support, Indonesia is obliged to stop issuing new licenses to exploit remaining peatland and natural forest areas. Yet Indonesia’s forest ministry appears to be debating within itself whether REDD is a valid path forward. Some officials are pro-REDD, while others apparently would prefer to continue promoting development of the palm oil and logging industries. The president of Indonesia has given a clear sign favoring the palm oil industry — the agreement with Norway exempts forestry development concessions issued before January 2011. These concessions will not be subject to the two-year moratorium on exploiting peat and natural forests.
It is worth noting that initial funds already provided by developed countries to Indonesia to begin implementing REDD have never been subject to solid disclosure and scrutiny by the public. In fact, it has been difficult to determine where the REDD funds have gone, and whether there have been measurable outcomes or concrete GHG emission reduction obligations. Quite simply, there is no independent assessment and monitoring of the agreements in either the donor or receiving countries.
It is very difficult to figure out why some developed countries (such as Norway) are so anxious to give away funds to developing countries, without first requesting firm reduced deforestation and mitigation goals in those countries that have received funds to tackle those issues. In my view, instead of blaming developing countries for accepting those funds offered without concrete results, members of the public in the donor countries should demand from their own governments that there be transparent accounting, monitoring, and reporting of outcomes.
The current agreement between Norway and Indonesia demonstrates that without open debate and transparent accounting of these agreements, it will be difficult to assess whether progress is being made to reduce GHG emissions, promote fair and non-corrupt forest governance, stop illegal logging, and protect local communities.
Environmental Policy Consultant