On the first official day of the Paris climate summit, heads of state and government officials gathered to emphasize the critical role of forests as a global climate solution. A major highlight of the gathering was the pledge by several developed countries to provide financial support for emerging economies to stop and reverse forest loss. Germany, Norway and the United Kingdom pledged to collectively support ambitious REDD+ programs to the tune of $5 billion total for the six years 2015-2020, reaching $1 billion per year by 2020.
Within this overall funding target, Brazil and Norway announced that their recently completed $1 billion REDD+ partnership will be extended through 2020, likely at a $700 million-plus scale. Colombia announced an ambitious $300 million partnership with Germany, Norway and the UK to help it reach zero net-deforestation in the Amazon by 2020, and to halt natural forest loss by 2030.
While these pledges came from donor countries that were already engaged in tropical forest protection, they represent more than just business as usual for two important reasons.
The first is that these announcements add up to more than the sum of their parts. For the first time, world leaders gathered at a milestone climate summit specifically to endorse forests as a key climate solution. While the past few years have seen the world set important forest goals, in Paris leaders aligned around a shared implementation strategy to deliver on these goals. This strategy will improve agricultural production, promote equitable rural economic development and food security, while enhancing forest protection by halting deforestation and massively increasing forest restoration.
The second reason is that the announcements themselves are big. When you dig into the numbers and what they mean, four important facts emerge:
1) This pledge is big new money. Germany, Norway, and the UK have together been the source of two-thirds of global REDD+ funding to date, providing an average of around $550 million per year from 2010-2014. These pledges will nearly double the rate of these countries’ investment in forests by 2020 to $1 billion per year. I modeled a scenario in which the donor countries would ramp up annual commitments to reach $1 billion per year in 2020 over six years starting in 2015. A steady 8% per year increase from a starting point of around $680 million in 2015 would land at $1 billion in 2020 and add up to $5 billion. Of course the actual financing commitments will be much more variable, but this gives a sense of the scale and growth rate of this commitment.
2) These donors have put a big offer on the table for forest countries. Helpfully, the Joint Statement from the donors included an Annex with a list of the specific REDD+ commitments they have made since last September’s climate summit in New York. The total funding committed since then and listed in the Annex is nearly $3.4 billion. But a big chunk of this amount was pledged during 2014 and is likely not part of the $5 billion total – I’ve estimated $1.3 billion (see below for details). No more than half of the $5 billion pledge has thus been allocated to specific partnerships (I estimated $2.1 billion). That means these three donors have put at least $2.5 billion of unallocated funding on the table to support developing countries with ambitious and high-quality forest emission reduction proposals.
Last year at the Lima climate summit, a group of forest countries committed to putting forward strong domestic climate goals, and promised to quantify the additional ambition that could be achieved with international support. They then issued the “Lima Challenge” to developed countries to match this ambition with support. Many forest countries quantified both unconditional and conditional commitments in their INDCs (see for example analyses by UNEP and JRC). Three of the biggest REDD+ donors have now risen to the challenge by putting serious money on the table. The next steps are to further advance detailed and credible strategies to cut forest loss, and to bring together these plans with donors and other stakeholders in concrete partnership agreements.
3) The pledge reflects a growing focus on results measured in tons. The donors commit to “a significant increase in pay-for-performance finance if countries demonstrate measured, reported, and verified emissions reductions [VERs].” About 42% of global REDD+ finance through 2014 was performance-based, while the combined historical contributions of Germany, Norway and the UK tilted a bit more strongly in this direction at 60%. A bit more than this proportion of the 2015 finance detailed in Monday’s announcement appears to be performance-based, beginning the promised ramp-up period.
I model a scenario where the proportion of pay-for-performance finance increases by 2.3 percentage points per year, reaching 75% in 2020. At this rate of change, the amount of readiness and implementation finance will remain steady at about $250m per year, while finance for measured, reported, and verified emissions reductions from just these three governments would grow from about $430 million in 2015 to $750 million in 2020. For comparison’s sake, Forest Trends’ recent State of Forest Carbon Finance 2015 report estimated that total global demand for forest VERs in 2014 was $476 million – $219 million from non-market payments such as these bilateral agreements, and $257 million from compliance and voluntary carbon markets.
4) Lastly, this commitment is globally significant in terms of tons CO2 in the atmosphere, and hectares of forest on the ground. There are some thorny issues when translating REDD+ investment dollars into tons of emissions reductions. For the results-based portions of finance, the bulk of the partnerships have yet to be determined, and the donor countries may not want to presume a particular price. And for the readiness and implementation finance, there is the added nuance of whether to count future tons enabled by the finance. For these and other reasons, it is understandable that the donor governments have not publicly translated their commitments directly into the number of tons that would be achieved.
But with a few assumptions, we can estimate a range. With the results-based portion of the commitment as modeled above, totaling $3.5 of the $5 billion, a total of 700 million tons of CO2 (megatons, or MtCO2) in verified emissions reductions would be financed at $5 per ton. The $1.5 billion in readiness and implementation finance is estimated to help enable between 200 and 900 MtCO2 of reductions over the period. The readiness and VER finance may or may not might flow to the same countries – so it is not possible to know whether or not these two range estimates are additive. It is something akin to adding apples and oranges – although perhaps more like adding apple tree saplings planted to bushels of apples produced.
Regardless, at a minimum the package will by 2020 help enable 200 MtCO2 of emissions reductions to be generated by forest countries and potentially transferred later as VERs for additional cost or retired (or counted as a country’s “own contribution”), while also directly financing 700 MtCO2 in VERs. At the higher end, the package will help enable more reductions – nearly a gigaton – while also directly financing the 700 MtCO2 in VERs. From completely overlapping to completely non-overlapping ranges between readiness funding and VER payments, these estimates yield a range of 700-1600 MtCO2 total by 2020, and reaching an annual rate of around 150-300 MtCO2 per year by 2020.
This is a big emissions cut. In total, it is like keeping 3.8 to 8.6 million rail cars of coal in the ground. Annually, it is like taking 32-64 million cars off the road, or closing down 40-80 coal plants. It is also globally significant in terms of forest area, for example preventing deforestation of 1.4 to 3.2 million hectares. This is an area the size of Connecticut (or Yellowstone and Grand Canyon National Parks put together) at the low end, and Connecticut plus Massachussetts (or add in Alaska’s Denali National Park to Yellowstone and the Grand Canyon) at the high end. That’s a whole lot of forest left standing that would otherwise be destroyed in the next six years.
Norway’s unquantified commitments: Two of Norway’s commitments were not quantified clearly in dollars. First, Norway committed to “continue to financially support Brazil’s Amazon Fund at around current levels up to 2020, if Brazil continues to meet its ambitions.” A footnote noted the amounts of Norwegian support in Krone for 2013, 2014, and 2015. A large drop in value of the Krone over this period complicates interpretation of this commitment. The “current level” in dollars would be about $147 million per year or $735 million for the five years 2016 – 2020. If instead the “current level” is in Krone, then the recommended exchange rate of 7.5 Krone per dollar would suggest $130 million per year or $650 million over 5 years. For this analysis, I split the difference. Second, Norway’s commitment to “increase its contribution to civil society organizations” was a bit unclear. Norway provided around 820 million Krone over three years for the last round of civil society grants; I assumed the same funding level per year in Krone for the 2016-2020 five year grant program converted at 7.5 Krone to the dollar. This could be an underestimate given Norway’s stated intent to increase the amount.
Commitment Years: I was unable to track down a clear commitment date for every single program mentioned in the Annex to assign them to 2014 or 2015. Absent a clear commitment date, the earliest of available program start dates and dated program documentation was used.
Estimating Impact: I modeled the results-based portion of the package at $5/ton for all tons, assuming that donors would be unlikely to raise this going rate significantly over the 2015-2020 time period. For the readiness and implementation portion of the finance, we estimate the impact from a range of sources. These include impact estimates for the Forest Investment Program, the forest investments by the Global Environment Facility, and USAID bilateral REDD+ programs as cited in a recent Climate Advisers’ analysis of the impact of US international climate programs; and in the UK’s public estimates in business case analyses of the $95 million Investments in Forests and Sustainable Land Use program and the $144 million Forest Governance, Markets and Climate program. These sources yield estimates ranging from $1.64 to $8.06 of readiness and implementation finance per ton of emissions reductions realized.