The Role of the Private Sector in Climate Change Interventions
Involving the private sector in REDD+ (Reducing Emissions from Deforestation and Forest Degradation) will be key to its success, says a new study by the ASB Partnership for the Tropical Forest Margins at the World Agroforestry Centre (ASB-ICRAF) and the International Institute for Sustainable Development (IISD).
Funding is a major concern in the implementation of REDD+ activities and involving the private sector will be absolutely critical to scale up investment in REDD+. It is estimated that betweenUS$17–40 billion per year is needed to realize the potential of forests to mitigate climate change. But since 2008, funding for the REDD+ mechanism has been largely in the form of public donor pledges, which fall far below this target at an approximate cumulative figure of US$7.2 billion. To mobilize funds for meeting the needs of developing countries in climate mitigation and adaptation, a decision to establish a Green Climate Fund (GCF) was made at the last Conference of the Parties (COP 17). The GCF is intended to mobilize US$100 billion annually by 2020 and has within it a “private sector facility” that targets funds from private sector sources.
Besides increasing the scale and speed at which investment needs to flow, the private sector can also make vital contributions to REDD+ initiatives through its technical expertise. In this way, the private sector can be part of the solution to mitigating climate change by addressing key drivers of deforestation.
REDD+ is a mechanism that aims at compensating developing countries that forgo development activities that cause deforestation. It is part of global efforts to combat climate change, encompasses the role of conservation, sustainable management of forests and enhancement of forest carbon stocks in developing countries.
The extent to which the private sector potential is effectively used to meet climate objectives, such as through REDD+ highly depends on i) a thorough understanding of the actors, including their areas of strength and capabilities that can be synergized to leverage on opportunities; and ii) Incentives needed to attract private sector engagement and investment at scale.
These are vital aspects explored in a new study titled The Private Sector in the REDD+ Supply Chain: Trends, challenges and opportunities. The study identified several private sector actors engaged in REDD+, including investment banks seeking future investment opportunities or to become ‘’carbon neutral’’, emission-intensive industries looking to offset carbon credits for pre-compliance/compliance, multinational firms through their voluntary Corporate Social Responsibility (CSR) programmes and for branding/image purposes, companies developing REDD+ projects, brokering firms, consulting companies offering technical expertise and capacity building and auditors, among others.
A conducive regulatory and policy environment that cushions against risk is key to moving forward on private sector engagement. “Policy clarity and certainty are critical determinants of private sector involvement in REDD+, both internationally and nationally,” explains Florence Bernard, Programme Associate at ASB-ICRAF and lead author of the study. “Governments need to make a deliberate intention to actively engage the private sector in national legislation and sectoral planning.”
Other necessary incentives for engagement involve including REDD+ in compliance markets to increase demand for REDD+ credits, ensuring clear land and carbon ownership systems, and engaging the private sector to address the fundamental drivers of deforestation. It is also crucial that the private sector’s investments are secured with performance-based payments issued directly to projects independently of national–level performance, through adequate embedding or “nesting” of projects within national level monitoring, compliance and overall accountability systems.
An in-depth discussion of these and other results from the study will be discussed at a side event organized by The International Emissions Trading Association (IETA) in partnership with IISD and ASB-ICRAF at the UNFCCC COP 18 on Thursday, 29 November, 2012 at 9:00 – 10:15 am, Diplomatic Club, Doha, Qatar.
For the past three years, IISD has partnered with the ASB Partnership for the Tropical Forest Margins at the World Agroforestry Centre to deliver a project aimed at addressing these challenges through information sharing and research to encourage innovative thinking and the continuous improvement of REDD+ processes and strategies. The project engaged over 300 developing country experts who identified topics of importance and inputted into the policy research process. The final year of the project focused on two critical determinants of REDD+ success, namely:
- Developing and implementing REDD+ safeguard information systems (SIS)
- Fostering effective private sector engagement in the REDD+ supply chain
Ahead of COP 18, IISD and ASB-ICRAF has released a series of publications to further explore these critical issue areas. The publications are the result of substantive research that included an extensive desk study, in-country semi-structured interviews with REDD+ experts and practitioners, and regional expert meetings.