Purpose of the work Recipients Methodology

Page 125 of 129 PwC Appendix 7: Terms of Reference Scoping Study: UK’s REDD+ Portfolio

1. Background

Tackling deforestation and degradation is a key part of the global effort to tackle climate change. Without REDD+, the goal of limiting the rise in global temperatures to 2°C above preindustrial levels will be much harder, and substantially more expensive, to achieve. Forests are also crucial to the livelihoods of 1.2 billion of the world’s poorest people who live on less than 1 a day. Losing these forests would jeopardise the achievement of the MDGs on poverty and environmental sustainability. Maintaining the world’s forests is also a crucial adaptation strategy. But forests are currently worth substantially more dead to key stakeholders than alive. Correcting this market and governance failure is the key to addressing deforestation. It is now widely accepted that financial incentives are needed on a systemic, international scale to create the right economic incentives for actors in developing forest countries to protect their forests. In Copenhagen, 6 developed countries - including the UK - agreed to provide 3.5bn over the period 2010-2012 to catalyse early action on REDD+ £300m from the UK. Pledges now total around 4 billion globally, and forest nations are willing to act. The UK has also committed to spending £2.9bn on climate finance over the next 4 years 2011-14 of which, though no decisions have yet been taken, REDD+ is likely to be a significant element. The UK therefore wishes to identify how best to scale up its support to REDD+. The objectives for our overall REDD+ programme portfolio are to: i Support countries to become “REDD+ ready” to participate in payment for results programmes and take complementary domestic action ii Support innovative mechanisms of payment for results, which leverage private sector involvement in REDD+ and lead to immediate results on the ground iii Create and support an efficient, effective, and coordinated international system to support countries to deliver REDD+ outcomes iv Learn what makes for effective REDD+ programming and share these lessons with developing forest nations and the international community It is intended that this portfolio supports innovative and sustainable forest carbon financing deals which maximise poverty reduction, climate resilience, biodiversity and adaptation pay-offs. The UK already invests in the Forest Carbon Partnership Facility FCPF, Forest Investment Programme FIP, Congo Basin Forest Fund CBFF, and is developing a 5 year REDD+ programme with Indonesia and a 10 year Forest Governance, Markets and Climate programme. The proposed scaled up portfolio could include: v Continued support to multilateral and regional programmes such as Forest Carbon Partnership Facility FCPF, Forest Investment Programme FIP, and the Congo Basin Forest Fund CBFF vi Scaled up bilateral work in one or several countries. This could be based on the development of large scale results-based partnerships with a limited number of forest nations and would seek to catalyse transformational change away from the unsustainable extractive use of forests and towards a new low carbon economy in coordination with other partners.

2. Purpose of the work

The purpose of the work is to set out and assess options for how the UK can most effectively scale up its engagement in REDD+ to achieve results, impact and value for money over the period 2011-14 and contribute to the development of global knowledge and an effective global architecture. Further work may be commissioned after this scoping exercise to design and appraise a new programme or programmes. If this is the case, the successful service providers will not be precluded from tendering for this follow-on work. Page 126 of 129 PwC

3. Recipients

DFID, DECC, and Defra will be the main recipients. The outputs will be delivered in consultation with other key government departments e.g. HMT, FCO and in close collaboration with external stakeholders, particularly forest nations and other donors. The ultimate beneficiaries once final programme design is completed will be stakeholders in developing forest nations, and potentially other donors who may want to support further programmes on REDD+.

4. Methodology

Stage I: Review and analysis of existing REDD+ experiences and approaches Drawing on i the service providers’ own knowledge and experience ii extensive work already commissioned by DFID, OGDs, and external organisationsstakeholders key documents will be shared on appointment iii reviewsevaluations of existing programmes including by the global REDD+ partnership; and iv consultations with key stakeholders, the service providers will produce a report which covers: i An assessment of existing REDD+forest governance programmes supporting national level REDD+ efforts. This should include major bilateral programmes and key multilateral, regional, and EU facilities, including FLEGT. The assessment should include a summary of early lessons learnt and “good practice” including an analysis of short-comings covering: a. Incorporating appropriate levels of national consultation, including involvement of indigenous peoples b. Providing adequate social and environmental safeguards e.g. for poor communities c. Securing economic development and poverty reduction objectives, equitable benefit sharing, and maximising the synergies and addressing potential trade-offs between adaptation, biodiversity, poverty reduction, and carbon reduction objectives d. Monitoring and evaluation frameworks for REDD+ programmes e.g. use of proxies, IPCC Tiers - with a review of possible indicators for tracking progress and impacts e. Overcoming the challenges of rapidly scaling up financing and potential implementation barriers. This should cover key macroeconomic risks, ensuring domestic accountability, and how to support and enhance the development of national capacity and REDD+ financing mechanisms. f. Addressing aid effectiveness principles in REDD+ planning and delivery. g. The appropriate balance between i REDD+ readiness, up-front investment, and results-based financing; ii use of grants, loans and equity based development finance; iii catalysing investments inside and outside the forestry sector to tackle the wider drivers of deforestation h. Incorporating the lessons from forest governance work. i. The range of possible approaches to catalysing private sector investment into REDD+ including i indirect approaches e.g. via government to government funding agreements; and ii more direct approaches e.g. directly incorporating into funding agreements ‘AMC style’ conditional purchase agreements with private sector investors, pre-identified demonstration programmes, or use of REDD+forest bonds. ii An assessment on the scope to expand and build on existing bilateral, regional, and multilateral funds, and in particular: a. their ability to absorb more funds and disburse quickly b. their ability to test truly innovative approaches e.g. with the private sector c. their capacity to expand to other countries Page 127 of 129 PwC iii A long list of priority countries, which could be prioritised for REDD+ programming, using criteria such as a the extent of political will to take action on REDD+ b current andor future potential for emission reductions, poverty reduction, resilience, and biodiversity benefits c HMG country office presence and capacity [or presence of other potential delivery partners] d the extent of funding from other sources vis-à-vis future investment needs e capacity to meet UK fiduciary standards and appropriate environmental and social benchmarks; f potential for demonstrable lessons for other countries in the region; and g progress in setting up national REDD+ financialinstitutional structures. Stage II: Options development Using the preliminary results from Stage I and working closely with the forestry team in DFID’s Climate and Environment Department, DECC, and Defra, develop a short-list of options for further UK support to REDD + programming. The service providers should assess the full range of options to deliver UK support including via other donors and the multilateral system, and the potential for co financing with DFID country offices, other donors and multilaterals at the country and global levels. The service providers should outline preferred options, and set out the pros, cons, trade-offs, and risks of different types of support and levels of ambition. A preliminary assessment should be made of what the different options could deliver in terms of results, as well as a strategy for overcoming and mitigating some of the inherent risks and challenges in scaling up REDD+ programming. The service providers should assess whether or not a separate programme or programmes will maximise the prospects for achieving results and impact at least cost, or whether the UK should focus its efforts on strengthening or building on existing programmes. One option that should be considered is that of providing significantly scaled-up results-based finance to reward a limited number of priority countries. For example, the UK could negotiate partnership agreements with a selected number of developing forest nations – in coordination with others e.g. other donors - setting out a programme of actions and agreed results to be supported by a combination of up-front and ex-post results based finance. The service providers should discuss and validate options and recommendations with relevant REDD+ country government officials, DFID’s Africa and Asia Divisions, DFID country offices, other donors, UK and other country-based NGOs, DECC, Defra, relevant private sector organisations, and any other relevant stakeholders. This Stage may include and a workshop with relevant officials to present findings and discuss options.

5. Main Deliverables