Models For Incentivising Multiple Benefits: Options for the Lam Dong Provincial REDD+ Action Plan Adrian Enright January 2014 Acknowledgements This paper is an output of the project ‘Delivering Multiple Benefits from REDD+ in Southeast Asia’ (MB-REDD), implemented by SNV Netherlands Development Organisation The MBREDD project is part of the International Climate Initiative The German Federal Ministry for the Environment, Nature Conservation and Nuclear Safety supports this initiative on the basis of a decision adopted by the German Bundestag The author would like to extend his thanks to Mr Steve Swan (SNV) for his invaluable comments to this report, in addition to those of Mr Nguyen Van Bang and Mr Pham Thanh Nam Authors: Adrian Enright REDD+ Advisor, SNV Netherlands Development Organisation aenright@snvworld.org SNV REDD + www.snvworld.org/redd Table of Contents Acknowledgements List of Tables, Boxes and Figures Abbreviations Executive Summary i ii iii 1 Introduction 1.1 Background context 1.2 Aims, structure and audience 1 Models For Delivering Multiple Benefits 2.1 Ex-ante and ex-post incentive models 2.2 International experiences 5 Provincial REDD+ Action Planning In Vietnam Lam Dong Province 4.1 Socio-economic context 4.2 Forestry sector 4.3 Drivers of deforestation and forest degradation 10 10 11 12 Potential REDD+ Activities for Lam Dong Province 14 Models for Delivering Multiple Benefits Under the Lam Dong Provincial REDD+ Action Plan 18 6.1 Sustainable agro-forestry and supply-chain developments 18 6.2 Improving agricultural output in areas of high forest-encroachment 19 6.3 Support agricultural value-add initiatives: the case for bamboo 20 6.4 Bundling and stacking carbon payments under Payments for Forest Environmental Services 21 6.5 Promoting sustainability standards for key agricultural commodities & timber 22 6.6 Combined ex-ante and ex-post savings books 25 Conclusions 26 References 27 Annex I Selecting effective strategies for no deforestation in supply chains 30 www.snvworld.org/redd List of Boxes, Figures, Maps and Tables Box Possible multiple benefits from REDD+ Box Payment for ecosystem services in Mexico 22 Box Examples of certification to reduce deforestation 24 Figure Key barriers and solutions to achieving multiple benefits from landscape-level planning multiple benefits Figure 2: Selecting effective strategies for no deforestation in supply chains Map i Lam Dong province 30 Table International examples of models for incentivising multiple benefits Table Forest type and ownership, Lam Dong province 12 Table Candidate activities for Lam Dong’s Provincial REDD+ Action Plan and their potential multiple benefits 15 Table List of forest owners potentially implementing future REDD+ activities in Lam Dong 17 SNV REDD + www.snvworld.org/redd Abbreviations DARD Department of Agriculture and Rural Development FPDF Forest Protection Development Fund FPDP Forest Protection and Development Plan GHG greenhouse gas HCMC Ho Chi Minh City MARD Ministry of Agriculture and Rural Development MRV measurement, reporting and verification NRAP National REDD+ Action Programme NTFP non-timber forest product PaMs policies and measures PSA-CABSA payments for carbon, biodiversity and agroforestry services PES payment for ecosystem services PFES payments for forest environmental services PFMB protection forest management boards PIAM participatory impact assessment and monitoring PRAPs Provincial REDD+ Action Plans REDD+ Reducing Emissions from Deforestation and Forest Degradation (including forest degradation and the role of conservation, sustainable management of forests and enhancement of forest carbon stocks) RIL reduced impact logging SFE state forest enterprise UNFCCC United Nations Framework Convention on Climate Change UN-REDD United Nations Collaborative Programme on Reducing Emissions from Deforestation and Forest Degradation in Developing Countries SNV REDD + www.snvworld.org/redd ii Executive Summary Vietnam has arguably been one of the faster movers in its preparedness for REDD+.1 On 27 June 2012 the Vietnamese Prime Minister approved the National REDD+ Action Programme Part of this plan stipulated the need to develop Provincial REDD+ Action Plans (PRAPs) for eight provinces coming under the initial focus of REDD+ activities One of these provinces of focus is Lam Dong, in the central highlands of Vietnam Lam Dong is the centre of piloting activities for REDD+ under the United Nations Collaborative Programme on Reducing Emissions from Deforestation and Forest Degradation in Developing Countries (UN-REDD) Viet Nam Programme Phase I Since 2009, Lam Dong has also been the site of several initiatives from SNV Netherlands Development Organisation The development of the Lam Dong PRAP is underway and is expected to be completed within 2014 Despite the progress being made in Vietnam, and more recent international advancements under the United Nations Framework Convention on Climate Change (UNFCCC), there remains uncertainty around the timing and size of future carbon financing As a result, greater attention has shifted to the role of REDD+ in generating ‘multiple benefits’ The multiple benefits that could be delivered through REDD+ are defined here under five broad categories: sustainable rural livelihoods; improved forest governance; strengthening human rights; biodiversity conservation and ecosystem services; and climate change adaptation A multiple benefits approach looks beyond what REDD+ may provide in terms of direct finance for ex-post emissions reductions and explores the suite of other possible social and environmental benefits under REDD+, in addition to the carbon benefits This approach contrasts with the thinking to date in Vietnam around benefit sharing models under REDD+ In particular, the expectations that significant benefits will be soon available for distribution down to the household level using a one-size-fits-all distribution system are now being put in the context of the uncertainty around future REDD+ funding and the realisation of wider multiple benefits This paper attempts to broaden the dialogue around benefit sharing by linking candidate REDD+ activities to incentives for multiple benefit delivery In response to the growing attention around multiple benefits under REDD+, this paper investigates options for incentivising multiple benefits in the context of the future Lam Dong PRAP In particular, the paper draws on the Lam Dong Forest Protection and Development Plan (FPDP) as a guide for the types of activities likely to be included under the eventual PRAP It will combine this analysis with a look at international examples of incentive models for multiple benefit provision Taking these examples, a series of possible incentive models specific to the possible activities in Lam Dong are discussed These models should not be seen as mutually exclusive and can often be used in association with each other For example, consideration is given to conditional ex-ante REDD+ investments to support agro-forestry and supply chain developments in key agricultural commodities in Lam Dong, such as coffee Potential exists for these activities to be coupled with appropriately targeted investments into local value-add processing facilities in other sectors (e.g cocoa) where almost 75 per cent of the commodities’ value currently lies Such opportunities may be especially useful for commodities such as bamboo which are currently crippled by high levels of wastage and poor access to capital Reduction of Green-house Gas Emissions through efforts to Reduce Deforestation and Forest Degradation,Sustainable Management of Forest Resources, and Conservation and Enhancement of Forest Carbon Stocks iii SNV REDD + www.snvworld.org/redd Other options explored include looking at land sharing opportunities in areas where forest encroachment is an important driver of deforestation In this case, agreements between local actors to move towards reduced or zero deforestation in adjacent forest areas could be rewarded through improved agricultural extension services or the establishment of hub and outgrower models (where smaller farmers within the vicinity of larger producers gain access to extensions services and processing facilities) to increase incomes and promote conservation Consideration is also given to the role sustainable agriculture and timber standards can play in contributing to sustainable livelihoods and promotion of reduced deforestation and degradation Here, plans under the FPDP to expand pilots for Reduced Impact Logging (RIL) could be supported through up-front financing for training and capital through REDD+ Such measures would need to be coupled with compliance conditions placed on loans ensuring proven emissions reductions at a later point in time Furthermore, plans under the FPDP to promote natural regeneration in degraded areas could be integrated alongside agricultural standards in areas where encroachment is a key driver of deforestation and degradation Similar strategies could also be applied in areas where there is an agricultural interface with protected forest areas The planned conservation efforts in the Cat Tien and Bi Doup-Nui Ba national parks could, for example, engage local communities in forest patrol and monitoring efforts to help curb illegal poaching and deforestation Compensation for these efforts under REDD+ may be explored through the introduction of sustainably accredited cropping regimes that could be primed for certification Building on existing systems will also be important in the context of incentivising multiple benefits through REDD+ For example, a combined exante and ex-post payment system trialled under reforestation pilots supported by KfW might provide a replicable model which has the potential to yield progressive income gains alongside important environmental benefits Options for bundling or stacking carbon payments with those for other ecosystem services under the existing payments for forest environmental services (PFES) system could also be considered, offering more immediate and tangible financial benefits to local actors in compensation for foregone agricultural land use opportunities In exploring these incentive models it is acknowledged that incentives should also be balanced on the other side of the equation with disincentives For example, plans to incentivise forest patrol efforts should also consider approaches to strengthen law enforcement and penalties for those people who not comply with the forest protection and development law Efforts to integrate multiple benefits into the PRAP through participatory environmental and social impact assessment will complement the mix of incentive options to achieve the economic, environmental and social objectives of Lam Dong’s existing development and sectoral plans for forestry and land use However, whilst recognising the importance of disincentives and other supporting mechanisms, this report will focus specifically on the role of REDD+ in realising multiple benefits through incentive models Coupling these with approaches addressing disincentives should be considered as a possible extension exercise, or one that is incorporated into the development of the Lam Dong PRAP SNV REDD + www.snvworld.org/redd iv Introduction 1.1 Background context Reducing Emissions from Deforestation and Forest Degradation (REDD+) has generated significant international interest and finance as a means for addressing carbon emissions associated with the forestry and other land use sectors Deforestation and forest degradation have been found to contribute between and 14 per cent of global emissions making efforts to reduce these unsustainable land use practices important contributions to global commitments to mitigating climate change (Vermeulen et al 2012) However, following the initial enthusiasm around REDD+, and hopes for it to deliver a cost effective means of emissions reductions, subsequent slow progress of international climate change negotiations, long-term financial uncertainty and technical challenges have limited progress Recent decisions under the United Nations Framework Convention on Climate Change (UNFCCC) have established a decision-making framework for future performance-based payments under REDD+ This, coupled with concomitant pledges by donor countries for further REDD+ financing, has helped provide renewed momentum for REDD+ However, the size and shape of long-term financing continues to be uncertain In view of these challenges, greater attention has turned to the provision of multiple benefits under REDD+ (see Karousakis 2009, Dickson et al 2009, Sasaki and Putz 2009, SCBD 2009, Miles and Dickson 2010, Harvey et al 2010, Midgley et al 2010, Pistorius et al 2010, Cowling 2013) Multiple benefits refer to benefits that go beyond carbon sequestration and can include improved biodiversity conservation, forest governance, expanded social capital and more secure land tenure for local communities (see Box 1) Box 1: Possible multiple benefits from REDD+ Pro-poor rural development - REDD+ could provide important opportunities to reduce poverty if it can deliver significant financial flows to rural areas, which are among the poorest parts of most developing economies Improved forest governance - The performance-based nature of REDD+ should drive significant improvements in forest management that can only be achieved through reforms and strengthening of forest governance systems Protection of human rights - The heightened international scrutiny of forest management that will accompany REDD+ finance could strengthen the implementation of existing safeguards and have positive implications for the respect for human rights Biodiversity conservation and other ecosystem services - Retaining existing biodiversity and ecosystem services; reducing pressures on biodiversity associated with fragmentation and loss of forest; ensuring long-term maintenance of forest resources; increasing the connectivity between patches of intact forest Climate change adaptation - As a climate change policy tool intended to protect and reduce impacts on tropical forests, REDD+ can mitigate greenhouse gas (GHG) emissions and at the same time help forest- dependent communities to adapt to the impacts of climate change Source: adapted from GlobalWitness 2010, Miles and Dickson 2010; Swan 2012, Schmidt et al 2012; Mant et al 2013 Peskett & Todd 2013 SNV REDD + www.snvworld.org/redd With the increased focus on the potential for multiple benefits through REDD+, attention has also be given to the possible delivery mechanisms for multiple benefits Mechanisms available to REDD+ countries include (Gardner et al 2011, Swan and McNally 2011, Rey et al 2013, Ochieng et al 2013, Marfo et al 2013): • country safeguard systems (national level safeguards to ensure the ecological integrity of REDD+ activities) • mainstreaming multiple benefits in national policies and sub-national plans • economic incentive models • disincentives (e.g law enforcement and penalties) The specific focus of this paper, however, will be to explore models which provide incentives to generate multiple benefits These models will be considered in terms of both ex-ante enabling conditions and ex-post outcomes (results) based approaches of REDD+ policies and measures which can be linked to future benefit distribution systems Benefit distribution systems refers here to the mechanisms for which REDD+ finances will be used to distribute both cash and in-kind benefits to actors involved in REDD+ activities (Enright et al 2012) This exploration of incentive models will be set in the context of REDD+ developments in Vietnam Specifically, the models will be considered in regards to the possible set of activities under the Lam Dong province REDD+ Action Plan Provincial REDD+ Actions Plans (PRAPs) are mandated to operationalise the National REDD+ Action Programme (NRAP).2 These plans will set a ten year agenda stipulating the REDD+ activities relevant to each of the eight initial REDD+ pilot provinces in Vietnam Lam Dong province, in the central highlands of Vietnam (see Map 1), has been a pioneer in Vietnam’s attempts to introduce results-based financing for forest protection and development, firstly through piloting PFES, and more recently with REDD+ readiness activities and PRAP development In response to Lam Dong province’s request, SNV is currently providing technical assistance to the development of the PRAP As part of this support, SNV and the PRAP drafting team are exploring cost-effective ways to incorporate multiple benefits from REDD+ in the province, namely participatory impact assessment and monitoring (PIAM) of the PRAP and this paper’s exploration of incentive structures linked to candidate REDD+ activities Decision 799/QD-TTg SNV REDD + www.snvworld.org/redd Map 1: Lam Dong province SNV REDD + www.snvworld.org/redd Table 4: List of forest owners potentially implementing future REDD+ activities in Lam Dong Forest owners Examples Households (smallholders) Community forest operations 17 State Forest Enterprises Da The SFE, Loc Bac SFE, Bao Lam SFE, Don Duong SFE, Di Linh SFE, Tam Hiep SFE, Bao Thuan SFE & Da Huoai SFE National Parks Cat Tien National Park & Bidoup Nui Ba National Park Commune Peoples Committee Commune level committees Protection Forest Management Boards Nam Ban PFMB, Dam Rong PFMB, Dai Ninh PFMB & Duc Trong PFMB SNV REDD + www.snvworld.org/redd Models For Delivering Multiple Benefits Under The Lam Dong Provincial REDD+ Action Plan This concluding section takes the discussion around ex-ante and ex-post multiple benefits delivery models and the international experience illustrated in Table and compares this with the potential list of REDD+ activities outlined in Table The models presented below are in no order of priority and will need to be considered in the context of broader provincial planning efforts and the financial and human capacity constraints of the province The intention of these options is to stimulate further thought on appropriate mechanisms for inclusion under the eventual Lam Dong PRAP 6.1 Sustainable agro-forestry and supply-chain developments The expansion of agriculture in Lam Dong is a considerable driver of deforestation and degradation This expansion comprises small-scale encroachment and the establishment of new fields and plantations (especially rubber) in degraded forests Opportunities, therefore, exist to use REDD+ finances to support agro-forestry expansion efforts alongside supply chain improvements in key agricultural commodities The Lam Dong FPDP clearly articulates a desire to develop sustainable agro-forestry as part of a larger push for increased business investment into the forestry sector Agro-forestry initiatives already exist across the province and are heralded as generating important benefits for local communities However, as suggested below, the province is looking for other sources of financing to support these initiatives: Funding for implementation [of afforestation and agro-forestry], apart from budgetary funds, needs to be mobilised from other programmes and projects such as forest environmental services payments project; Greenhouse gas emissions reduction projects (pp139) Ex-ante REDD+ financing could be an important source of funding to help co-finance investments into sustainable agro-forestry initiatives This may be appropriate for commodities such as shade grown coffee Lam Dong is a major producer of Arabica coffee, a high yield, low quality coffee type The province also has an even larger area of Robusta coffee which is of poorer quality, but higher yield Coffee remains one of the most valuable sources of agricultural income for many poorer households living in Lam Dong, alongside tea, cashews, cassava and maize (Nguyen and Enright 2012) However, coffee plantations are also a significant driver of deforestation (Nguyen and Enright 2012) For example, industrial coffee farming has promoted severe deforestation, especially following spikes in coffee prices in Tan Thanh and Phi To communes in Lam Ha district, Dinh Trang Thuong commune in Di Linh district and Phi Lieng commune in Dam Rong district (DARD 2012) Thus, looking at ways to promote more sustainable production through agroforestry may help alleviate this pressure on forested areas, whilst maintaining an important income source Similar initiatives could also be explored for medicinal products which are listed as a priority in the FPDP (see page 91 of DARD 2012) SNV REDD + www.snvworld.org/redd 18 Supply chain improvements for these commodities could also be supported alongside agroforestry initiatives to facilitate a more holistic process of benefit delivery The FPDP states that the agro-forestry processing industry accounts for 73 per cent of the total product value This suggests there is significant value outside the production of raw materials Well-targeted investments into local value-add processing facilities may therefore generate much wider livelihood benefits than are currently being realised in key agricultural commodities Further exploration of key gaps in important local supply chains could be investigated with the intention of using REDD+ financing to invest in various initiatives Such investments could be undertaken on the condition of more direct forest protection activities such as participatory forest monitoring (PFM)6 efforts as a condition on PFES-financed forest protection contracts 6.2 Improving agricultural output in areas of high forest-encroachment Forest encroachment from small-scale agriculture development continues to be an important driver of deforestation and degradation in Lam Dong province (Nguyen and Enright 2012) Faced with diminishing returns from their land, poorer land owners frequently encroach on neighbouring forested areas to slowly expand into new, more fertile lands This process continues to threaten the adjacent forested areas whilst also exposing local communities to related problems including soil erosion and diminishing supplies of important NTFPs such as bamboo shoots, rattan buds and forest vegetables (Nguyen and Enright 2012) Improving agricultural output on existing land allocations is highlighted as a clear challenge under the FPDP, suggesting that “due to lack of knowledge on farming techniques, the crop yields, particularly agricultural crops of the households living near forests, were still low” (pg77) As suggested, these challenges are compounded by out-dated cropping techniques alongside under resourced extension service provision Opportunities appear to exist for REDD+ to provide ex-ante incentives for small-scale agricultural producers to improve cropping techniques on existing land under the agreement to prevent encroachment on adjacent lands This could be explored in several ways including co-financing improved agricultural extension service provision, under which extension services are offered as a form of up-front in-kind incentive for landowners to agree to stop deforesting and degrading neighbouring land This could also be established in a similar way to the hub and outgrowers’ schemes in Mozambique (see Table 1), in which smallholders in the vicinity of large-scale farms are able to access inputs, extension services and value adding facilities (Streck and Zurek 2013) Here, REDD+ support could be provided to help establish and finance the cost of similar co-operative models in exchange for agreements to reduce forest encroachment An alternative, or perhaps complementary, incentive model could see REDD+ finance used to improve existing agricultural extension services through improved training of trainers There appears to be considerable deficiency associated with the capacity of support services both in terms of human capital and resources Investing in improved service delivery as a part of contractual agreements under REDD+ could help to alleviate the pressure on neighbouring forested areas, as well as bring direct benefits to communities through increased yields and support local agricultural service providers DARD Lam Dong, with technical and financial assistance from SNV, has piloted PFM activities as a cost-effective way of engaging local actors in REDD+ and may also have important links to broader REDD+ architecture such as benefit distribution systems and future national and/or provincial carbon accounting frameworks 19 SNV REDD + www.snvworld.org/redd Incentive models for multiple benefits under REDD+ could also take the form of improved capital access through ex-ante loan provision Evidence from Loc Bac commune suggests that community groups would consider contractual REDD+ agreements if provided with loans with which to invest into farming equipment and fertilisers (Enright 2013) Any form of loan contract, however, would need to be constructed carefully to ensure loans are invested in appropriate ways and not exhausted on luxury goods which leave poor people vulnerable to repayment default and loss of collateral 6.3 Support agricultural value-add initiatives: the case for bamboo With 70 per cent of the Lam Dong population engaged in agriculture there appears to be considerable opportunity to explore livelihood improvements through a focus on adding value to raw material production One industry with significant potential is bamboo Bamboo is highlighted in the FPDP as struggling to generate consistent income for local households and thus being outcompeted by more valuable land uses, particularly rubber plantations: “these [bamboo] plants lack input materials and have outdated technology/equipment as well as low quality products Only a part of bamboo plants is used to make traditional products such as bamboo chopsticks, toothpicks, incense, and handicraft products or whole bamboo trees are used as building materials There have been no official handicraft villages in the province, and the handicraft production activities have been developed spontaneously at household scale Bamboo production during 2000 - 2010 was 34,741,000 trees, but the output fluctuated annually due to unstable consumption market due to application of simple exploitation and processing method.”(pg 33) Opportunities may exist for REDD+ to co-finance local value-added initiatives and improved market access in commodities such as bamboo products This could help to yield larger benefits to local communities and could be conducted on the condition of meeting REDD+ objectives such as improved forest patrols of neighbouring forests Alternatively, more sustainable bamboo production could be coupled with plans under the FPDP to reforest degraded lands Similar approaches have been implemented in Meru Betiri National Park, Indonesia whereby local communities are engaged in forest patrol efforts in exchange for support for local agroforestry initiatives to yield important medicinal products (McDermott 2012) Again, such an approach in Lam Dong would need to be done in association with efforts to improve market access for small-scale producers and improved capital provision to address the existing low-value add on bamboo products Incentives could also be provided at the processing end of the bamboo supply chain The FPDP suggests that roughly 40 of the 50 processing mills in Lam Dong are small-scale and suffer from technology inefficiencies and considerable wastage In this case, REDD+ finances could be used to trial uses for bamboo residues, such as energy briquettes, which has been successfully accomplished in China (Mingjie 2004) This could help to generate an additional revenue stream for small-scale bamboo plants whilst also providing additional carbon sequestration benefits through the reduced demand for fuel wood Here, REDD+ finances could therefore be used in a three-way deal between REDD+ financers, bamboo mills and communities For example, mills could be supported through ex-ante seed-grants to invest in technologies to convert waste biomass into energy briquettes These briquettes could then be subsidised under REDD+ and supplied to local communities under the condition they reduce or stop fuel wood collection SNV REDD + www.snvworld.org/redd 20 6.4 Bundling and stacking carbon payments under payments for forest environmental services In Vietnam, a national payment for ecosystem services scheme has been established following Decision 380/QD-TTg on the pilot policy for payments for forest environmental services (PFES) in 2008 in Lam Dong and Son La provinces The implementation of activities in these two provinces laid the foundation for Decree 99/ND-TTg (hereafter Decree 99) which stipulates the implementation of PFES nationwide According to Decree 99, ecosystem services are bundled and are sold to service users At present, only watershed payments and a very small proportion of ecotourism payments (roughly per cent of all PFES payments) have been mobilised under Decree 99, leaving space for the operationalisation of carbon payments (Pham Thu Thuy et al 2013) Carbon payments could be added to the existing PFES structure in either a bundled credit (where all ecosystem services are packaged together and bought as a single credit) or stacked (where each service is accredited and sold separately) REDD+ could be seen as an important opportunity to push forward the idea of bundling or stacking carbon payments alongside domestic payments for forest ecosystem services This would need to explore the practicalities of using a provincial level fund (such as the Forest Protection and Development Fund) to make carbon payments alongside those for other ecosystem services In this way, REDD+ would help to incentivise a wider set of ecosystem services beyond carbon and may make REDD+ more financially attractive to potential service providers This would help to address one of the major criticisms of the current PFES scheme: the opportunity cost of most alternative land uses is significantly higher than the payments people receive under PFES forest protection contracts (Pham Thu Thuy et al 2013) Similar approaches have already been put in place in other contexts, such as in Mexico (see Box 2) In considering options for bundling and stacking carbon and existing PFES payments, issues of transparency of international carbon finances would need to be explored alongside the practicalities of how ex-post performance payments for carbon would be made alongside payments for other services which are currently not performance based Opportunities to link measurement, reporting and verification (MRV) approaches for REDD+ into other PFES services may also help to address a major monitoring gap that exists in the existing PFES architecture (Pham Thu Thuy et al 2013) 21 SNV REDD + www.snvworld.org/redd Box 2: Payment for ecosystem services in Mexico Mexico’s carbon payments programme was established in 2004 as a component of a wider programme of Payments for Carbon, Biodiversity and Agroforestry Services (PSA-CABSA) which aims to provide financial incentives to rural communities and private landowners for the design and implementation of carbon sequestration, biodiversity conservation and agroforestry projects PSA-CABSA built on the experiences of the Payments for Watershed Services (PSA-H) which was established in 2003 and eventually merged in 2006 into a single policy framework of Payments for Environmental Services, with each sub-programme (hydrological, biodiversity, carbon and agroforestry services) maintaining its own procedural rules (Corbera 2011) Mexico’s system is said to have been largely successful especially in terms of creating a long term, sustainable model of financing In particular, although initially relying on foreign aid investments, the model has evolved to create entry points for the private sector to invest in the scheme through the establishment of a long-term fund which support both private sector contributions as well as continued foreign aid (Herbert and Tepper 2012) 6.5 Promoting sustainability standards for key agricultural commodities & timber Incentive models for the delivery of multiple benefits under REDD+ could also include the promotion of standards by exploring opportunities in certification and the establishment of certification targets for specific commodities, such as cocoa, coffee and timber Standards in the agricultural sector can be an important method of moving towards lower, or zero, deforestation associated with crop production Standards, including the Rainforest Alliance Certification and Fair Trade association, aim to supply important social co-benefits through improved links to higher end markets in commodities such as tea, coffee, chocolate and fruit For timber, certification standards such as the Forest Stewardship Council (FSC) can also offer potential opportunities to generate higher income from more sustainably produced timber alongside securing other community orientated benefits through improved forest management practices Certification can also introduce changes in production methods that may also yield cost savings in the production chain in the longer term This is especially true in cases where improvements are made to introduce production methods that reduce waste (Liu et al 2004) Examples of such an approach are shown in Box 3, illustrating SNV’s activities supporting aquaculture certification in Ngoc Hien, Ca Mau province, Vietnam, as well as activities in Guatemala where rubber plantations are pursuing FSC certification for sustainable forest management This second example is particularly pertinent in Lam Dong where significant growth in rubber plantations has seen ‘degraded’ land being converted for rubber plantation expansion However, there are well-known impediments to the uptake of standards, especially at the local level Such impediments include the high up-front costs associated with compliance, SNV REDD + www.snvworld.org/redd 22 high transactions and opportunity costs, monitoring and verification costs and uncertainty around the demand for premium-priced goods In this case, innovative ways of using REDD+ financing to help cover at least a part of these costs could be considered In the case of activities listed in the FPDP, intentions to expand piloting of Reduced Impact Logging (RIL) could be supported through ex-ante front-loading of REDD+ funds being used to fund training efforts or to support the purchase of new technology to facilitate RIL These payments could be incorporated into the incentive model under REDD+ by requiring State Forest Enterprises to repay loans if the anticipated emissions reductions are not met Small loans or up-front in-kind incentives may also be appropriate in areas where sustainable agricultural standards are implemented alongside REDD+ activities For example, plans under the FPDP to promote natural regeneration in degraded areas could be integrated alongside agricultural standards in areas where encroachment is a key driver of deforestation and degradation Similar strategies could also be applied in areas where there is an agricultural interface with protected forest areas The planned conservation efforts in the Cat Tien and Bi Doup - Nui Ba National Parks could, for example, engage local communities in forest patrol and monitoring efforts to help curb illegal poaching and deforestation Compensation for these efforts under REDD+ may be explored through the introduction of sustainably accredited cropping regimes that could be set-up for certification Approaches of this vein have been introduced in Acre province, Brazil (see Table 2) Here, win-win scenarios are claimed in so far as reducing deforestation pressure alongside introducing best management practices for certified timber, rubber and Brazil nut (Emerton 2012) Furthermore, opportunities in using certification standards for key commodities, such as timber, coffee and cocoa in Lam Dong, could be supported through the establishment of longer-term provincial targets Such targets could be integrated into the PRAP This jurisdictional approach can achieve lower costs for monitoring and can more easily take leakage into account (Stanley et al 2013) Such an approach has been implemented in Central Kalimantan in Indonesia where the governor issued a decree requiring oil palm concessions to be certified within a set period (Stanley et al 2013) To help guide decisions around such approaches, SNV is developing approaches to use certification standards as a means to promote zero deforestation agriculture Annex 1, for example, illustrates a decision-making tree which can help identify the viability of moving towards zero deforestation in the supply chain of several commodities, two of which are of direct relevance to Lam Dong; coffee and cocoa 23 SNV REDD + www.snvworld.org/redd Box 3: Examples of certification to reduce deforestation Vietnam In recognition of the growing pressure shrimp farming is placing on important mangrove areas, the SNV Netherlands Development Organisation is working alongside shrimp importers, traders and farmers to introduce ecologically sound shrimp production in areas of high deforestation and degradation These practices will then seek certification under international aquaculture certification standards, alongside plans to access carbon financing for the emissions reductions generated through the conservation of the threatened mangrove areas Such an approach illustrates the way certification can be used to incentivise multiple benefits in the form of carbon sequestration, habitat restoration and livelihood improvements provided by restored mangroves Guatemala The Producción, Industrialización, Comercialización y Asesoría de Hule Natural, Sociedad Anónima (PICA) project is designed to promote sustainable development through the establishment of natural rubber tree plantations in two distinct regions of Guatemala The proposed project activities involve certifying the proposed project areas under the Forest Stewardship Council (FSC) forest management certification, in addition to the validation of the project as an Afforestation, Reforestation and Revegetation (ARR) project with the VCS Over 2,000 hectares of degraded pastureland is intended to be planted with Hevea brasiliensis spp (rubber trees) on seven different farms located in the Suchitepéquez and Izabal departments The reforestation effort is projected to sequester a total of 1,739,855 t CO2e over 42 years The revenue derived from the sale of carbon credits from the project will enable it to pursue FSC certification (Arreaga 2010) SNV REDD + www.snvworld.org/redd 24 6.6 Combined ex-ante and ex-post savings books Ex-ante and ex-post incentives could also be combined in a way which replicates existing payments for reforestation efforts in Vietnam In particular, the German development bank, KfW, introduced a novel incentive structure for households involved in reforestation efforts in several provinces across Vietnam Here, participants were provided with free seedlings and fertilisers as an initial start-up incentive (Enright et al 2012) Pending the survival of 80 per cent of the seedlings, households were provided with a savings book after three months to deposit payments for their labour Withdrawals from individual accounts were capped to ensure a continual income stream was maintained, whilst the project reserved the right to cancel withdrawals on the condition of non-compliance with management activities (Enright et al 2012) Such an approach could be replicated under activities in the Lam Dong PRAP In particular, activities which intend to engage local households, such as restoration of degraded areas, forest patrols or promoting natural regeneration through exclusion could adopt a similar mix of ex-ante and ex-post incentives In doing so, important social benefits could be generated in the form of controlled streams of income In particular, the work of KfW boasts to have achieved poverty reduction and sustainable environmental management in 13 provinces in northern and central Vietnam with a total of 130,000 hectares reforested and 86,000 families having taken part in the project (KfW 2011) 25 SNV REDD + www.snvworld.org/redd Conclusions 7 Recent decisions made under the UNFCCC Warsaw Framework for REDD+ provide an important step forward in terms of stipulating the agreed rules on performance-based REDD+ financing The agreement makes resultsbased finance contingent on safeguards being met, lays out clear rules for transparency and sets minimum reporting requirements for countries to qualify for REDD+ revenues (Ecosystems Marketplace 2013) This is an important step forward for REDD+ Yet, there still remains uncertainty associated with the future size and shape of REDD+ financing This uncertainty has provided an important shift in attention towards the multiple benefits possible under REDD+ This thinking moves away from more conventional REDD+ ideas around performance-based cash payments for emissions reductions from forest-based activities In particular, greater effort has been given to ways in which multiple benefits can be facilitated through such means as safeguards and broader integration into sub-national planning efforts (Rey et al 2013) This has also brought to the fore thinking around the types of incentive models that could be adopted to promote multiple benefits This paper has presented a suite of incentive-based options that are relevant to the Lam Dong Provincial REDD+ Action Plan (PRAP) The development of the PRAP provides an excellent opportunity to explore opportunities to use REDD+ finances to go above and beyond carbon and look at ways to co-invest in new and existing activities which promote the delivery of multiple benefits A broad suite of options have been presented around using REDD+ in innovative ways to promote more sustainable agriculture and forestry models and meet sustainable development objectives of existing plans of Lam Dong province Each model has been provided to stimulate further dialogue amongst subnational stakeholders in Lam Dong These models illustrate some of the opportunities available but require further innovative thinking and planning to ensure the viability of such options in the context of Lam Dong By doing so, Lam Dong can move away from more traditional REDD+ benefit sharing arrangements which are associated with significant uncertainty Instead, this paper advocates taking a ‘no-regrets’ approach by presenting models which offer significant environmental and livelihood benefits regardless of the size and shape of future international financing mechanisms for REDD+ SNV REDD + www.snvworld.org/redd 26 References Arreaga, W (2010) Validation assessment report for: Producción, Industrialización, Comercialización y Asesoría de Hule Natural, Sociedad Anónima (PICA) in Guatemala Rainforest Alliance Brook, 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Apply certification and validatE in problematic countries w/ deforestation tracker tools YES Choose certification standard YES (Source: Stanley et al 2013) Commodity SNV REDD + Strategies Figure 2: Selecting effective strategies for no deforestation in supply chains Annex 1: Selecting Effective Strategies For No Deforestation In Supply Chains www.snvworld.org/redd 30 SNV - Netherlands Development Organisation REDD+ Programme 5th Floor, Nguyen Gia Thieu Ward 6, District 3, Ho Chi Minh City Tel/Fax +84 3930 0668 Email: sswan@snvworld.org www.snvworld.org/redd SNV REDD + www.snvworld.org/redd ... in regards to the possible set of activities under the Lam Dong province REDD+ Action Plan Provincial REDD+ Actions Plans (PRAPs) are mandated to operationalise the National REDD+ Action Programme... Potential REDD+ Activities For Lam Dong Province The Lam Dong Provincial REDD+ Action Plan (PRAP) will not be completed until 2014 Therefore, definitive activities to be included in the PRAP will... to Lam Dong province.3 As indicated in the NRAP and directed by the Vietnam REDD+ office, the Lam Dong FPDP will form the basis for identifying priority activities comprising the PRAP, where they