Independent Evaluation Group review of the FCPF: “World Bank needs a high-level strategic discussion on its overall approach to REDD”

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Independent Evaluation Group review of the FCPF: World Bank needs a high-level strategic discussion on its overall approach to REDD

In August 2012, the Independent Evaluation Group of the World Bank published a review of the Forest Carbon Partnership Facility (FCPF). The review reveals some of the major flaws behind the FCPF and recommends that the World Bank needs to re-think its approach to REDD.

Since it was launched in 2007 in Bali, the FCPF has been controversial. Nevertheless, 18 countries have pledged a total of US$457 million to the FCPF. Germany has pledged most money to the FCPF (24%), followed by Norway (20%), Canada (10%), and Australia (9%).

The World Bank acts as a Trustee for two funds under the FCPF:

  • The Readiness Fund (with US$239 million pledged of a target of US$300 million): through which 36 countries are “preparing themselves to participate in a future, large-scale system of positive incentives for REDD”; and
  • The Carbon Fund (with US$218 million pledged of a target of US$350 million): aims to test “a program of performance-based incentive payments in some pilot countries”.

So what has the FCPF achieved with all this money? The IEG Review (pdf file, 2.5 MB) starts with the good news, and lists three “major achievements”. The “main achievement to date has been to use the World Bank’s convening power to operationalize REDD+ by developing the modalities of REDD+ readiness”. Translated into English, the Bank has held a series of international meetings and produced a “roadmap” for countries to develop REDD readiness strategies.

The review concludes that the FCPF has succeeded in creating a space for debate:

Even in the absence of an agreed-upon instrument and a system of positive incentives and financing flows for REDD+, the FCPF has rekindled interest in addressing challenges that have plagued the forest sector for years. Because of the requirements associated with REDD+, the FCPF has facilitated a level of consultation and dialogue at the country level that has not traditionally taken place in sustainable forest management projects.

The FCPF has supported 24 of 36 country members with their readiness strategies, but the IEG notes that implementation of these strategies “is so far at an early stage in most countries”. Results on the ground “should be assessed as part of the next independent, external evaluation commissioned by the FCPF”. The Bank has “helped the Democratic Republic of the Congo, Nepal, Indonesia, Ghana, and the Republic of Congo move into the implementation phase of REDD+”. Perhaps wisely, the review refrains from commenting on whether these countries can really be described as REDD ready.

The IEG’s description of the FCPF’s third “major achievement” is no more than an explanation that although the FCPF’s “own financial resources have proved insufficient for countries to achieve REDD+ readiness” countries have used the FCPF-supported readiness process to persuade other aid agencies to provide co-financing.

So far, so good (or mediocre, depending on whether your salary comes from 1818 H Street or not). The IEG review’s bad news is broken down into four key points:

  • At the launch of the FCPF the Bank stated that “The facility’s ultimate goal is to jump-start a forest carbon market”. Five years later, the carbon markets have collapsed. The IEG comments that,

    Whereas the period surrounding the launch of the FCPF was characterized by optimism about the UNFCCC process and increased momentum behind carbon markets, progress at the UNFCCC process has been slower than expected and a financing instrument for REDD+ remains elusive.

    The Bank has so far only managed to get two private companies to pledge the minimum contribution of US$5 million to its Carbon Fund. These two make interesting bedfellows, one of the worlds biggest (and most polluting) oil companies and the world’s biggest “environmental” organisation: BP and The Nature Conservancy.

  • The IEG notes that, “The FCPF’s is further complicated by ‘over-demand’.” Currently, the FCPF has 36 member countries, with 11 more wanting to join. Meanwhile, five to ten countries are hoping to take part in the Carbon Fund. The IEG raises the question of how the FCPF will “support this expanded demand for services”.
  • “REDD+ is a more expensive, complex, and protracted undertaking than was anticipated at the time of the FCPF’s launch,” the IEG writes. What the IEG fails to point out is that this should come as no surprise. The Bank undertook no feasibility study, prepared no business case, and did no market or technical analysis before launching the FCPF in Bali. The FCPF anticipated that US$3.6 million would be adequate to cover the development of readiness strategies, but countries have budgeted an average of four times this amount.
  • Only 16 per cent of the paid-in contributions to the Readiness Fund has been disbursed (either to recipient countries or spent by the Facility Management Team on technical support or administration). To make matters worse, the FCPF has so far spent about US$22 million to deliver a total of US$4.9 million in grants. Of this, 70% went to five countries.

The IEG recommends that the FCPF “needs to update and clarify its mission to the World Bank’s Board and to its participating members in relation to the changes that are taking place in the carbon market and with respect to the evolving nature of the Carbon Fund”. This makes sense. FCPF’s achievements have nothing to do with the carbon markets, whereas the problems it has run into are to a large extent a result of its focus on carbon markets.

The IEG also recommends that the World Bank “needs a high-level strategic discussion on its overall approach to REDD” and points out that the Bank “faces a risk to its reputation in case financing does not materialize on the scale envisaged”.

A final recommendation is that the Bank should focus on activities such as “legal and policy support for land tenure and forest governance reforms”. As the IEG notes, such “no regrets” investments and activities are also useful outside of the REDD context.

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8 Comments

  1. One can only wonder at how this initiative has been able to blunder on for five years, and burned through tens of millions of dollars with almost nothing to show for it, before someone in the Bank (at the request of donor governments?) actually took any notice and decided to have a closer look at it.

    Clearly, the IEG has struggled to find something positive to say about the FCPF. The initiative may have ‘created a space for debate’, but it has also provoked inter-ministerial conflict and competition in a number of countries, falsely raised expectations of the riches to flow from forest carbon markets and thereby ultimately undermined the credibility of REDD, spawned a number of highly questionable REDD-Readiness plans and associated studies, set new standards of confusion in decision-making, implementation and accountability mechanisms, and undermined important forest policy processes such as EU-FLEGT.

    One can understand the IEG wanting the Bank to focus more on ‘no-regrets’ issues such as ‘land tenure and forest governance reforms’ – and of course support for these is badly needed. The problem is that the Bank’s record of working on these issues in the past has been dismal, and I can’t see any reason to believe that it would be any better in the future.

    Officials in cash-strapped donor governments should be looking to remove this embarrassing waste of money from their future expenditure plans – before government auditors or disgruntled taxpayers demand that they do so. They should at least suspend any further disbursements to the FCPF until such time as the ‘high-level strategic discussion’ has taken place and the Bank has been able to present a convincing and properly argued case for why it should be involved in REDD, and what it’s underlying strategy is.

  2. The WB definitely failed to have a mandatory mechanism that would have entailed a true ‘due diligence’ of RPPs of countries. If they had done this then they would have found that indigenous peoples, for example in Guyana, don’t understand what exactly REDD+ is about.. about the benefits and risks.. implications and yet the WB went ahead to approve Guyana’s RPP.
    The current document of Guyana fails to uphold human rights and ignores the government’s obligations under international human rights law. Legitimate concerns and recommendations made by interest human rights groups have either been ‘brushed over’ or greatly undermined. Conflict has been created among indigenous communities as they try to grapple with either to support ‘to get development’ from the government and give up their lands and forests and resources.

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  5. Here is a different interpretation to why FCPF disbursements have been so slow and achievements on the ground so little yet: REDD+ as promoted by the FCPF is a national approach, not a carbon market project approach. It requires complex planning for cross-sector and stakeholder-inclusive land-use policies. In short, it promotes transformational change in a conflict-ridden sector in mostly poor countries. These countries are run by governments who care about getting reelected, as everywhere else in the world. They are simply not willing to engage in the adventure of national-scale Readiness as long as the financial sustainability of REDD+ is uncertain, i.e. as long as prospects for results-based payments are poor, because the international community doesn’t get their act together about climate change.

    This is the main reason for slow disbursements. You cannot expect countries to engage in transformational change as long as all you can offer is 350 million US$ in results-based payments. The FCPF is not a waste of money – it is a ridiculous offer from industrialized countries to tropical forest countries. The EU’s budget for agricultural subsidies is what – 50 billion Euros for about the same period of time?

    If the Bank and bilateral donors are serious about REDD+ they need to increase results-based finance for REDD+ and mainstream the goal of reduced deforestation into their aid portfolio – but first and foremost get serious about climate change and sustainable land use policy.

  6. @Seeker

    So you are suggesting that the Bank, or rather its donors, should invest a lot MORE money into the FCPF? Despite the devastating findings of the Independent Evaluation Group??

    OK, one can excuse the slow disbursement of funds, for the reasons you state, but the point is that the “complexity [of] planning for cross-sector and stakeholder-inclusive land-use policies” has ALWAYS been a feature of anything to do with tropical forestry issues – but it is clear that the FCPF was completely ill-equipped and ill-designed to deal with this. In fact, as the IEG has made clear, the Bank had no strategy for dealing with forest carbon issues, and ignored everything it was warned about from the very outset in terms of focusing its efforts on market-based models of REDD.

    And one can hardly blame the FCPF’s failure on “the international community failing to get its act together” to create demand for the “results based payments” which you believe (probably somewhat naively) that the FCPF aimed to generate. Anyone with a whit of intelligence could see back in 2007-08 that the Kyoto Protocol was going to be run into the ground by the US and China and that, as a result, binding emissions’ reduction commitments would not happen, and the carbon markets would collapse. Yet the FCPF blundered on with the Bank’s usual arrogance, as if it were immune from such global developments.

    And yes, in a sense you are right, the money on offer is dismal compared with the scale of the problem and the scale of egregious financial waste elsewhere. But the fact is that the scale of money needed for the current approach of ‘buying off’ forest country governments is not going to come from public OR private sources for the foreseeable future, and so radically different approaches are required – perhaps those that are based on regulation rather than ‘compensation’, and that use trade relations as leverage.

    But with the FCPF being allowed to carry on wasting the money that it does have, Treasuries will be much more reluctant to invest in ANY REDD initiatives the future.

  7. @Seeker

    But yes, absolutely 100% agree with you on this point: bilateral donors and the World Bank should “first and foremost get serious about climate change and sustainable land use policy”.

    Do you see any evidence of that happening? No, me neither. And perhaps the reason for that is precisely because REDD is seen as an ‘easy-out’ ALTERNATIVE to dealing with these politically difficult issues at both the domestic and international level.

    So maybe we can agree that until such time as bilateral donors and the World Bank do “get serious about climate change and sustainable land use policy”, then programmes such as FCPF should be stopped?

  8. @X Witness
    No, I don’t agree that stopping the FCPF is going to help anyone on the ground. Rather believe we should work with what we’ve got and continuously improve it. It’s learning by doing. The World Bank is not one person that knows everything, it is a big organization that works along its own weird logic, with people changing their jobs every few years. To the extent that the people working inside and along with it realize over time what the challenges and possible solutions are and learn from it, I wouldn’t stop them midway. If we abandon REDD+ now after a steep learning curve and start from scratch with a new politically fancy eye-catcher, we’d just repeat the same mistakes. Unfortunately the human society as a whole is not so clever as some of their individuals. Organizational and societal learning takes long.

    But totally agree with you that WB alone is completely ill-equipped to do the job and that financial incentives for REDD+ cannot be the “easy way out” of difficult issues, including regulations and trade policy. It all has to come together.

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