Financing BFCP REDDeX Discussion

14 July 2010 All numbers are draft and US$

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Recap • One of four officially recognized REDD demonstration programs

in Indonesia• BFCP is an innovative forest carbon demonstration program

located in the District of Berau, East Kalimantan, Indonesia; – Multi-sectoral approach to addressing land use and deforestation – Spans a political jurisdiction –Berau, East Kalimantan, Indonesia– Berau is 2.2m ha – the size of Belize

• Objectives

1. Develop the capacity of the Berau district government to manage a REDD program.

2. Achieve emissions reductions of 10-12.5 million tons of CO2e by 2015

3. Improve natural resource governance and biodiversity conservation while creating economic opportunities for forest communities and the private sector.

• Key model for:– REDD & low-carbon development at provincial level – Pathway to a national program - Working with GOI/GON LOI Implementation

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Where Are We?

Scoping[Apr-Dec 08]

Development I[Jan 2009 – Dec 2009]

Demonstration [Jan 2011 – Dec 2015]

• Political Support

• Situation analysis/drivers

• Rough program design

hypothesis

• Identification of partners/

contractors

• Baseline scenario and modeling approach

• Refined strategies for reducing deforestation and degradation

• Stakeholder support

Development II [Jan 2010 – Dec 2010]

• Business Plan

• Master Budget ($50m)

• Initial budget

• ($12m)

• Funding Plan – Public/Other

• Senior TNC buy-in

• GOI Engagement (Draft MOU)

• Donor Dialogue & Negotiation

• Legal Structure

• Comprehensive Agreements

• Pilot-based strategies

• Improved forest management

• Protection forests

• Oil palm

• Land-use planning, policies & enforcement

• Monitoring & verification

• Adaptive management

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Core Funding Requirement

• Our original thinking on funding needs…• Total Core Funding Requirement (Jan 2011 - Dec 2015)*

– i.e. funding required upfront (committed to by y/e 2010) to support results and outcomes as articulated within business plan

– BFCP $50m (this number originally closer to $65m)– TNC Global $10m– TOTAL $60m

• Total Additional Funding Requirement (Jan 2010 - Dec 2015)– i.e. committed to over time (2011-2015) to support additional

outcomes, and further support TNC programs– $ tbd

• Let’s focus on the core

* All numbers draft and US$

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Proposed BFCP Governance and Mgnt. Structure

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$50m Budget Cost Type (US$m) Year 1 Year 2 Year 3 Year 4 Year 5 TOTAL %Supervisory Council & Secretariat 0.9 0.8 0.8 0.8 0.8 4.1 8.2%Joint Working Group 0.2 0.2 0.2 0.2 0.2 1.1 2.2%Trust Fund Management 0.0 0.0 0.0 0.0 0.0 0.1 0.2%Technical Assitance Unit (TAU) 2.4 2.2 2.2 2.2 2.3 11.2 22.5%

Low Carbon Development Strategies 6.9 5.9 7.9 6.3 6.5 33.4Enabling Strataegies

1.4 1.2 3.4 2.0 2.1 10.1 Planning 0.4 0.4 0.4 0.4 0.4 1.8 3.6% Governance 0.5 0.4 2.5 1.1 1.2 5.7 11.5% Stakeholder Engagement 0.2 0.2 0.2 0.2 0.2 1.0 2.1% Measures - Carbon accounting 0.2 0.2 0.2 0.2 0.2 1.0 2.0% Communications 0.2 0.1 0.1 0.1 0.1 0.6 1.1%

Site-based Strategies 5.5 4.7 4.5 4.3 4.3 23.3 Communities 0.9 1.0 0.9 0.9 0.9 4.6 9.1% Production Forests 2.6 1.8 1.8 1.8 1.9 10.0 20.0% Protection and Conservation 1.2 1.1 1.1 1.1 1.1 5.6 11.1% Oil Palm 0.8 0.8 0.7 0.4 0.4 3.2 6.4%

TOTAL 10.4 9.1 11.1 9.6 9.9 50.0 100.0%

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Core – Suggested Financing Sources

Uses

Public Funding

Private Funding

Required Funding

BFCP 48 2 50

TNC Operations 5 5 10

TOTAL 53 7 60

• Funding committed to by y/e 2010 to support core outcomes as articulated in the business plan

• It’s largely about public funding

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Fundraising Plan – Approach

• TNC and GOI will work together to launch a joint fundraising campaign for BFCP with the goal of $2m in private funds through TNC (TNC’s capital contribution or ‘skin in the game’) and $48m in public funding.

• Initially, unlikely to be appetite for corporate financing (via emission reduction purchase agreement) – risks are many and several

• TNC makes GOI aware that it will be soliciting $5m in public funding sources for its own direct costs to support BFCP

• [TNC makes GOI aware that it will be soliciting additional private funding to support additional TNC program costs]

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Fundraising Plan – Key Objectives

• Fully fund all program costs

• Tap into the strong interest among range of funders to support a majority of the overall costs.

• Include a TNC contribution to the BFCP trust to demonstrate our commitment to the program, but limit the TNC commitment to what is needed to accomplish this goal so our philanthropic fundraising can also support TNC operational costs

• Coordinate closely and ensure complete transparency with GOI partners regarding the overall funding plan and TNC’s commitments and approach.

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Public Funding for REDD

• Surely this is easy…

• In Copenhagen, December 2009, six nations committed $3.5 billion for REDD implementation from 2010-2013

– Australia, France, Norway, Japan, U.K., U.S.

• Norway has made a $1bn commitment to GOI

• Additional global REDD funding sources include:

– German Govt.

– Australian Govt.

– Japan Govt.

– Forest Carbon Partnership Facility (World Bank)

– Forest Investment Program (World Bank)

– UN REDD

– Additional funding commitments may stem from COP 16

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Public Funding - Initial Progress

Sources Public Private TOTAL1. U.S. Treasury (TFCA) – working towards being named swap partner

10 -  10TNC capital contribution to BFCP via TFCA  - 2 2

Total TFCA  10  2 122. KFW Disbursement channel will be ‘on budget, on treasury’ (i.e. outside BFCP) but will support 5  - 5

Total Berau 15 2 173. Norway: TNC has been invited to participate in a multi-stakeholder working group looking to implement the recent Letter of Intent between GOI and Norway.

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Commitments for IndonesiaGlobal

CommitmentsIndonesia

Commitments

France

Australia

Norway

• $350 million from 2010-2013

• $1 billion from 2010-2013 (total of $2.7 bn over five years)

• Automatic bullets

• Automatic bullets

• Automatic bullets

Japan • $550 million from 2010-2013

• Automatic bullets

UK • $480 million from 2010-2013

• Automatic bullets

US • $1 billion from 2010-2013

• $35 million USAID program

• $120 million from 2010-2013

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Commitments for IndonesiaGlobal

CommitmentsIndonesia

Commitments

FCPF

Germany

FIP

• Readiness Fund $180 million

• Carbon Fund • $55 million

• TBD

• $558 million

• $3.5 million Readiness

• $30 million

• Indonesia selected as one of five recipient countries

UNREDD • $74 million • Automatic bullets

REDD funding for Indonesia has not yet begun to flow at the level of its potential.

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Donor Issues in Indonesia

• Lack of central leadership and coordination within GOI

– Different approaches taken by DNPI, Bappenas, MOF, MOE

– Competing Funds: ICCTF, MOF

– Getting GOI to provide fundraising support (road-show, roundtable)

• Lack of a cohesive plan for scaling up REDD at the National, Province and District levels

• Donors with different interests (programs and geographies)

• Donor mentality to spend the money ‘thinly’ across a number of different initiatives.

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Additional Issues

• Transparency, accountability, safeguards, and pay-for-performance mechanisms

• Internal organizational management

– Donor relationship managers

– Forest carbon staff within HQ

– Field staff

– Fundraisers

– Single-point accountability