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Nested Approaches to REDD+
An Overview of Issues and Options
This work was made possible by:
*
* This publication is made possible by the generous support of the American people through the United States Agency for International
Development (USAID), under the terms of the TransLinks Cooperative Agreement No.EPP-A-00-06-00014-00 to The Wildlife Conservation
Society. TransLinks is a partnership of WCS, The Earth Institute, Enterprise Works/VITA, Forest Trends and The Land Tenure Center. The
contents are the responsibility of the author(s) and do not necessarily reflect the views of USAID or the United States government.
Nested Approaches to REDD+
An Overview of Issues and Options
Climate Focus: Forest Trends:
Thiago Chagas
Charlotte Streck
Robert O‘Sullivan
Jacob Olander
Joerg Seifert-Granzin
Forest Trends’ mission is to maintain, restore, and enhance forests and connected natural ecosystems, life-
sustaining processes, by promoting incentives stemming from a broad range of ecosystem services and
products. Specifically, Forest Trends seeks to catalyze the development of integrated carbon, water, and
biodiversity incentives that deliver real conservation outcomes and benefits to local communities and other
stewards of our natural resources.
Forest Trends analyzes strategic market and policy issues, catalyzes connections between producers,
communities and investors, and develops new financial tools to help markets work for conservation and people.
Climate Focus is an advisory company committed to the development of policies and projects that reduce
greenhouse gas emissions. Our international and multidisciplinary team works closely with companies,
governments and non-governmental organizations on reducing emissions in energy, households, industry,
agriculture and forestry. Climate Focus is an independent expert in international and national climate law,
policies, project design and finance.
Nested Approaches to REDD+ | iii
Table of Contents
1. Introduction .................................................................................................................. 1
2. International REDD+ Developments ......................................................................... 2
3. Policy Considerations ................................................................................................. 3
4. Review of Nesting Options ......................................................................................... 5
4.1 Phased Approach ............................................................................................................... 6
4.2 Distribution of Incentives ..................................................................................................... 8
4.3 Regulatory Aspects ............................................................................................................ 10
4.4 Use of a Registry for REDD+ .............................................................................................. 15
4.5 Definition of Risk Mitigation Tools .................................................................................... 16
4.6 Measurement and Monitoring ........................................................................................ 17
4.7 Baselines or Reference Levels ......................................................................................... 20
4.8 Leakage ................................................................................................................................ 23
Conclusion ......................................................................................................................... 25
References ......................................................................................................................... 26
Annex – Current Status on Nesting Implementation ................................................. 28
iv | Nested Approaches to REDD+
Acknowledgements
This paper benefited greatly from comments received and conversations with an extensive group of
practitioners, policy makers and experts. Special thanks go to Carina Bracer, David Burns, Slayde Hawkins, David
Tepper, and Anne Thiel. The authors also wish to thank Michael Jenkins for his guidance and the staff at Forest
Trends for their assistance and support.
In addition, the authors gratefully acknowledge discussions and presentations of participants in an international
workshop on Nested Approaches to REDD+ convened by Forest Trends in Miami, USA, on 16-17 March, 2011.
While the perspectives presented in this paper are those of the authors, Forest Trends and Climate Focus alone,
we would like to recognize the valuable observations shared by participants in that meeting: Girma Amente,
William Boyd, Jose Manuel Bulas, Bruce Cabarle, Augusto Carlos Castro, Mariano Cenamo, Marco Chiu, Michael
Colby, Deddy Hadriyanto, Bruno Hugel, Toby Janson-Smith, Michael Jenkins, Tracy Johns, Yaw Kwakye,
Ludovino Lopes, Nicolas Lucas, Diana Vargas, John Mason, Xavier Mugumya, Dan Nepstad, John Niles, Evan
Notman, Lucio Pedroni, David Rothschild, Lucia Ruiz, Richard Saines, Lucio Andrés Santos, Phuc Xuan To, Marco
van der Linden, and Heather Wright.
Nested Approaches to REDD+ | v
Executive Summary
There is consensus in climate negotiations that efforts associated with Reducing Emissions from Deforestation
and Forest Degradation (REDD+) will ultimately be measured and rewarded based on national-level accounting
systems. But while developing countries are building capacity to implement and manage these national
systems, subnational initiatives are evolving rapidly at the state, provincial, and project levels. Integrating these
different accounting scales will be crucial to ensure the environmental integrity of the system as a whole and to
mobilize finance.
To ensure appropriate emission accounting and allow the transfer of incentives in the form of carbon credits or
payments, rules need to be defined that integrate the various levels of accounting, management, and
incentives. Such rules are referred to as “nested systems” that nest project or programs within national- or
state-level REDD+ accounting systems. Nesting allows incentives to be placed at the appropriate level of
governance. While broader policy reforms may take years to be implemented, REDD+ action can be developed
faster at the project level, delivering near-term emission reductions. Projects and programs also offer
opportunities for private sector engagement and may provide important options for direct community-level
participation in REDD+. Finally, subnational activities can make important contributions to emerging national
frameworks for REDD+ management and accounting. Establishing local investment mechanisms as well as
measurement, reporting, and verification (MRV) capacity is providing valuable experience to inform broader
national policies.
While the focus of this paper is on the nesting and integration of projects into subnational and national systems,
the discussion of REDD+ projects and programs should also be understood in the broader context of national
REDD+ strategy development. Creating incentives for projects is only one part of a national REDD+ strategy
which may include governance reform, fiscal incentives, and other policies that address particular drivers of
deforestation. The discussion of accounting, legal and technical issues around the integration of different levels
of crediting emission reductions is relevant not only for projects but also for the allocation of emissions and
emission reductions among different levels of government (states, provinces, national) and policies (e.g.,
payments for ecosystem services, other subsidies, protected areas).
Countries and states or provinces may opt to implement nested forms of REDD+ through progressive phases.
This step-wise approach is one of the main advantages of nesting and allows governments to move from
independent project accounting to projects nested within state/provincial programs, and finally to a full-fledged
national accounting system. These phases can be harmonized with the general REDD+ implementation phases
acknowledged in the Cancun UNFCCC decision.
Distribution of Incentives
Emission reductions from REDD+ can be rewarded in the form of carbon credits (recognized in voluntary and/or
regulated markets) and results-based payments from public sources (e.g., Green Climate Fund, bilateral REDD+
funding). Options to be defined in international negotiations might include direct distribution of incentives from
an international REDD+ mechanism to projects (as under the Clean Development Mechanism) or direct
distribution to national and/or subnational governments with a subsequent (indirect) distribution to
subnational programs or projects. At the national level, governments with the authority to allocate credits or
vi | Nested Approaches to REDD+
funds must make a range of policy choices, including (i) deciding whether and how to incentivize project
activities (striking a balance between these and use of funding for policies and programs), (ii) opting to allocate
tradable credits or distribute benefits/payments; and (iii) defining the criteria or basis for allocating incentives.
Regulatory Aspects
The regulatory and institutional setup for REDD+ will have a considerable impact on the ability of nested
approaches to ensure credible emission reductions and to attract private investment. Issues and options that
require the attention of international as well as national policymakers include:
Defining the basic institutional setup, such as the main regulatory entity responsible for overseeing
domestic implementation, and the contours of the powers of that entity.
Establishing approval procedures at international and domestic levels. At the international level, a
dedicated system for approving projects and/or subnational programs could be created following the
criteria set by the Cancun UNFCCC decision. At the domestic level, countries and states or provinces
could determine what is required to approve or endorse project; who proposes and registers
subnational reference levels; when independent verification is needed; and what relevant consultation
procedures are.
Creating a registry to support domestic policy options. A registry could function as an electronic
database that is designed to evolve over time as domestic MRV capacities grow.
Managing Risk of Government Failure
Risk mitigation mechanisms can be designed at the project level or the government level. At the project-level,
risk mitigation tools may be needed to address the issues of permanence and project performance. However,
when rewards or incentives for subnational project activities are linked to the overall performance of the
government, additional risks are generated beyond a project’s control. Commonly cited risk management tools
include: (i) buffer and reserve accounts; (ii) insurance mechanisms for reversal of carbon stocks; (iii) government
guarantees; and (iv) penalty fees for sanctioned deforestation. These tools could be applied in many different
combinations.
Measurement and Monitoring
Measuring and monitoring emissions from forests and land-use is complex but feasible. Specific parameters will
generally be determined at the domestic level in order to ensure that forest cover, forest condition, and carbon
stocks are measured consistently at different jurisdictional levels. To obtain consistent results, certain elements
and concepts will need to be standardized, while other methodological decisions can be left to developers at
the subnational level.
Potential issues and options for countries and states or provinces, and the international REDD+ system include
(i) creating a definition of forest that is common and applicable at multiple scales; (ii) defining eligible activities
and how to account properly for different land-use and forestry activities taking place at different scales; and
(iii) harmonizing accounting periods for REDD+ activities implemented in different time periods.
Nested Approaches to REDD+ | vii
Reference Levels
Potential methods for establishing baseline deforestation rates (reference levels) discussed under the UNFCCC
include using historical average deforestation as well as various mechanisms that take into account projected
deforestation and national circumstances. While, in itself, establishing relevant baselines is a difficult task, the
technical and political challenges are compounded in nested REDD+ because the multiple baselines needed at
different levels must be consistent and coherent. At least as challenging as setting national reference levels is
determining how national levels are allocated within national (or subnational) boundaries.
Options to develop and integrate business-as-usual reference levels from subnational activities for nested
approaches can be categorized as:
Disaggregate or bottom-up approaches, in which multiple project-specific baselines are developed
largely independently; or
Consolidated or top-down approaches, where spatially explicit regional baselines are developed and
used to zone and stratify the forest landscape to predict the rate, location and timing of future
deforestation, or to establish benchmarks.
Leakage
Leakage is a real risk for project-level activities, as activity-shifting, market or other effects, can cause emissions
to shift to areas outside their project boundaries. Current approaches to dealing with leakage under project-
level accounting standards (e.g., CDM, VCS) include improving design of project activities to minimize leakage
risks, accounting for leakage within a monitored “leakage belt” that covers the range of displaced agents and
their activities, and making use of discount factors. At the national or state/provincial level, options to deal with
leakage include applying these project approaches, using a leakage tax, and/or having governments assume
leakage risks in order to spur private investments.
viii | Nested Approaches to REDD+
Glossary
Baseline
A projection into the future of expected emissions and/or deforestation if no REDD policies, measures or projects are
implemented.
Clean Development Mechanism (CDM)
A mechanism established in Article 12 of the Kyoto Protocol and designed to assist non-Annex I Parties in achieving
sustainable development and in contributing to the ultimate objective of the UNFCCC, and to assist Annex I Parties in
achieving compliance with their quantified emission limitation and reduction commitments.
Joint Implementation (JI)
A mechanism under the Kyoto Protocol through which a developed country can receive “emission reduction units” when it
helps to finance projects that reduce net greenhouse-gas emissions in another developed country (in practice, the recipient
state is likely to be a country with an “economy in transition”). An Annex I Party must meet specific eligibility requirements
to participate in joint implementation.
Leakage
GHG emissions displacement that occurs when interventions to reduce emissions in one geographical area (subnational or
national) cause an increase in emissions in another area.
Measurement, Reporting, and Verification (MRV) System
A national and/or subnational set of processes and institutions that ensure reliable assessment of climate benefits
associated with real and measurable emission reductions and enhancement of carbon removals.
Nested Approach
An accounting, management, and incentive system that accommodates activities and incentives to reduce emissions at
various activity and implementation levels. Where projects are nested within subnational or national programs, activity-
specific emission are deducted from the broader (national or regional) accounting for emission reductions against a
reference level.
Reference Level
Negotiated level of emissions at the national or subnational scale that is synonymous with a baseline for providing
incentives for a participating REDD+ country, if emissions are below that level.
REDD+
A system that creates incentives and allocates emission reductions from the following activities: (a) reducing emissions from
deforestation; (b) reducing emissions from forest degradation; (c) conservation of forest carbon stocks; (d) sustainable
management of forests; (e) enhancement of forest carbon stocks.
Registry
Electronic infrastructure designed specifically to ensure accurate accounting of projects and their respective performance
(measured either through emission reductions or removals, or another agreed performance metric) as well as the issuance
of REDD+ units.
Results-based Program
An incentive system wherein the international contribution to support REDD implementation is contingent on meeting pre-
agreed benchmarks.
Subnational Activities
Activities that take place at the local (i.e., project) level, as well as the state/provincial level.
Nested Approaches to REDD+ | 1
1. Introduction
In international climate negotiations there is consensus that the climate benefits from Reducing Emissions from
Deforestation and Forest Degradation, sustainable forest management, conservation, and enhancement of
forest carbon stocks (REDD+) will ultimately be measured and rewarded based on national-level accounting
systems. Working towards this goal is a principal focus of current REDD+ readiness funding. In the meantime,
public and private demonstration projects are already being implemented that reduce greenhouse gas (GHG)
emissions at the subnational or project level, while countries develop national policies, data, and capacities. As
international and national REDD+ frameworks develop, these subnational activities will need to be brought
under broader accounting frameworks to ensure that any carbon credits issued to projects or programs “add
up”—maintaining environmental integrity while catalyzing action at multiple scales of implementation.
Integrating different local and national levels of action has come to be referred to as “nesting” and is important
for a number of reasons. First, incentives need to be placed at the appropriate level of governance. While
broader policy reforms may take years to be implemented, REDD+ action may be developed faster at the
regional or project level, delivering near-term reductions in emissions. Secondly, the project level is a key entry
point for private sector engagement and may provide important options for direct community-level
engagement with REDD+. Finally, subnational activities are a critical piece of emerging national frameworks for
REDD+ management and accounting. Establishing local investment mechanisms, and measurement, reporting
and verification (MRV) capacity in advance of national frameworks is providing valuable experience to inform
broader architectures and capacity.
The term “nesting” is variously used to refer to state- and province-level accounting integrated into national
level systems, as well as to project-level activities sitting within broader national (or subnational) systems. Both
types of nesting are critically important and some of the most significant progress to date on developing
compliance systems is being led by states and provinces (e.g., under the Governors’ Task Force on Climate and
Forests, a subnational collaboration between 15 states and provinces). However, this briefing document
focuses on the discrete set of issues and options for nesting project-level activities within broader frameworks
under the assumption that the issues will be broadly similar if the broader jurisdiction in which projects sit are
national or subnational. The document aims to explain relevant technical and regulatory aspects that require
further clarification (and simpler explanation) so that REDD+ design options for the integration of different
levels of governance can be more easily understood and applied nationally and internationally.
This briefing document is structured as follows. Section 2 provides a brief overview of relevant REDD+
developments at the international level. Section 3 presents some initial strategic considerations that place
nested forms of REDD+ as an instrument within the context of broader domestic policies and measures. Section
4 addresses policy options for the design of nested approaches to REDD+. Here we consider a range of
technical, regulatory, institutional, and economic aspects that may affect nested approaches and influence their
design at the national level.
2 | Nested Approaches to REDD+
2. International REDD+ Developments
At the 16th session of the Conference of the Parties to the UNFCCC in Cancun in 2010 (COP16), parties to the
UNFCCC adopted, with slight modifications, the REDD+ decision negotiated (but not adopted) at COP15 in
Copenhagen.1
In line with ongoing REDD+ readiness activities, countries are encouraged to develop (i) a national REDD+
strategy, (ii) national and, if appropriate, subnational reference (emission) levels, (iii) an MRV system, and (iv) a
system for providing information on how the safeguards in the decision
With this UNFCCC decision, parties officially established an international incentive mechanism
that encourages developing countries to reduce forest-related emissions and enhance forest carbon stocks in
the context of the provision of adequate and predictable financial and technological support to developing
country Parties.
2
i) The development of national strategies or action plans, policies and measures, and capacity building;
followed by
are being addressed through the
implementation of REDD+ activities.
The REDD+ decision recognizes implementation through a phased approach beginning with:
ii) The implementation of national policies and measures, and national strategies or action plans that
could involve further capacity building, technology development and transfer, and results-based
demonstration activities; evolving into
iii) Results-based actions that should be fully measured, reported, and verified. The choice of the starting
phase of each country depends on national circumstances and available support.
There is no reference to sources of financial support (either government or market-based), but there is a
mandate to explore financing options for the full implementation of the results-based actions (phase III
implementation of REDD+).
Cancun also marked formal acknowledgement under the UNFCCC of subnational approaches to REDD+
accounting and monitoring. Developing country Parties aiming to participate in an international REDD+
mechanism are encouraged to develop3
1 See “Outcome of the work of the Ad Hoc Working Group on long-term Cooperative Action under the Convention”, Draft decision -
/CP.16 (“Cancun COP decision”).
2 Safeguards are formulated in Annex I to the Cancun COP decision and include social, legal, and environmental issues.
3 This development is to be done “in the context of the provision of adequate and predictable support, including financial resources
and technical and technological support to developing country Parties, in accordance with national circumstances and respective
capabilities”. See paragraph 71(b) of the Cancun COP decision.
a “national forest reference emission level and/or forest reference
level or, if appropriate, as an interim measure, subnational forest reference emission levels and/or forest
reference levels, in accordance with national circumstances, and with provisions contained in decision 4/CP.15,
and with any further elaboration of those provisions adopted by the Conference of the Parties.” The Subsidiary
Body on Technical Advice (SBSTA) is mandated to develop for consideration at COP17 modalities relating to
Nested Approaches to REDD+ | 3
forest reference (emission) levels as well as modalities for measuring, reporting and verifying anthropogenic
forest-related emissions.
Outside of the UNFCCC context, various initiatives are financing “readiness” for REDD+ in developing countries.
The REDD+ Partnership established in May 2010 seeks to help coordinate REDD+ actions and financial support.
Operational multilateral initiatives include the World Bank’s Forest Carbon Partnership Facility, the UN-REDD
Programme and the Forest Investment Program. In addition, a wide array of bilateral support initiatives exist
between the governments of countries like Norway, France, and Germany (among others) who support the
testing and learning processes for REDD+ readiness in developing countries.
While many countries and international institutions recognize the relevance of nested approaches, relatively
little progress has been made in establishing accounting systems that explicitly support nesting. One forum in
which progress is being made on the design of compliance regimes for nested approaches is the Governors’
Task Force on Climate and Forests (GCF). The GCF has been working since 2008 on mechanisms to establish
partnerships between states and provinces that implement REDD+ programs on one hand, and those that
create demand for carbon credits on the other. With fifteen states and provinces from five countries
encompassing roughly 20% of the world’s tropical forests, the GCF member states are developing capacity and
systems to generate measured emission reductions from REDD+ for a variety of market and non-market
mechanisms. Primarily focused on linking California’s cap-and-trade system with states and provinces in Brazil,
Indonesia and Mexico, the GCF is likely to encompass crediting pathways involving an array of nested options
from projects, to states or provinces, to national systems.
The voluntary market is also preparing to adjust for the accounting and crediting requirements of nested
approaches to REDD+. The Verified Carbon Standard (VCS) has recently launched an initiative to revise and
expand its forestry-specific standards to allow different accounting scales, in particular the crediting of project-
level activities that are embedded in regional or national accounting systems.
3. Policy Considerations
Governments have to prioritize policy options that are effective, efficient, and politically acceptable when
implementing REDD+ activities. Levers for shifting land-use and deforestation trajectories may involve cross-
cutting measures such as security in land tenure, rural credit, and technical assistance to improve agricultural
productivity, strengthened forest governance, climate-smart infrastructure planning, as well as policy reforms in
forestry, agriculture, and finance that affect land-use economics. Site-specific or project-level activities can
complement these policy choices by encouraging private action on REDD+ and addressing specific
constellations of factors driving deforestation.
The decisions regarding how governments prioritize different policies is a critical piece of the REDD+ readiness
process and is directly linked to questions of how and if projects-level activities may be incentivized directly.
There will be trade-offs between allocating finance for emission reductions to government programs and
policies and to individual stakeholders (e.g., communities, landowners, projects). If countries, or states or
provinces are receiving credit for emissions that are reduced across the jurisdiction as a whole, governments
4 | Nested Approaches to REDD+
will need to determine which portion of credits or benefits are more properly associated with government
policies and which with project activities. It is in this context that nested approaches matter. The appropriate
choice of REDD+ policies and measures will depend on a series of factors:
Agents and Drivers of Deforestation. The reduction of deforestation and the creation of appropriate
incentives for conservation and improved land use will depend on the drivers of deforestation in a
particular country and region. Where most deforestation is planned and driven by economic interest of
large corporations, policies are likely to consist of a mix of command-and-control measures and
incentives that divert economic activities to other sectors or areas. Where deforestation is driven by
poverty, the need for fuelwood, or subsistence farming, REDD+ policies are likely to consist of
community programs that give access to different sources of income and fuel needed for cooking or
heating.
Governance. The choice of policies will also depend on the institutional capacities of a country. In
places where corruption is rampant and governance weak, incentives to non-state actors may be more
effective than the implementation of government-driven policies. In these cases, a mix of encouraged
and supported private (for-profit and non-profit) action paired with governance reform may constitute
the best course of action, while in countries with strong governance and effective enforcement
systems, regulatory action (such as lifting or enacting tax incentives) may be the most effective way to
incentivize REDD+.
Political System. In federal systems, much of the law making and enforcement is delegated to the state
and regional level. The policy choice for REDD+ depends therefore on the allocation of authority and
powers within the political system of a country. Equally important, and actually far more so for project-
level activity, is the political orientation of the state with regards to its role, and that of the private
sector, in the economy and forest sector. Governments with a strong tradition of state enterprise and
government participation in investment and production are likely to prefer more centralized
approaches, while more market-oriented states are likely to prefer options for direct private
investment. In a similar vein, states with robust community and civil-society sectors may also be more
open towards non-governmental initiatives.
Legal Land Status. Finally, secure rights in forest land are essential for the implementation of REDD+.
Where the majority of forest is owned by the government, different policies apply than where forest is
privately owned. In the latter case, governments will operate with incentives, as regulation of private
property is often limited through constitutional and other legal barriers (that forbid the taking of
property rights without due compensation). In cases where land ownership is unclear and titles do not
yet exist, other policies will have to establish incentives for forest stewardship.
Allocating resources (whether funds or carbon credits) amongst different options involves trade-offs. In all cases
where emission reductions are credited on the subnational level and where a national reference level has been
adopted, rules need to guide the allocation of emission reductions between the various levels of action to avoid
double counting and crediting of emission reductions. In some cases, subnational action will be credited with
tradable carbon credits; in other cases, accounting for emission reductions merely serves to assess the
effectiveness of subnational actions or to guide the allocation of incentive payments. In all these cases, rules for
nesting are relevant.
Nested Approaches to REDD+ | 5
4. Review of Nesting Options
The nesting of programs and projects within broader accounting frameworks is generally understood as an
accounting, management, and incentive system that allows the accounting of emission reductions on various
activity and implementation levels. The notion of a nested approach to REDD+ was first introduced by Pedroni
et al. (2009) as a way to promote the direct engagement of private actors in project activities nested within a
national accounting system. Key assumptions of the nested approach as initially proposed were (i) the use of
market-based instruments as a tool to deploy REDD+ finance; (ii) direct crediting of project-level activities; and
(iii) the detachment of national-level performance from project-level crediting.4
Box 1 – Recent Studies on Nested Approaches to REDD+
A non-exhaustive list of recent studies relating to nesting approaches to REDD+ includes:
Since then the concept of nesting has been elaborated in a variety of forms by experts grappling with the issue
of integrated accounting systems for REDD+ and private sector investment (see Box 1). Over the past couple of
years, several organizations, including governmental, for-profit and non-profit entities, have developed a
number of conceptual papers highlighting the many intricate aspects surrounding nested approaches to REDD+.
These papers have gone into great depth in pinning down some of the most relevant technical, regulatory, and
commercial implications of the adoption and integration of project-level activities within national and/or
subnational accounting frameworks for REDD+.
Options Paper – Regulatory Design Options for Subnational REDD Mechanism, William Boyd, University of Colorado
Law School, 2010
Brazil’s Emerging Sectoral Framework for Reducing Emissions from Deforestation and Degradation (REDD) and the
Potential to Deliver Greenhouse Gas Emissions Offsets from Avoided Deforestation in the Amazon’s Xingu River
Basin, Electric Power Research Institute, 2010
Making GCF/ARB REDD feasible for private sector investment, Tobias Garritt, GCF Representative, Province of
Papua, Indonesia (discussion draft of 2010)
A Nested Approach to REDD+: How could it be implemented?, Lucio Pedroni, Manuel Estrada, and Mariano Colini
Cenamo in “Pathways for Implementing REDD+”, UNEP RISOE Centre, 2010
Integrating Project and National REDD+: The Importance of the Private Sector, Naomi Swickard, Kim Carnahan in
“Pathways for Implementing REDD+”, UNEP RISOE Centre, 2010
An Integrated REDD Offset Program (IREDD) for Nesting Projects under Jurisdictional Accounting, Terra Global
Capital, 2010
A Nested Approach to REDD+ - Structuring effective and transparent incentive mechanisms for REDD+
implementation at multiple scales, The Nature Conservancy and Baker & McKenzie, 2010
Engaging the Private Sector in the Potential Generation of REDD+ Carbon Credits: An Analysis of Issues, Robert
O’Sullivan, Charlotte Streck, Timothy Pearson, Sandra Brown, and Alyssa Gilbert, supported by the UK Department
for International Development (DFID), 2010
4 See Pedroni et al. 2009.
6 | Nested Approaches to REDD+
The Cancun Agreements indicate that countries may start out implementing subnational accounting systems
for REDD+ while preparing for full-scale national REDD+ implementation. Countries are implicitly free to create
incentives for project-level activities after the adoption of national reference levels, as long as the overall
performance of the country is measured at the national level. Nesting becomes relevant under both scenarios:
in the first one, when subnational pilot areas and programs will eventually have to be integrated into future
national accounting systems; in the second, when incentives are passed on to sponsors of programs and
projects within the context of already established national accounting systems.
While it is not clear whether an international REDD+ mechanism will allow the creation of compliance-grade
credits, the need to involve the private sector (investment by landowners, investors, companies and non-profit
civil society organizations) in REDD+ implementation remains obvious. The level of finance estimated to
effectively address emissions5
4.1 Phased Approach
from the forestry sector in developing countries cannot be pooled and deployed
in the required quantity and speed without significant private sector engagement. Actions on the ground will
also necessarily entail the participation of non-governmental organizations (NGOs) and companies, directly or
indirectly. Hence, creating the conditions for program- and project-level activities to be nested within national
and/or subnational accounting, and providing the means for private sector engagement in such activities
remain important goals of nested approaches to REDD+.
One of the key advantages of nesting is that countries and states or provinces can begin implementing REDD+ in
a step-wise approach, moving progressively from independent accounting of projects to nested projects within
states or provinces, and finally to a full-fledged national accounting system.
The language in the Cancun UNFCCC decision on subnational activities allows countries to make use of
subnational accounting and monitoring as an interim measure to a national REDD+ system. While the decision
does not explicitly affirm the continuation of subnational approaches once the national system is established, it
is reasonable to assume that countries will still be able to make use of subnational approaches as long as the
overall accounting of emissions ultimately occurs at the national level. Similarly, the UNFCCC decision in Cancun
recognized the implementation of REDD+ through progressive phases, with the last phase being associated with
the complete establishment of a national MRV system that allows for results-based actions. Countries will
therefore be able to engage in REDD+ activities even before a fully-fledged accounting system (i.e., national
reference level and national MRV system) is in place.
5 The actual cost of reducing emission (as opposed to readiness measures) is estimated at USD17 billion to USD28 billion per year in
order to halve global deforestation according to opportunity cost estimates in major forest nations. See Pagiola and Bosquet 2009.
Nested Approaches to REDD+ | 7
The following phases for implementing a nested REDD+ approach may be envisioned:6
An initial phase in which countries and states or provinces would establish: (i) criteria for approving
pilot REDD+ projects, including some basic rules for the reconciliation of these projects with the
subnational or national accounting, once this is in place; (ii) a strategy to control deforestation and
degradation; and (iii) possibly a target for reducing (emissions from) deforestation and degradation.
A second phase in which additional institutional and technical capacity is put in place, such as the
implementation of a national and/or subnational monitoring systems and the development of a
registry for tracking emission reductions and units issued for subnational projects.
A third phase in which national reference-level and MRV requirements are fully developed and
reconciliation (including grandfathering) occurs.
Figure 1 – Phased Approach to Nesting
6 See De Gryze and Durschinger 2010, and Garritt 2010.
8 | Nested Approaches to REDD+
4.2 Distribution of Incentives
International incentives for REDD+ may take the form of results-based payments from bilateral and multilateral
public sources, or may be mediated by the creation of offsets that may be used by countries or entities to meet
voluntary goals or compliance requirements. Whether credits or offsets may be used for compliance purposes
will form part of an international agreement is still an area of contention within the UNFCCC process, but such
use of offsets was included in draft US federal legislation and in California’s emerging emissions trading system.
As a general rule, advocates of nested approaches see an advantage in promoting both carbon markets and
public funding mechanisms. It is also possible to combine these funding streams: REDD+ incentives can come in
the form of carbon credits (recognized in voluntary and/or regulated markets) as well as results-based
payments from public sources (e.g., Green Climate Fund, bilateral REDD+ funding). Currently, REDD+ public
fund-based payments are typically associated with rewarding policies and programs carried out by
governments, whereas direct crediting mechanisms (i.e., issuance of carbon credits) are seen as a more
appropriate alternative for attracting voluntary or compliance-driven private demand and stimulating private
sector engagement at the subnational level.
The allocation of incentives can be direct (i.e., when project entities receive incentives directly from an
international REDD+ system, as is the case under the CDM) or indirect (i.e., when project entities receive
incentives via the central government or a subnational government). The international REDD+ system would
specify the crediting mechanisms available at the international level, including options for direct crediting of
emission reductions to national actors. Allocation of REDD+ credits or benefits under nested architectures
therefore involve institutions and policies at least two different levels:
i) The international REDD+ mechanism regarding the direct allocation of incentives and/or credits, and
ii) National (and/or state/provincial) government decisions regarding the allocation of credits and benefits
within jurisdictional boundaries.
There are a number of options for initial incentive allocation by a bilateral or international REDD+ mechanism.
Although other variations exist, major scenarios can be broadly summarized as follows:
Direct distribution of REDD+ incentives from the international REDD+ mechanism to subnational actors
as well as governments;
Direct distribution of REDD+ incentives from the international REDD+ mechanism to states/provinces
and indirect distribution (or pass-through) of REDD+ benefits from governments to private actors;
Direct distribution of REDD+ incentives from the international REDD+ mechanism to the national
government only, and indirect distribution (or pass-through) of these to state/provincial governments
and to private actors.
Nested Approaches to REDD+ | 9
Figure 2- Distribution of REDD+ Incentives
Where the international REDD+ mechanism accepts direct project-level crediting, countries and
states/provinces may restrict their role to endorsing projects for international approval and crediting. Direct of
projects is generally seen by private entities and investors as the most attractive option as it requires less
governmental intervention when compared to indirect forms of crediting.
When the international REDD+ mechanism allows indirect distribution of incentives, national and potentially
subnational governments will have flexibility in allocating incentives within their jurisdictional boundaries.
Governments have a series of choices in this regard:
Whether to incentivize project-level activities. Determining the role of project activities involves a
strategic decision regarding the relative weight of policies and programs as opposed to site-based
project activities. Governments may choose to fully support project-level activity, to restrict REDD+
projects to certain geographic areas,7
If project-level activities are to be incentivized, whether to allocate tradable credits or financial
benefits/incentives to these projects. While traditional carbon project models (e.g., CDM, JI, or the
voluntary market) are based on allocation of tradable credits, other performance-based options exist,
or to focus mechanisms solely on government policy and
programs, excluding projects.
7 Some analysts have suggested only allowing credits to be generated from geographically defined activities in order to establish a
causal link between the activity and the emissions reductions or removals achieved. See De Gryze and Durschinger 2010.
10 | Nested Approaches to REDD+
including ex-ante financial incentives (e.g., payment-for-ecosystem-services (PES) schemes such as
those in Mexico, Costa Rica, and Ecuador) or ex-post results-based payments (functionally equivalent
to feed-in tariffs in the energy sector). The decision as to whether to distribute credits or payments will
depend on government evaluation of risks, transaction costs, and the most effective mechanisms to
attract capital and promote change on the ground.
Decide on the criteria or basis for allocating credits or incentives. Benefits can be distributed to
projects:
o Project-level accounting of achieved greenhouse gas (GHG) benefits (as is currently the modality
for CDM and voluntary carbon projects and as explored further in section 4.8 [leakage]);
o Other performance metrics (e.g., hectares of deforestation avoided as opposed to tCO2);
o Other benchmarks or criteria (e.g., estimated opportunity cost, adjustment factors for other social,
equity and development objectives).
4.3 Regulatory Aspects
Regulatory aspects of REDD+ will have a considerable impact on the ability of REDD+ policies to attract private
investment. In order to create a viable and workable framework for nested forms of REDD+, guidelines can be
formulated in parallel at the international and at the national level. In this document, we focus on the
regulatory considerations that are relevant at the national level. International regulatory elements and options
are briefly outlined in Box 2.
Box 2 – International Regulatory Aspects
In order to incentivize nested projects an international REDD+ mechanism can explicitly deal with a number of issues,
including:
Establishing criteria for endorsing national REDD+ programs, including elements used for establishing the reference-
level and MRV requirements.
Defining whether in addition to determining national REDD+ criteria, distinct project activities within subnational
REDD+ programs could be submitted for international approval.
Defining types of crediting mechanisms that would be available for projects and program (e.g., direct and/or indirect
crediting of activities).
Defining criteria applicable to projects developed prior to the establishment of national reference levels to incentivize
early action.
Defining the criteria for issuance/acceptance of REDD+ credits, including whether successful performance at the
subnational level would be a requirement for issuance/acceptance of credits at the project-level.
Under the UNFCCC, some of the eligibility criteria for REDD+ are already emerging. The UNFCCC decision in Cancun established
some prerequisites for countries to qualify for REDD+, including an established national strategy, a national forest reference
(emission) level, a robust monitoring mechanism, and a system for reporting on safeguards. Approval of national REDD+
activities, in turn, should be subject to the requirements listed in annex I of the UNFCCC decision, which includes being country-
driven, consistent with the objective of environmental integrity and national development goals, and results-based.
Nested Approaches to REDD+ | 11
Government REDD+ Regulation
For those countries and states/provinces that wish to encourage and regulate project-level activities, the
adoption of implementation guidance via national law is recommended. Such guidance could be adopted as
freestanding act of law or in the context of more comprehensive REDD+ regulation that formulates the national
REDD+ strategy, defines the scope of REDD+, prioritizes policies, formulate the principles guiding REDD+
activities at different levels, and decides on the basic institutional set-up. In addition, some issues are
particularly important for attracting non-state actor engagement, such as: establishment of a registry system,
definition of entitlement to emission reductions and benefits, and adoption of a domestic standard or protocol
for project development.
The enactment of general REDD+ regulation at the national level is particularly useful in federal systems, where
states and provinces also have power to regulate environmental issues. National REDD+ guidance ensures
consistency by having states and provinces abiding by the same principles and general rules, while leaving
flexibility for subnational governments to regulate REDD+ in accordance with regional and local circumstances
and needs. From a private engagement perspective, the early establishment of a national REDD+ framework
would be very positive, as it reduces uncertainties related to future conflicts of laws or the potential overriding
of existing state/provincial laws.
Governments may, for instance, define eligible REDD+ activities. Countries or states/provinces may opt to
follow the full scope of REDD+ as agreed at the UNFCCC level, may restrict its scope in accordance with current
national/local capabilities (e.g., deforestation and sustainable forest management only), or may even expand
the system’s reach to include other activities (see section 4.5).8
8 This may be the case with broader regulations created to protect and incentivize ecosystems services beyond REDD+ (e.g., water
quality control, and social-biodiversity). Activities falling outside the scope of REDD+ as determined by an international REDD+
mechanism may not be creditable separately under that regime, but may still be considered as complementary to REDD+ and weigh-
in positively in the approval of such activities.
Ineligible activities such as reforestation with
exotic species and conversion of natural forests may also be explicitly stated in the REDD+ regulation.
Countries and states/provinces need to consider the relevance and need for creating regulations and dedicated
institutional arrangements for nested forms of REDD+ where little activity is being done on the ground. For
instance, in countries where few voluntary projects and/or subnational initiatives have been developed so far
the introduction of comprehensive regulation and new (or reformed) institutions may have little impact. In
these circumstances, governmental procedures for issuing non-objection or endorsements letters to projects
on a case-by-case basis might suffice as a low-cost first step to stimulate project development.
Institutional Arrangements
A basic institutional set-up should include the designation of a regulatory entity responsible for overseeing and
approving REDD+ projects and programs. This regulatory entity may be a new dedicated public agency, an
autonomous entity, or an existing entity (e.g., the entity responsible for the forestry sector).
12 | Nested Approaches to REDD+
The REDD+ regulatory entity’s attributions and powers may also be identified in the REDD+ framework and
could include:
Establishing procedures for approval of subnational and project activities;
Registering and listing REDD+ project activities;
Overseeing the operation and functioning of a registry for activities and reference levels;
Establishing procedures for monitoring of activities, including requirements for dealing with leakage,
permanence, and double-counting;
Issuing credits or defining allocation of credits or other incentives;
Following obligations regarding consultation of/information dissemination to stakeholders;
Hearing cases and resolving disputes that may arise as a result of REDD+ implementation and/or
decisions of the national regulatory body; and
Formulating provisions related to grandfathering of activities implemented before the establishment of
the domestic system.
An autonomous entity may provide transparency to the domestic REDD+ system and, to some extent, reduce
the risks of political interference where pure technical decisions are required. The recently enacted legislation
on payment for environmental services in Brazil’s Acre state creates an organization that is self-managed and
administratively independent from government, although it is supervised by the state environmental
department. The effectiveness of such entity depends on continual political commitment to REDD+ and the
entity itself. It is therefore important that the entity be established at appropriate level of seniority and with
cabinet-level support. A REDD+ law may designate sources of funding to support the operation of the
responsible entity. The entity may also be supported in its tasks by independent committees comprised of
technical experts and representatives of civil society, as defined under the general REDD+ guidance.
Definition and Transfer of Carbon Rights
Clear rules around ownership and title to carbon rights give project developers additional regulatory certainty.
Governments could, for instance, clarify the extent to which non-state actors can own and transact
internationally recognized emission reductions and how these are related to laws that pertain to land and forest
tenure and other environmental resources of the country or subnational government.
In addition, governments may define in REDD+ guidance the basic features of those emission reductions. Some
countries may wish to restrict the sale of a portion of those units to foreign entities as offsets to meet national
(voluntary) commitments. For example, some countries, like Brazil, are considering distinguishing between units
which would only entitle holders to receive fund-based payments (non-tradable) from units which could be
transacted as offsets.
Governments may also wish to establish guidance on benefit-sharing arrangements between local communities
and project developers.
Nested Approaches to REDD+ | 13
Approval of Projects
There can be several layers of approval in a REDD+ system which must be reconciled and streamlined. At the
international level, a REDD+ mechanism could set its dedicated system for approving projects and programs. In
the absence of (or in parallel to) an international REDD+ mechanism, international regulation may result from
bilateral agreements. This may lead to the creation of a plethora of guidelines and eligibility criteria for
governments that participate in various multilateral and bilateral initiatives.
At the domestic level, governments have to decide what is required to approve or endorse projects; who
proposes and registers subnational reference levels; what type of verification and certification procedures will
be put in place; and what the relevant consultation procedures are. There are many policy options available to
governments in relation to designing these approval procedures, including:
Defining whether procedures for implementing projects should be created on a provisional basis to
incentivize action prior to the full establishment of a national REDD+ system;
Developing an official standard for forestry carbon quantification, or appointing one or more voluntary
carbon standards to be used on a provisional basis, if appropriate;
Appointing domestic public agencies to carry out validation and verification of projects, or making use
of independent auditors (similarly to the CDM);
Creating a REDD+ registry to be managed by a domestic regulatory body or outsourcing registry
operations to a specialized third party; and
Defining who should be consulted when putting in place procedures for approval of projects.
Figure 3 – Design Options for Approval Procedures
Which entity could carry out
key functions?
•Build on/strengthen
current DNA infra-
structure;
•An existing public (forestry)
agency;
•A new inter-ministerial
commission;
•Other institutions that may
be needed:
•scientific committee;
•stakeholder committee;
•an independent body to
hear disputes and solve
conflict.
What functions could a
national regulatory entity
exercise?
•Approve reference-levels
and project-specific
baselines;
•Develop reference levels;
•Approve project activities;
•Oversee the operation of a
registry and authorize the
recording of information,
transfer and issuance of
units;
•Oversee the
implementation of social
and environmental
safeguards;
•Endorse benefit-sharing
arrangements.
What type of project
approval and registration
procedures?
•Create an official country
protocol/standard for
verification of projects; or
adopt an existing protocol,
such as the VCS;
•Make use of independent
auditors to verify projects;
or use governmental
agencies to verify and
certify projects;
•Create a registry to be
managed by the national
regulatory entity; or
outsource registry
functions to a third party.
14 | Nested Approaches to REDD+
These decisions will be influenced by the rules and procedures established on the international level. As
international regimes for REDD+ are still evolving under the UNFCCC as well as under other regional and state
forums such as the Governor’s Climate and Forest Task Force and in California (see Annex I), governments may
wish to allow some flexibility for regulatory adjustments in their REDD+ legislation. These adjustments can be
implemented and overseen, as needed, by the relevant national and/or subnational REDD+ regulatory body.
Promotion of Early Efforts
Where countries wish to incentivize early action, they may give REDD+ project proponents additional guidance
and assurances, such as:
Requiring projects to follow basic technical, social, and environmental standards that allow projects to
qualify for the future national REDD+ system (this includes, for instance, making use of conservative
baselines based on (pre-agreed) parameters, so as to allow for a smoother transition to the national
REDD+ system);
Providing project developers the certainty that, if government-approved standards are followed,
projects and emission reductions or removals will be taken into account and grandfathered into the
national REDD+ system; and
Ensuring projects and emissions can be accounted for and tracked properly during the early phase.
Without an appropriate database to register and collect information about projects, their baselines and
emission reductions, the task of reconciling pre-nesting activities with the national REDD+ system once
established may be insurmountable.
Governments may establish their own official voluntary standards which would apply for projects seeking
future recognition, or may refer to one or more of the existing voluntary carbon standards, such as the Verified
Carbon Standard (VCS) (see Figure 3); They may also determine the period of validity for project baselines being
grandfathered to a fully nested system or devise other rules to ensure smooth progression to broader
accounting.
Governments may also outline basic procedures for adjusting existing voluntary projects so that they meet the
requirements of the official standard. These may include, for instance, dedicated provisions that indicate what
modifications or additional information is required for projects to qualify under the official standard.
Box 3 – Early Efforts in Mexico
The Climate Action reserve is currently developing a Forest Project Protocol for use in Mexico, stemming from a September
2009 Statement of Intent between CAR, the Secretariat of Environment and Natural Resources of the United Mexican States
(SEMARNAT), the California EPA, and the ECOLIFE Foundation. This version of the protocol will be used to guide the
development of the Mexican Protocol for forest management and reforestation in Sierra Madre Occidental States and
Michoacán, including developing standards for nested projects within a REDD framework. Project types will include
Reforestation, Avoided Deforestation (Avoided Conversion) and Sustainable Forest Management (Improved Forest
Management). Separate protocol documents will be developed by CAR staff in Mexico for each project type, taking into
account the specifics of Mexican forest carbon sequestration. Protocols for Reforestation will be developed first, as the other
two rely on more complex data. Finalized protocols for all three project types are expected by the fall of 2011 (CAR 2010).
Nested Approaches to REDD+ | 15
4.4 Use of a Registry for REDD+
A registry functions as an electronic database that enhances transparency, efficiency, and environmental
integrity of REDD+ actions domestically. A registry may have multiple functions and may also be designed to
evolve over time and in accordance with a country’s progress through different phases of REDD+ and nesting.
For instance, in an initial stage, where only a limited number of project-level activities have been implemented
and actions being carried out domestically are mainly readiness-related, a national or subnational registry may
simply capture core information for discrete projects and track activities and performance. Early use of a
registry would help in avoiding double-counting of emission reductions as the number of projects increases. As
MRV capacities grow domestically and reference levels are being adopted, various reference levels (national
and subnational) can be consolidated, and the outcomes of projects can be recorded. Issuing and tracking of
REDD+ units could be a feature for countries and states/provinces that have already achieved the final phase of
REDD+. Examples of supporting functions of a REDD+ registry include:
Capturing basic information on discrete projects implemented prior to a national or subnational REDD+
accounting system;
Displaying environmental, social, and technical criteria applicable to projects;
Ensuring the requirements of the relevant standard or protocol have been met;
Tracking performance of projects and storing information on credits issued or payments made to
projects; and
Issuing and tracking movement of units, where these can be traded.
Governments may decide to create only one central national registry to serve as main depository of all relevant
information or may establish additional independent registries for each state/province. While the latter may
require additional resources and institutional infrastructure, it may be a helpful approach to supporting a
nested approach in states with federal systems.
The registry system can also be of great value for clarifying title and effecting transfer. A registry provides
transparency and certainty to the process by publishing title to land and carbon. A registry can also be used to
enforce policy decisions by making the transfer of title of credits dependent on the fulfilment of certain
eligibility criteria.
16 | Nested Approaches to REDD+
Figure 4 – Potential Functions and Design Options for a REDD+ Registry
4.5 Definition of Risk Mitigation Tools
Different views exist as to whether the receipt of REDD+ credits at the project-level should be tied to
government performance. Some experts are of the view that, in order to maintain environmental integrity of
subnational REDD+ systems, no credits should be issued to project-level entities unless the government reduces
emissions beyond its reference level.9 Systems would, in this case, be designed in a way that credits at the
project level would be issued only after a positive assessment of the government’s performance overall.10
Others favor decoupling projects and government performance as the only realistic means to reduce risks and
attract substantial private sector participation. De-linking government performance from project-level
performance reduces the reliance of private investment on governmental action and could thus promote an
early flow of private capital and help achieve emission reductions in the near to medium term.11
What seems clear, however, is that private sector engagement in REDD+ is conditional on the ability to assess
and manage risks affecting project success. While the private sector is normally prepared to deal with risks
associated with project performance, counter-party credit risks, and market and currency fluctuation, it is not
normally willing to take on significant political and sovereign risks (such as failure of the government to perform,
absence of clarity of carbon rights, and poor enforcement capacity).
9 See Cortez et al. 2010.
10 See Electric Power Research Institute (EPRI) 2010.
11 See Pedroni et al. 2010.
Nested Approaches to REDD+ | 17
Governments can establish provisions that mitigate the risk of private project developers to lose carbon credits
for the government’s failure to reduce emissions (Figure 5). These mitigation tools may be used in many
different combinations. One potential scenario is the use of a reserve account at the government level and an
insurance policy (or a performance reserve account) at the project-level. The government reserve account
would serve to cover for government non-performance in future verification periods and would ensure that
successful project activities can still receive credits. The project-level insurance (or performance reserve
account), on the other hand, would insure the government against non-performance at the project level.12
Figure 5 – Potential Risk Mitigation Tools Available to Governments and the Private Sector
4.6 Measurement and Monitoring
Emission reductions and removals reported as resulting from REDD+ action at the subnational level, whether by
projects, states/provinces, need to be consistent and tally with emission reductions achieved and reported at
the national level. To ensure environmental integrity of the system, national-level reductions should be the sum
total of all reductions within the country’s boundaries.
Determining the relative contributions of subnational activities to emission reductions and removals is essential
to avoid government liabilities and double-counting. If nested systems have inconsistencies across scales then,
at the very least, they will result in inefficient allocation of resources (granting more credits or payments to
some entities than warranted). In a worst-case scenario, emission reductions attributed to projects may exceed
12 This scenario is mentioned in Cortez et al. 2010. A similar scenario was also discussed during the high-level workshop in Miami.
•Performance or buffer reserve accounts retain a percentage of the credits issued at
government as well as project level
•Could cover risks of reversals of stock and non-performance
•Already applied for VCS projects
Reserve Accounts
•Guarantees can range from unconditional performance guarantee to limited
guarantees and could be provided by governments and multilateral agencies
•Could cover risks of unsuccessful government programs, changes in policies and
laws, and non-fulfilment of contracts by governments
•Examples could be modeled on the World Bank's partial risks guarantees and
MIGA-like guarantees adjusted to REDD+
Guarantees
•Insurance mechanisms may be funded with goverment contributions or provided by
private sector insurers (or mix of public and private resources)
•Could cover government and/or project under-performance
•There is little experience so far with forestry insurance products. Key players include
Forest Re, Munich Re and Swiss Re
Insurance
18 | Nested Approaches to REDD+
or undermine reductions claimed at national scale (granting more credits or payments than the system actually
has).
Measuring and monitoring emissions from forests and land-use is increasingly feasible, with clear guidance and
rapidly growing technical and institutional capacity around the world. However, many specific parameters will
need to be determined at the national level in order to ensure that forest cover, forest condition, and carbon
stocks are measured consistently at different nested levels. At COP 15, parties agreed to use the most recent
Intergovernmental Panel on Climate Change (IPCC) guidance and guidelines as the basis for estimating
anthropogenic forest-related greenhouse gas emissions by sources and removals by sinks, forest carbon stocks,
and forest area changes.13
Consistent forest carbon accounting requires a common understanding of what constitutes a “forest” and its
boundaries. Countries wishing to engage in REDD+ will need to adopt a clear definition of forests that is
applicable at multiples scales. A consistent national forest definition based on structural characteristics
(correlated with carbon stocks) is a prerequisite for determining when and where deforestation is considered to
occur, and for differentiating between deforestation and forest degradation. Many countries that have adopted
definitions of forest in the context of the Clean Development Mechanism
Following this principle in a multi-level nested accounting approach requires
standardizing the use of certain elements and concepts, while other methodological decisions can be left to
project proponents at the project and subnational level.
Definition of Forest
14
Deforestation is, relatively speaking, the most straightforward activity of the ones covered by REDD+, both in
terms of definitions, as well as measurement and monitoring considerations. UNFCCC parties have agreed on a
deforestation definition under the Kyoto-Protocol, conceptualizing it as “the direct, human-induced conversion
of forested land to non-forested land.”
may want to reevaluate the chosen
definition in light of REDD+ implementation.
Eligible Activities
15
13 See FCCC/CP/2009/11/Add.1.
14 The rules of the Kyoto Protocol require countries to adopt parameters within a forest definition that includes a minimum area (0.05-
1.0 hectare), tree crown cover threshold (>10-30 %), and minimum potential tree height (2-5 meters). See 16/CMP.1, Annex,
paragraph 1(a).
15 See FCCC/KP/CMP/2005/8/Add.3.
In contrast, a UNFCCC decision defining degradation is still pending. It
is unclear how activities like degradation and sustainable management of forests, enhancement of carbon
stocks, sustainable forest management and afforestation/reforestation can be conceptually distinguished. For
example, minimizing collateral damage of timber harvesting practices in forest concessions could be considered
as reducing degradation or as one of the means of sustainable management of forests. Thus, national
authorities need to establish guidance for projects and subnational activities to account properly for different
activities, avoiding inconsistencies with emerging national compliance frameworks. This guidance should
include clear definitions of eligible activities and probably limitations on eligible activities in a phased approach,
depending on what can effectively be captured in national MRV (e.g., beginning solely with reductions in
emissions from deforestation).
Nested Approaches to REDD+ | 19
National, subnational, and project-based activities will also have to address questions of scale and significance in
order to be clear about which types of land-use changes have to be accounted for at which level. While large-
scale changes from forest to cropland can be easily tracked as deforestation with remote sensing means at all
levels, dispersed, small-scale slash-and-burn practices could be far more difficult to monitor at the national
level. In this case, subnational schemes might provide for the necessary means to track local land-use change
dynamics. However, to avoid asymmetries in accounting, a common conceptual framework on how to integrate
these different monitoring efforts needs to be established upfront. This framework should be based in IPCC’s
key categories analysis, which leads to an identification of land-use change to be considered significant in terms
of their absolute emission and removal level, related uncertainties, and trend.16
To determine emissions factors consistently for different forest types, the IPCC 2006 Inventory Guidelines
require stratification of land-use data considering climate, soils, ecological zones, and management practices.
Each country will determine
those key categories which encompass all significant emission sources at the national level.
Stratification
17
An agreed national stratification scheme, established up-front, can avoid the problem of entities applying
different emission factors to equivalent forest ecosystems. This scheme might stratify the country at a higher
level and leave room for sub-stratification at the subnational and project level. This would be in line with the
IPCC 2006 distinction of different complexity levels (“tiers”) and spatiotemporal boundaries (“approaches”). To
begin with, national accounting might aim first at tier 2-compliant accounting (use of IPCC default assumptions
and methods, applied to national data), accounting for land-use change between two points in time based on
key categories (approach 218
16 See IPCC 2006 Vol. 1, Chap. 4.1.1.
17 See IPCC 2006 Vol. 4, Chap. 3.3.2.1.
18 In the context of IPCC 2006, approaches describe different ways of representing so-called activity data, i.e., data on the magnitude
of human activity resulting in emissions or removals taking place during a given period of time (IPCC GPG 2003). While approach 1
provides only data on the area of each land-use category and not on the change between them, approach 2 tracks conversions for
key categories (land-use changes significant in terms of their absolute level, uncertainties, and trend) between two points in time.
Approach 3 goes one step further in spatiotemporally tracking changes between all key categories across several periods. In general,
approach 3 is considered the most appropriate approach for REDD+ (see GOFC-GOLD 2010). However, only very few Annex I
countries are currently using it due to its complexity.
). Project-based and other subnational activities could start applying site-specific
methods or assumptions to site-specific data (tier 3), spatiotemporally tracking emissions and removals across
all key categories (approach 3). While projects or other subnational activities might have the resources to
measure relevant carbon pools at tier 3 level based on an agreed stratification, countries will require several
(possibly many) years to fully cover the national forest domain within a GHG inventory.
Applying a national sampling scheme and standard measurement protocols could facilitate sharing emission
factors amongst different levels, reducing implementation costs substantially. Measuring above-ground
biomass within one stratum requires a certain sampling density to be determined upfront. If projects or
states/provinces sharing the same forest stratum agree to divide their efforts to achieve the required sampling
density jointly, they could establish tier 3 emission factors at lower costs.
20 | Nested Approaches to REDD+
Accounting Periods
REDD+ activities are being implemented at different pace. Some have already begun, while others are
scheduled to be implemented in the near future. Achieving temporal consistency in emission accounting across
different scales will become a challenge the more stand-alone activities become operational in a national
domain. One way to overcome this challenge is to standardize future accounting periods at the national level.
Projects and other subnational schemes can be encouraged to anticipate these periods by providing
corresponding data sets or remote-sensing products as a common basis for emission accounting at different
levels.
4.7 Baselines or Reference Levels
The baseline or reference level establishes the benchmark for creditable emission reductions. The term
reference level is more frequently used in the context of national or subnational accounting, while baseline is
the most common usage for project-level accounting. The concept generally refers to a business-as-usual (BAU)
projection of emissions.19
The challenge in a nested system is that an overall country- or state/province-wide deforestation rate is not
evenly distributed across the forest landscape. Even countries with high rates of deforestation will contain areas
with a high probability of being cleared as well as areas at low risk; protecting and managing the former will
Under the UNFCCC, the additional application of adjustment factors is being
discussed to take into account particular national circumstances. For the purpose of this paper, reference levels
are understood as BAU baselines. Due to their counterfactual nature, reference levels can never be verified or
measured. It is widely agreed that setting business-as-usual reference levels is technically and politically
challenging because it essentially means predicting and agreeing on an unknowable future. Challenges are
further compounded in nested frameworks because reference levels at different scales must be consistent and
coherent.
Reference levels can usefully be separated into two elements: future rate and future location of deforestation
and its associated emissions, as they are under the approved VCS methodologies for avoided deforestation.
Each element is discussed in turn, including specific recommendations on each.
Baseline Deforestation Rates
The projected rate of deforestation will depend on many factors including governance decisions, population
growth, markets for land, agricultural and forest products, infrastructure development, amongst others.
Methodologies at the project level under the VCS, for example, allow for the projection of deforestation rates
based on historical averages, linear projections, non-linear projections and/or modeling.
Baseline Deforestation Location
19 Although “crediting baselines” may refer to a level of emissions lower than BAU, with crediting for emissions reductions only below
this level, with the aim of increasing environmental stringency and reflecting the shared nature of responsibility for emissions
reductions between host governments and other jurisdictions demanding offsets.
Nested Approaches to REDD+ | 21
reduce emissions, while protecting and managing the latter will not.20 For this reason, determining where and
when deforestation is likely to take place is critically important.21 Within a nested framework, there are two
broad pathways to develop and integrate baselines from projects and states/provinces22
The disaggregate approach has the disadvantages of nearly certainly leading to inconsistencies between project
baselines, especially if and when projects have overlapping reference regions. Even the best modeling exercises
will produce varying outcomes, especially as project-level entities have strong incentives to maximize
predictions of baseline emissions. Integrating different baselines might become nearly impossible in cases
where the reference region or leakage belt of one project includes the project area of a subsequent project.
Overlaps will, in turn, cause shortages of suitable reference areas for additional baseline development and
updating and will also dramatically increase transactions costs of project development, with each project having
to replicate investments in data collection, model design, and validation.
– i) disaggregate or
bottom-up; or ii) consolidated or top-down.
Disaggregate or Bottom-Up Baseline Development
Currently, project-based accounting approaches, such as those under VCS methodologies, establish project-
level baselines, predicting rates, location, and timing of expected deforestation with a baseline that must be
periodically updated. This baseline is based on an analysis of deforestation agents and drivers in a broader
reference region that mirrors conditions at the project location. One approach to baseline determination in a
nested structure is for government regulators (or authorized third-party auditors) to review, approve, and
register project-originated baselines, gradually building up a patchwork or mosaic of baselines within their
jurisdiction. Consistency of these nested baselines can be further enhanced by establishing methodological
guidance on how to establish consistent projective reference emission levels at the subnational level. Those
preconditions could encompass a systematic listing of agents and drivers to be considered, a certain type of
modeling approach, validation techniques, or policy scenarios, amongst others.
The disaggregate approach has the advantage of being deployable in the short-term, harnessing the interest of
project-level entities to invest in the design and modeling work required, gaining time while more complex
processes are consolidated at state/national level. If these baselines are rigorously and conservatively
constructed and if the scale of the sum of project activities is likely to be a limited proportion of overall country
or state/province reductions, this approach may be an appropriate interim step to catalyze REDD+ activities.
Under these conditions, it would be expected that project-level reductions would be consistent with the
national baseline and not represent severe distortions.
20 E.g., a country with a high 2% p.a. rate of forest loss would still be expected to have 80% of today’s forests standing in 2020,
meaning that some areas of forest are near certain to be cleared, while others, for reasons of suitability or access, will almost certainly
not be deforested.
21 Inefficient targeting has been pointed to as a weakness of forest conservation incentives or payment for ecosystem services
programs, with compensation largely flowing to areas that were not significantly at risk of deforestation (se Pattanayak et al. 2010,
Wunder et al. 2008). Poor spatial allocation of baseline deforestation rates could lead to similar distortions, potentially putting a
country’s overall REDD+ outcomes at risk.
22 Depending on the scale of the jurisdiction there may be advantages to an intermediate step, disaggregating reference emissions
levels to smaller subnational or regional scales, to reflect differences in circumstances as well as inter-regional equity issues, as has
been proposed for the Brazilian States (see EPRI 2010 and Cortez et al. 2010).
22 | Nested Approaches to REDD+
Consolidated or Top-Down Approach
To ensure consistency and streamline project development, a country or state/province may choose to develop
spatially explicit regional baselines as the basis for calculating emission reductions. In essence, this may simply
be a scaling-up of the sorts of baseline approaches developed for the project level under VCS methodologies.
This type of approach is currently being developed, for example, in two regions of Peru23 (see Box 4) and in
Colombia.24
Adopting regional baselines may also prove contentious and politically charged. Government endorsement of
spatially explicit regional baseline models is based on the presumption that they accurately reflect the location
and timing of future deforestation. As high-stakes financial and commodity markets consistently demonstrate,
the accuracy of predictions made by models of complex systems is frequently doubtful.
Under a top-down approach, a regional baseline zones or stratifies the forest landscape to predict
the rate, location, and timing of future deforestation and calculate emission reductions from specific project
areas against the model, allowing projects to extract relevant project-baselines out of a broader baseline map.
The consolidated approach has the advantage of creating a clear, internally consistent framework for
determining emission reductions from project-level activities, ensuring that these add up consistently with
region-wide emissions levels. Having regional baselines in place also achieves significant economies of scale for
project development, allowing a greater share of investment to flow to communities and landowners for
emission reductions activities, rather than complex technical exercises. Consolidated approaches, however, are
likely to require significant investments and longer lead times due to the scale of the efforts involved.
25
23 San Martin and Madre de Dios. Regions are decentralized entities under the Peruvian system, analogous to states or provinces.
24 Cortez et al. 2010.
25 Taleb 2007. Or, as the physicist Niels Bohr noted, “It is exceedingly difficult to make predictions, particularly about the future.”
Risks and controversy
can be compounded if a fairly opaque technical exercise aims to determine apportionment of rights to
potentially valuable carbon assets across the landscape and rights holders. Even if validated by technical
experts, the use of regional baseline maps is likely to be challenged if these serve as the simple basis for
allocating credits, allowing some landowners to claim benefits for emission reductions while excluding others.
The VCS Association is currently carrying out a process to establish new guidance for regional baselines to be
used to support both project- and national-/subnational-level accounting.
Nested Approaches to REDD+ | 23
Box 4 – The Examples of San Martín and Madre de Dios
Of Peru’s 25 regions, San Martín and Madre de Dios are two of four that have been given decentralized authority for forest
management by the Ministry of Agriculture. These two regions are already organizing participatory technical processes and
formulating spatially and temporally explicit deforestation forecasts. These processes are backed by Regional REDD
Roundtables, which are composed of organized civil society and are authorized as consultative and technical implementation
agencies by the regional governments of San Martín and Madre de Dios. These Regional REDD Roundtables both guide
institutional coordination among the different levels of REDD+ implementation (i.e., local, regional, national) and build
capacity for the development of reference scenarios and MRV. Thus, in both San Martín and Madre de Dios, technical working
groups have been formed, financed by project promoters and international NGOs, to analyze satellite images, opportunity
costs, carbon stock inventories, and regional emission forecasts.
In Madre de Dios (where there are at least 11 projects), the development of reference emission scenarios is well advanced,
with three working groups analyzing historical deforestation, studies of biomass and carbon, and modeling of deforestation
respectively. Brazil’s Institute for Environmental Research on the Amazon Region (IPAM) is also developing a deforestation
model that will cover the region (and the State of Acre). The individual REDD+ projects, financed through grants from the
Norwegian Government or contracts with private investors are also carrying out baseline studies. In San Martin, a regional
baseline model in support of the Regional Government´s REDD Strategy is being developed under the technical guidance of
CarbonDecisions and with broad stakeholder input. Peru’s R-PP (Readiness Preparation Proposal) states that “local early
initiatives have merged in order to collaborate on the development of a regional reference scenario that may be used as a
common, consistent baseline.”
4.8 Leakage
Leakage describes the “unanticipated decrease or increase in GHG benefits outside of the project’s accounting
boundary… as a result of the project activities.”26 Reducing the risk of leakage is frequently cited as an
important reason for moving to national or state/provincial accounting.27 Project-level activities intrinsically
have the potential to displace emissions through activity-shifting, market or other effects, to areas outside their
project boundaries. Increasing the scope of the accounting boundaries is therefore one way to reduce leakage,
by ensuring that these effects are captured within the bounds of the broader accounting system.28
26 IPCC 2000: 246.
27 See e.g., Murray et al. 2009.
28 See Schwarze et al. 2002.
In national and state/provincial accounting frameworks, allowing a project to claim credits for reductions on-
site, without adequately accounting for increased emissions it may have produced off-site, can undermine the
outcomes of the entire jurisdiction and create an externality, or liability, for the government and other
stakeholders. Accurate accounting should allow for attribution not just of emission reductions achieved at the
project scale, but also consequences of leakage beyond project boundaries.
24 | Nested Approaches to REDD+
Current approaches to dealing with leakage under project-level accounting standards (e.g., CDM, VCS) include:
Improving the design of project activities to minimize leakage risks (reducing displacement of farming
and grazing activities, generating employment alternatives, maintaining or replacing baseline supplies
of good and commodities);
Accounting for leakage within a monitored “leakage belt” that covers the range of displaced agents and
their activities;
Establishing discount factors for certain kinds of leakage that are intrinsically difficult to measure and
monitor (e.g., market leakage tables).
National and state/province governments may deal with leakage in a number of additional ways:29
Require leakage assessment, as per the project-level approaches described above. This option has the
advantage of encouraging improved project design to reduce leakage risk and increase sustainability
and, in principle, allows for a more accurate attribution and allocation of reductions. On the other
hand, it increases complexity and transactions costs for projects.
Establish a flat discount rate for projects that recognizes uncertainties and minimizes risks of over-
crediting projects at the expense of overall national or state/province performance.
Establish a “leakage tax,” with a volume of verified credits or portion of proceeds used to finance
leakage mitigation measures (e.g., investments in rural development alternatives, land titling, improved
forest governance) at the national or state/province level.
Ignore leakage from projects. The government could assume responsibility for leakage and may choose
to adopt this approach in order to incentivize project investment within certain caps or restrictions on
the overall volume of project crediting.
Cross-boundary leakage may occur, but is beyond the control of individual project proponents or governments.
Governments may choose to require leakage assessments to include cross-boundary effects, especially if they
occur in neighboring states/provinces without comparable accounting frameworks. However, the international
climate negotiations have, in principle, excluded accounting and liability for international leakage (e.g., between
developed and developing countries).
29 See also Jenkins et al. 2009, and Schwarze et al. 2002.
Nested Approaches to REDD+ | 25
Conclusion
It is essential to create incentives for early REDD+ action while an international legal framework is still being
developed and, promisingly, REDD+ implementation is already happening at the national and the subnational
level. With the support of the World Bank’s Forest Carbon Partnership Facility (FCPF) and/or UN-REDD,
governments have started engaging in REDD+ readiness. Non-state actors (local governments, NGOs,
businesses) have begun investing in local REDD+ projects and programs. In the context of the Cancun
Agreements, such early REDD+ actions correspond to the first phases in the implementation of REDD+ activities.
The development of national strategies and capacities as well as the implementation of demonstration activities
prepare for participation in a national, full-scale, results-based REDD+ program.
Subnational projects and programs represent the beginnings of entrepreneurial activity, both from the private
sector and forward-looking provincial and state governments, for addressing deforestation and forest
degradation. As such, it will be important to effectively harness and leverage these initiatives and continue to
support similar participation in initiatives that address the challenges presented by deforestation and forest
degradation. In order to do this, such site-level activities must be brought under broader-scale accounting
frameworks, both to ensure that any carbon credits issued are recognized under emerging compliance markets
and that such efforts add-up properly. Knitting bottom-up activities together is critical to maintaining
environmental integrity and to incentivizing early action and catalyzing REDD+ initiatives at a much larger scale.
By summarizing the main issues and options that need to be considered in developing crediting frameworks for
harmonizing emission reductions at the jurisdictional and project scales, this briefing paper aims to contribute
to the considerations of policy makers and project developers that are engaged in on-the-ground decisions
about how to address REDD+. In addition to providing the private sector and non-profit organizations investing
in REDD+ projects with an understanding of issues that may affect their investments in the future, the present
analysis is expected to be useful to state and provincial governments that structure their programs according to
local needs. In sum, we hope to have contributed to our goal to strengthen current REDD+ activities by
providing needed learning that will inform emerging regulatory frameworks.
26 | Nested Approaches to REDD+
References
Boyd, W., Options Paper – Regulatory Design Options for Subnational REDD Mechanisms, University of Colorado
Law School (2010).
Climate Action Reserve (CAR), Mexico Forest Project Protocol: Reforestation Statement of Intent, 4 March
2010.
Cortez, R. et al. A Nested Approach to REDD+: Structuring effective and transparent incentive mechanisms for
REDD+ implementation at multiple scale, The Nature Conservancy and Baker & McKenzie (2010).
De Gryze, S. and L. Durschinger, An integrated REDD Offset Program (IREDD) for Nesting Projects under
Jurisdictional Accounting, Terra Global Capital, version 2.0 (2010).
EPRI, Brazil’s Emerging Sectoral Framework for Reducing Emissions from Deforestation and Degradation (REDD)
and the Potential to Deliver Greenhouse Gas Emissions Offsets from Avoided Deforestation in the
Amazon’s Xingu River Basin, Palo Alto, 1021606 (2010).
Garritt, T., Making GCF/ARB REDD feasible for private sector investment, GCF Representative (2010).
GOFC-GOLD, A sourcebook of methods and procedures for monitoring and reporting anthropogenic greenhouse
gas emissions and removals caused by deforestation, gains and losses of carbon stocks in forests
remaining forests, and forestation, report version COP16-1, Project Office, Natural Resources Canada,
Alberta, Canada (2010).
IPCC, Land Use, Land-Use Change, and Forestry, edited by Watson, R.T., Noble, I.R., Bolin, B., Ravindranath,
N.H., Verado, D.J., and D.J. (2000).
IPCC, 2006 Guidelines for National Greenhouse Gas Inventories, Prepared by the National Greenhouse Gas
Inventories Programme, Eggleston H.S., Buendia L., Miwa K., Ngara T. and Tanabe K. (eds).Published:
IGES, Japan (2006).
Jenkins, W.A., L.P. Olander, and B.C. Murray, Policy Brief: Addressing Leakage in a Greenhouse Gas Mitigation
Offsets Program for Forestry and Agriculture, Nicholas Institute for Environmental Policy Solutions,
Duke University (2009).
Murray, B.C. et al., Forging a Path for High Quality Compliance REDD Credits, Nicholas Institute Report NI R 09-
06 (2009).
Parker, C., A. Mitchell, M. Trivedi, N. Mardas, and K. Sosis, The Little REDD+ Book, Global Canopy Program
(2009).
Pattanayak, S.K., S. Wunder, and P.J. Ferraro, Show Me the Money: Do Payments Supply Environmental Services
in Developing Countries? Review of Environmental Economics and Policy: 1–21 (2010).
Nested Approaches to REDD+ | 27
Pagiola, S. and B. Bosquet, Estimating the Costs of REDD at the Country Level, Forest Carbon Partnership Facility,
Version 1.0 (2009).
Pedroni, L. et al., Creating incentives for avoiding further deforestation: the nested approach, Climate Policy
(2009).
Pedroni L. et al., A Nested Approach to REDD+: How could it be implemented? in “Pathways for Implementing
REDD+”, UNEP RISOE Centre (2010).
Schwarze, R., J.O. Niles, and J. Olander, Understanding and managing leakage in forest-based greenhouse-gas-
mitigation projects in I. Swingland (ed.) “Capturing Carbon and Conserving Biodiversity: The Market
Approach” London: Earthscan (2002).
Taleb, N.N. The Black Swan: The Impact of the Highly Improbable. Random House (2007).
Wunder, S. et al., Taking stock: A comparative analysis of payments for environmental services programs in
developed and developing countries, Ecological Economics 65:834–52 (2008).
28 | Nested Approaches to REDD+
Annex – Current Status on Nesting Implementation
This annex briefly describes some important initiatives that are dealing with a range of issues associated with
nested approaches to REDD+ and presents an overview of their current status. It is divided into the following
categories: (i) compliance frameworks; (ii) voluntary initiatives; and (iii) domestic readiness processes.
1. Compliance frameworks
Under compliance frameworks we highlight the work being carried out by the Governors’ Climate and Forest
Task Force (GCF) and by the California Air Resources Board (ARB) within the context of the Assembly Bill 32 (AB
32). It is important to note that, while the GCF is not a compliance regime per se, it seeks to promote standards
and criteria that can result in compliance-grade REDD+ credits and is already having an impact on the domestic
regulatory framework of its members.
The Governors’ Climate and Forest Task Force (GCF)
The GCF is a coalition of 15 states from Brazil (Acre, Amapa, Amazonas, Mato Grosso, Para), Indonesia (Aceh,
Central Kalimantan, East Kalimantan, Papua, West Kalimantan), Mexico (Campeche, Chiapas), the US (California,
Illinois), and Nigeria (Cross River State). The GCF has been working since early 2009 on design recommendations
for subnational frameworks presented in a discussion draft released in September 2010.30
REDD+ scope;
The GCF seeks to
develop standards and criteria for the generation of compliance-grade REDD credits and accounting
frameworks that ensure coordination between state/provincial and federal initiatives.
The report on subnational issues is organized around “Key Issues” and “Design Recommendations.” The former
presents the major issues to be dealt with (e.g., sub-national accounting, MRV, risk management), while the
latter lays out recommended requirements, criteria, tools, and procedural options for the GCF. Key issues
discussed in the draft report include:
crediting possibilities;
accounting and MRV; and
phased approach;
With respect to scope, the report states that the general sentiment among members was for regulators and
early-mover states/provinces to begin with Reduced Emissions from Deforestation (RED) and then incorporate
Forest Degradation (REDD) as better methodologies are developed, although it also calls for further explanation
of the various approaches (i.e., RED vs. REDD vs. REDD+).
30 The draft paper does not yet reflect the official position of the GCF. The draft paper can be accessed at
http://www.gcftaskforce.org/
Nested Approaches to REDD+ | 29
The draft also discusses sectoral crediting pathways, i.e., how REDD credits could be issued. Three options were
addressed, and the GCF recommended preserving multiple pathways in order to provide flexibility for
compliance and offset generation. This means that both sector-based and direct crediting should be permitted,
with different states choosing among the different pathways, while having the ability to move from one to
another over time. Under sector-based crediting, credits would undergo conversion to the appropriate offset
currency and result in the largest amount of reductions. Under direct crediting, credits could either be issued
directly to states or provinces for specific program/policy activities, or directly to projects nested within a
state/province REDD program.
With respect to accounting and MRV, it is noted that state-/province-level accounting would be necessary for all
crediting pathways discussed and would ultimately “synch up” with national-level accounting. The discussion
around this issue includes i) reference-level baselines and crediting baselines; ii) state/province RED plans and
programs; iii) GHG inventory requirements; iv) registry requirements; and v) project nesting and reconciliation
architectures. Recommendations for these aspects include i) criteria for establishing reference-level baselines
and two options for establishing crediting baselines; ii) the development of state/province REDD
plans/strategies/programs that include the listed elements/criteria; iii) general criteria for state- and province-
wide tracking and registry systems that would respond to signals from compliance markets. Recommendations
for project nesting and reconciliation architectures have yet to be developed.
MRV could occur at the state/province level or the project level, in the case of a nested approach. Additional
requirements for MRV under a nested project pathway are also discussed (including, additionality, and leakage).
The GCF recommends general criteria for MRV of state/province performance that retains the flexibility to
incorporate future technological developments. The GCF draft report notes that more coherent and possibly
less detailed MRV criteria should be developed. Recommendations for MRV of nested project performance
includes that any credits issued to nested projects be based on project-level performance as determined by an
approved “quantification methodology,” along with additional potential requirements for leakage, additionality,
and reversals.
The GCF draft report also discussed a phased-approach pathway which would allow and incentivize those states
not yet ready to enter into a full sectoral accounting and crediting system the opportunity to gain credits for
immediate GHG reductions in initial compliance periods and outlines two potential options. The first presents
prerequisites for participation in a phased approach pathway, while the second discusses the establishment of a
limited window into the first compliance period for early pilot/demonstration nested pathways and/or state-
/province-level programs.
The GCF is currently in the process of reviewing and incorporating additional feedback received on the draft
report.
California’s Global Warming Solutions Act of 2006 (AB 32)
As part of AB 32, the California Air Resources Board (ARB) developed a scoping plan which utilizes a
combination of regulatory, voluntary, and market-based mechanisms that seek to reduce GHG emissions in
California to 1990 levels by 2020 (a 30% reduction from BAU) and achieve an 80% reduction by 2050.
30 | Nested Approaches to REDD+
The Proposed Regulation Order, which incorporated comments to an earlier preliminary draft regulation,
explicitly mentions that the board should consider a nested approach. If adopted, this would include:
Offset requirements that formulate accounting rules for all project-level activities;
A system for reconciling offset project-based GHG reductions in sector-level accounting.
Under the Proposed Regulation Order, REDD would only be eligible under the sector-based approach (and
currently it is the only set of activities named under sector-based offset crediting). Under this arrangement,
compliance instruments issued from sector-based offset crediting programs must originate from developing
countries or from states and provinces within those countries. Emission reductions at the project level could be
credited if the program established a clear accounting system. [Two possible crediting pathways have been
proposed: in the first, the ARB would directly approve sector-based credits, and in the second, sector-based
credits would be issued by an ARB-approved external program.]
The Proposed Regulation Order also lays out general requirements for sector-based crediting programs for the
Board to consider. In addition to calling for a nested approach, these include:
The host jurisdiction establishing a plan for REDD;
The program including a transparent MRV system, including enforcement capability;
Requirements to ensure that offset credits are real, additional, quantifiable, permanent, verifiable, and
enforceable;
A transparent system for determining and reporting when the program meets or exceeds its crediting
baseline(s); and
Public participation.
Under these requirements, the “crediting baseline” refers to the ”reduction of absolute GHG emissions below
the business-as-usual scenario or reference level across a jurisdiction’s entire sector” after accounting for the
imposition of emission reduction requirements or incentives.
Recently, progress on the approval and implementation of the Proposed Regulation Order has been halted
however. In March 2011, a San Francisco Superior Court judge finalized a decision to suspend AB 32 (The
Association of Irritated Residents, et al. Vs. California Air Resources Board), on the grounds that CARB violated
the California Environmental Quality Act by failing to complete sufficient analysis of the environmental impacts
of alternatives to a cap-and-trade system. CARB is currently expected to both appeal the order and to submit
additional analysis demonstrating why cap-and-trade is better than the alternatives. Because of this set-back,
the expected implementation date of January 1, 2012 is unlikely.
2. Voluntary Initiatives
Below, the two main voluntary initiatives dealing with REDD+ nesting issues and the status of their current work
on nesting are briefly described.
Nested Approaches to REDD+ | 31
Verified Carbon Standard (VCS)
The Verified Carbon Standard (VCS) (formerly the Voluntary Carbon Standard) is a standard and program for the
approval of credible voluntary offsets. Currently, five categories of Agriculture, Forestry & other Land-Use
project activities are eligible under the VCS, including Reducing Emissions from Deforestation and Forest
Degradation (REDD). In December 2010, the VCS launched its VCS Jurisdictional and Nested REDD Initiative,
which was made possible through a grant from the Climate and Land Use Alliance. As accounting and crediting
scales for REDD move from the project level to state/province and national levels, project-level activities will
need to be brought under broader scales, helping to ensure that emission reductions “add-up” properly. The
initiative will develop new VCS guidelines that allow for i) the development of jurisdiction-wide baselines; and ii)
the integrated accounting and crediting of REDD+ activities (projects, policies, and programs) at the jurisdiction
level. Because the initiative is still in its infancy, the exact nature of the final guidelines (i.e., new VCS rules,
requirements and/or Good-Practice-Guidance (GPG)) is still to be determined.
In developing the initiative, the Verified Carbon Standard Association (VCSA), which oversees the VCS, is
collaborating with a broad range of stakeholders and experts. A secretariat, composed of the VCSA, the chair of
the VCS AFOLU Steering Committee, and Climate Focus, is responsible for implementing the project, including
day-to-day coordination. Conceptual development and strategic input are being provided by a 22-member
Advisory Committee, composed of developing-country government representatives from the Americas, Africa,
and Asia, balanced with civil society and private sector representatives, sharing a broad range of skill-sets (e.g.,
business, law, government, technical, etc.). Technical experts and a peer review team will be retained to
provide expert advice on specific issues identified by the Advisory Committee. The technical experts will draft
relevant background papers and both technical experts and the peer review team will peer-review the final VCS
text. Following ISEAL Alliance Codes of Good Practice, a public consultation on the final draft of the new VCS
text will also be held.
To date, the scope of initial discussions has focused on potential crediting pathways, including: i) project-level
crediting using project baselines (the current scope of the VCS); ii) project-level crediting using jurisdictional
baselines; iii) project-level crediting using jurisdictional baselines and accounting; iv) project and jurisdictional
crediting using jurisdictional baselines and accounting; and v) subnational jurisdictional crediting schemes as
part of a national scheme. Variations on several of these scales have also been proposed. Additional discussions
have focused on technical issues, such as the scope of activities included in accounting, baselines, additionality,
MRV, leakage, underperformance and reversals, etc. A scoping paper is currently being drafted that will
highlight issues for the technical experts to address and outline the current thinking of the Secretariat and
Advisory Committee on relevant issues. The Initiative will take place over a 12-month period, with final VCS
guidance and requirements expected in the first quarter of 2012.
Climate Action Reserve (CAR)
The Climate Action Reserve is an offset program working to ensure integrity, transparency, and financial value in
the US carbon market. It does this by establishing regulatory-quality standards for the development,
quantification, and verification of greenhouse gas (GHG) emission reduction projects in North America. It issues
carbon offset credits known as Climate Reserve Tonnes (CRT) generated from such projects and tracks the
transaction of credits over time in a transparent, publicly-accessible system.
32 | Nested Approaches to REDD+
The CAR established the California Climate Action Registry (CCAR) as one of its programs. The CCAR is a
voluntary initiative formed in 2001 and currently has over 300 members ranging from corporations, to cities,
and non-governmental organizations.
In August 2010, CAR released the Forest Project Protocol which seeks to provide complete, consistent, accurate,
and conservative standards to account for forest carbon storage. In September 2011, the equivalent Mexico
Forest Protocol is expected to be released. In December 2010, the CAR held a side event in Cancun to present
its independent initiative to develop standards for nested project accounting for possible REDD programs in
Mexico – most likely implemented at the state level. Reserve staff will work with a Mexico forest work group to
refine the Forest Project Protocol for use in Mexico by developing guidance and standards for nested projects
within a REDD framework, environmental integrity, land tenure issues, and permanence of forest carbon
sequestration specific to projects in Mexico. The Reserve’s effort in Mexico is seen as collaborative and
informative to the work conducted by the GCF.
The “Jurisdiction Subcommittee” of the Mexico forest work group set the following goals for itself in November
2010:31
3. REDD+ Strategy Development in Key Countries
building justification for the nested project approach in Mexico, and demonstrating carbon accounting
mechanisms of nested projects to jurisdictions. They will do this via defining options for: i) methods for
calculating sharing of benefits between projects and jurisdictions based on merits of accounting, ii) methods for
accounting for leakage at jurisdiction level and how the jurisdiction level estimated can inform project-level
accounting; iii) accounting and enforcement mechanisms for ensuring permanence and sharing of risks and
liabilities between projects and jurisdictions and iv) measurement, monitoring, and verification that can be
deployed at varying spatial scales that allow for truing up between project- and jurisdiction-level quantification.
Below we provide an overview of how REDD+ nesting issues and subnational activities are being dealt with in
the REDD+ readiness process of the following countries: Ecuador, Ethiopia, Colombia, Ghana, Indonesia, Mexico
and Peru.32
31http://www.climateactionreserve.org/wp-content/uploads/2011/01/Goals_of_Jurisdiction_Subcommittee_111110.pdf.
32 This analysis was conducted through a review of the main the issues related nesting and subnational activities as they appear to be
dealt with under the countries’ Readiness Preparation Proposals (R-PP) (where available). This information is complemented with
information provided during the workshop held in Miami on 16-17 March, 2011.
Ecuador
Ecuador is not part of the FCPF, and as such, has not submitted an R-PIN or R-PP. The country did, however,
recently join the UN-REDD Programme, and the validation meeting occurred in February 2011. In March 2011,
they presented their National Programme Document at the UN-REDD Programme Sixth Policy Board Meeting,
which proposes that by 2013, Ecuador will have completed the readiness stage for the implementation of the
REDD+ mechanism at the national level.
Nested Approaches to REDD+ | 33
While Ecuador is proposing a nested framework, little detail below the national-level is included in the National
Programme document. The National Joint Program (NJP), which supports the country in the preparation phase
of REDD+ implementation, sets out six expected outcomes: i) the design and implementation of a National
Forest Monitoring System (with a single system of national MRV); ii) national implementation of a REDD+
consultation process that involves civil society, indigenous communities, peoples and nationalities, Afro-
Ecuadorian and Montubio peoples and communes; iii) development of policies and instruments for the
implementation of REDD+; iv) development of the operational framework for the implementation of REDD+; v)
ensuring multiple environmental and social benefits; and vi) design and implementation of a benefit-sharing
system.
In addition, Ecuador is promoting activities that combine government-level action with private projects at the
subnational level. Under the Socio Bosque Program, an incentive-based policy that provides an economic
incentive to private land owners and communities who protect forested land, Ecuador plans to conserve 4
million hectares of forest over the next seven years. Current challenges identified by Ecuador in promoting
subnational action include designing and establishing a unified MRV system; harmonizing national and
subnational methodologies for baseline definition and carbon estimates; and defining the role of the private
sector and local governments in REDD+ project development.33
While Ethiopia does not explicitly mention a nesting approach to REDD+, some issues with a direct bearing on
subnational activities are mentioned in the country’s R-PP. For instance, Ethiopia is planning to follow a piloting
approach to strategy development by supporting existing or developing REDD+ pilot activities that address the
drivers of deforestation and degradation. The country also aims at developing a learning strategy to harness
lessons learnt from these pilots. There are already a number of REDD+ pilot projects in the country that are
found at various preparatory stages. In particular, in the Oromia State (which accounts for more than 70% of
the country’s forest cover), advanced REDD+ pilot projects will be used as “building-block” to develop a state-
level program.
Ethiopia
The latest version of Ethiopia’s R-PP was submitted on March 7th, 2011. The FCPF Participants Committee
subsequently assessed it on March 24th, and funding has already started to be disbursed.
34
In addition, Ethiopia’s R-PP states that a decision will be made on whether REDD+ baselines/reference levels
could be established either at the national accounting level and/or the subnational (including projects)
accounting level. The decision will consider implications on carbon leakage. Also, when discussing a future MRV
33 See “Ecuador: Towards REDD+ National Implementation: Technical & Policy Issues on Allocating Incentives and Credits”,
presentation delivered at International Workshop on Nested Approaches to REDD+, 16 March 2011. Available from:
http://www.forest-trends.org/~foresttr/documents/files/doc_2704.pdf.
34 See “Subnational REDD initiatives as building blocks for National REDD Programs”, presentation delivered at International
Workshop on Nested Approaches to REDD+, 16 March 2011. Available from: http://www.forest-
trends.org/~foresttr/documents/files/doc_2704.pdf.
34 | Nested Approaches to REDD+
system the R-PP again mentions that a forest carbon MRV program may operate at the national and/or
subnational level.
With respect to institutional arrangements, a specific organizational structure at different levels has been
established: the Federal-Level REDD Steering Committee (RSC), the Federal-Level REDD Working Group
(RTWG), the Topic Specific Focus Groups (TSFG), the regional-level RSC and RTWG and the REDD Secretariat.
The REDD readiness process is a cross-ministerial process currently chaired by the Environmental Protection
Authority (EPA).
Colombia
Colombia’s last formal submission to the FCPF was an R-PIN, selected in October of 2008. Currently, extensive
consultations with key stakeholders in REDD+ priority areas are close to consolidation, and an R-PP submission
is expected in June 2011.
Colombia clearly favors a subnational approach to REDD+. The country’s stated goal is “is to achieve a
subnational REDD approach where the Government will support the communities or organizations that want to
implement REDD activities in their territories.” Transactions would occur directly between the buyer and
projects proponents, and no fee or levy on credits are envisaged.
The R-PIN calls for the further enhancement of the National Forestry Development Plan (NFDP) of 1989, and
further stratification of forest ecosystems at the municipal, regional, and national scales. Specific activities
mentioned include i) the development of pilot projects with communities for natural forest management and
regeneration and ii) implementation of the National Strategies for Payment for Environmental Services. For the
purposes of REDD+ readiness, the country would seek capacity for project design and monitoring of carbon in
forests at a national and regional level. At a national level, this would be done through the Hydrology,
Meteorology and Environmental Studies Institute (IDEAM), and regionally through the Regional Autonomous
Corporations (CARs – regional environmental authorities, which are responsible for natural resource
management and regional monitoring).
The R-PIN calls for each project in the country to have specific “spatial, biological, and socioeconomic
information” to enable the country to develop an analysis on the local and regional context. Each community or
landowner should establish the causes of deforestation in their area of influence and develop sustainable forest
management plans (or alternative productive projects) to address them. The central and/or local government
may support the technical aspects of these proposals (e.g., remote imagery analysis, reference scenario setting,
MRV, etc). It also calls for the creation of a “national reference framework for deforestation” and a national
REDD strategy that allows for the creation of a MRV system. It is unclear whether MRV will only occur at the
national level, or also at the project level.
Ghana
The first draft of Ghana’s R-PP was submitted to the FCPF in December, 2009. After assessment by the FCPF, a
revised version of the R-PP was re-submitted in December 2010. Implementation of the R-PP is anticipated to
continue through until early 2012/2013. In addition to its participation in the FCPF Ghana is also a pilot country
of the Forest Investment Program (FIP).
Nested Approaches to REDD+ | 35
Many elements relevant to nesting and subnational activities can be distilled from Ghana’s R-PP. Ghana’s R-PP
stresses the importance of strengthening local decentralized management of natural resources through the
support of, inter alia, training in forest and resource management for district-level administrators as well as pilot
projects in decentralized environmental management and resource planning through national agencies.
The R-PP states that policies and institutional frameworks should be tested through targeted REDD+
demonstration and pilot activities. Private entities, communities, and other actors may be invited to submit
proposals for demonstration projects to the government. Demonstration actions will cover a wide range of
project and program designs to test targeted REDD+ policies. Learning from project approaches that fit into the
voluntary market can also be an important part of testing how policy and legal changes influence the ability to
create carbon reduction credits.
The Government of Ghana is also working with stakeholders in the country to formulate rules and procedures
applicable to projects that may yield carbon credits, including (potentially) government endorsement of
activities, carbon rights allocation, and project participation requirements.35
With respect to technical aspects, Ghana considers developing different reference scenarios for the following
zones: the high forest zone, the transitional zone, and the savannah zone. It is still, however, possible that one
reference scenario is established for all three forest zones, especially if monitoring costs prove to be significantly
lower with one reference scenario. A national working group or department within an existing national
institution will be set up with staff dedicated to the design and implementation of the MRV system. This body
will develop a monitoring framework for Ghana, and the monitoring system will be tested in several pilot
In that respect, the country’s R-PP
calls for national expert consultation on carbon rights to examine the potential allocation of carbon rights under
a future REDD+ mechanism and to define procedures for the transfer of REDD+ payment for forest managers.
Under a future REDD+ Implementation and Management System, a specific institution will need to authorize
project proponents to own and sell carbon credits. Entities that approve forest uses at the local level could play
a role in the permitting process for REDD+-related activities.
Currently, the National Climate Change Committee (NCCC), a multi-stakeholder committee under the auspices
of the Ministry of Environment, Science, and Technology, is developing national strategies on Climate Change
Mitigation and Adaptation for forestry, agriculture, and energy as part of the national climate change policy
development. At the ministerial level, a national REDD+ steering committee, a multi-stakeholder body, has been
established to advise the Ministry of Land and Natural Resources on REDD+ issues.
To ensure transparency, accountability, and equity in the implementation of mechanisms for REDD+, there are
plans to develop an information clearinghouse with the ability to track, publicly share, and hold accountable the
various actors involved in REDD+ implementation. A central management information depository and a central
carbon accounting registry will be designed and established for tracking carbon emissions and credit
monitoring.
35 See “Challenges and proposals for government approval of REDD+ projects – A conceptual view in the context of Ghana”,
presentation delivered at International Workshop on Nested Approaches to REDD+, 16 March 2011. Available from:
http://www.forest-trends.org/~foresttr/documents/files/doc_2704.pdf.
36 | Nested Approaches to REDD+
regions. The monitoring system will ultimately allow for national-scale, reportable at regional-scales, annual to
bi-annual reporting of GHG reductions achieved.
Indonesia
Indonesia’s R-PP was prepared by the Ministry of Forestry and submitted in May 2009. It was assessed by the
FCPF Participants Committee at PC4 in June 2009, and a Synthesis Review was issued by the FCPF Technical
Advisory Panel (TAP).
Indonesia’s R-PP refers explicitly to subnational implementation of a national approach, and the country is
currently considering financial transfer mechanisms operating at different scales. Two options are considered:
In option 1, transactions are carried out with the central government. In option 2, transactions would be carried
out with subnational governments or directly with project developers. Under option 2, redistribution of funds
could take place in three ways:
Following the government administration hierarchy (e.g., National > Provincial > District > Village);
Based on management of forest function (conservation, protection, production, or conversion forest)
(e.g., national forest authority > local forest management units);
Domestic, project-based with the nation as re-seller on the international market (e.g., national
authority > Project entities > local actors)
In deciding between the two options and sub-options, existing revenue-sharing legal frameworks will likely
inform ultimate decisions, and the advantages and disadvantages of these combinations are currently being
discussed. The form payments will take is also being discussed and a Climate Change Trust Fund is being
established, although the details on its management and distribution still need to be developed.
A significant number of demonstration and pilot projects have already been initiated by private and public
entities in Indonesia. As result, Indonesia’s R-PP calls for a comprehensive system of approval criteria and MRV
to be developed, in addition to a national registry (as per P.30/Menhut-II/2009).
Indonesia’s REDD+ strategy will cover multiple scales, including the national, provincial, and district. At the
national level, drivers of deforestation will be identified in addition to the establishment of a national reference
level and MRV system. At the provincial and district levels, reference levels and MRV systems will also be
developed, with demonstration activities planned at each level. Activities and payments will be tracked in a
national carbon registry, although it still needs to be decided how this would be linked to sub-national actions
and definitions of who would be entitled to sell emission reductions or receive payments, including ownership
and transfer of carbon rights.
With regard to technical issues, the sections of the R-PP dealing with reference scenarios and MRV both make
specific reference to subnational implementation. Under the regulation on REDD (30/Menhut-2/2009),
reference levels need to be established at the national and subnational (provincial and district) levels that are
consistent with each other. The establishment of a national reference level will serve as guidance for the
establishment of provincial and district reference level. Indonesia will consider a historical emissions approach,
a modelling approach, and a hybrid approach in choosing how to develop RELs.
Nested Approaches to REDD+ | 37
For MRV, the National Carbon Accounting System (NCAS) was established and provides tools to monitor all GHG
emissions from land-use/forest cover changes. It was designed to accommodate monitoring at both the
national and sub-national levels, using both remotely sensed and ground-based inventory approaches.
Mexico
Mexico’s most recent R-PP was submitted in February 2010 and was assessed by the participants committee in
March 2010. Mexico was asked to revise and resubmit the R-PP, and these revisions are currently in progress.
Mexico’s R-PP calls for the development of national carbon accounting system that allows for both national and
project-type REDD activities. It also calls for the development of a series of pilot demonstration projects in
different socio-ecological conditions and the creation of a national registry of project activities. It does not
however address crediting pathways or whether such projects will be credited directly.
The objective of the REDD strategy is described as a system that incorporates national accounting with local
implementation. The R-PP calls for Mexico to develop the necessary institutional, legal, and political frameworks
necessary to achieve this. The REDD strategy will be developed at three scales, i) national; ii) state; and iii)
project level (i.e., community, ejido, or private land owner). At the national-level, the R-PP calls for the
establishment of i) a national accounting system and bureau; ii) a REDD payment distribution system similar to
the Pro-Arbol model (an umbrella for 45 support programs administered by CONAFOR for conservation and
restoration of vegetation in arid and semi-arid regions of Mexico); iii) national reference emissions/removals
scenario; iv) a national MRV system; and v) a market at both community and national levels for forest products
and ecosystem services. At the state-level, regional RES and MRV will also be established, in addition to working
groups and pilot projects. At the project level, landowner-level land-use planning instruments will be developed.
Despite mentioning a “nested national, state, and local monitoring system with coordinated national, state, and
locally-based carbon inventories,” it is unclear what this will look like in practice. The R-PP calls for the
development of a projected national reference emission scenario based on spatial analysis of historic land-use
trends and impact analysis of land-use-related government programs. A set of criteria and indicators will be
developed in close consultation with the stakeholder groups, and a deforestation risk map will be generated,
based on an analysis of underlying and proximate drivers. A multi-scaled monitoring system will also be
established, based on remote sensing and ground-based permanent and temporary monitoring plots. The
system will follow the methodologies proposed in the GOFC-GOLD Sourcebook of methods and procedures for
monitoring and reporting GHG emissions and removals caused by deforestation, gains, and losses of carbon
stocks in forests, remaining forests, and forestation (GOFC-GOLD, 2009). This will include i) assessing changes in
land use over time (deforestation and forest degradation); ii) estimation of above-ground biomass stocks; and
iii) estimation of CO2 emissions from deforestation and forest degradation.
Peru
The current version of Peru’s R-PP, prepared by the Ministry of the Environment with input from the Ministry of
Agriculture, and the private and public sectors, was submitted on March 7, 2011. The most recent assessment
by the Participants Committee was scheduled to occur on March 24, 2011.
38 | Nested Approaches to REDD+
The R-PP explicitly calls for a three-tiered phased and nested approach. Initially, emission reductions would only
be reported for local-level initiatives, of which there are about 20 currently being carried out by private firms,
international NGOs, and the Peruvian government, utilizing methodologies approved under voluntary carbon
market standards, such as the VCS. As the system evolves, monitoring and reporting would encompass local-
and regional-level initiatives and would finally include the national-level. In this way, subnational initiatives may
be in phase 3 (performance-based incentives), while the national level efforts remain in either phase 1
(readiness) or phase 2 (implementation of policies and programs). Subnational (local and regional) initiatives,
including projects and programs, would be proposed and registered at the national level and undergo a process
of review and approval. Once subnational initiatives are registered in the REDD+ National Registry, project
developers would have the right to market the verified emission reductions that have been generated in their
respective areas. Also according to the R-PP, in the event that the UNFCCC process recognizes national emission
reductions only, “the State would provide priority access to international incentives for those initiatives that
have been registered.” In San Martin and Madre de Dios, “Regional REDD Roundtables” have been authorized
as consultative and technical agencies, and the model is being considered for replication in other regions in
Peru.
The stance adopted by Peru has been referred to as a “level’s approach to REDD+”, i.e., building up from the
local level to the national level. This approach allows Peru to appropriately reflect its national circumstances,
which is characterized by a process of decentralization and devolution of public powers from the national to
regional governments.36
In addition, Peru is proposing several initiatives that will contribute to MRV, including the establishment of the
National Data Generation System for the National Greenhouse Gas Inventory. Another initiative, titled
“Strengthening of Technical Capacities for the Implementation of a REDD Program in Peru” seeks to i) establish
an inter-institutional coordination and cooperation mechanism; ii) develop standardized methodological
In order to support REDD+, the national institutional arrangements for REDD+ are being re-organized. This
includes a (proposed) new Forestry and Wildlife Law and the creation of the National Forest Conservation
Program for the Mitigation of Climate Change. In addition, a forestry and REDD+ coordinating entity will be
created to ensure overall coordination among different government bodies.
With respect to technical issues, the R-PP states that “reference scenarios will first be established in regions
with greater technical capacity and data availability and will then be added until the national reference scenario
is completed.” Reference scenarios will initially only consider deforestation, while other components (especially
degradation) will be gradually included. Baselines will be “spatially and temporally specific forecasts . . . and will
be conducted using strict, internationally validated methodologies.” Forecasts will be reviewed at least every
ten years and will also serve as reference scenarios for early initiatives and future REDD+ programs in the
regions, so as to “ensure consistency between the local and regional levels.” Peru estimates that it will take at
least five years for it to define a national reference scenario, assuming that the relevant technical, analytical,
and financial capacities are developed in the regions.
36 See Ministerio del Ambiente, “Designing and implementing REDD+ in Peru – Peru in the forestry context”, presentation delivered at
International Workshop on Nested Approaches to REDD+, 16 March 2011. Available from: http://www.forest-
trends.org/~foresttr/documents/files/doc_2704.pdf.
Nested Approaches to REDD+ | 39
frameworks; and iii) establish a national MRV system. The R-PP stresses that a major challenge will be “to
ensure that the MRV generated at the national level is adequate for the different regional strategies,” since the
actions that each region implements for REDD+ will be different from one another and a strategy with unique
elements may require its own MRV.
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