Application of IFC Performance Standards in Forestry and
Implications for REDD
Dave GibsonInternational Finance Corporation
May 12, 2010
Guide
• Forestry & REDD Portfolio• Investment Decisions
IFC Performance Standards
• FSC evolution• Integrated standards
Use in Forest Sector
Investments
• Climate change interests• Limitations and future
Implications for REDD
3
Current Investments in the Forest Sector
• IFC Forest Product portfolio dominated by downstream industries
• 40% of projects in IDA countries
• One forest carbon (CDM) deal
• No tropical forest investment in the last 25 years
• Supported 350,000+ jobs
Portfolio of $1.13 billion…
…across 67 projects
Annu
al C
omm
itmen
ts
No. of projects 11 10 13 11 2 10
Standards Core to Appraisal & Supervision
PS 1: Assessment &Management Systems
PS 2: Labor & Working Conditions
PS 3: Pollution Prevention & Abatement
PS 4: Community Health, Safety & Security
PS 5: Land Acquisition & Resettlement
PS 6: Biodiversity & Natural Resource
PS 7: Indigenous Peoples
PS 8: Cultural Heritage
http://ifcnet.ifc.org/ifcint/cesweb.nsf/Content/EnvSocStandards
Project Cycle Performance Standards
Other Environment, Health & Safety Resources
• IFC General EHS Guidelines: Introduction • IFC EHS Guidelines for Board and Particle-Based Products• IFC EHS Guidelines for Forest Harvesting Operations• IFC EHS Guidelines for Plantation Crop Production• IFC EHS Guidelines: Pulp and Paper Mills• IFC EHS Guidelines: Sawmilling & Manufactured Wood Products• IFC EHS Guidelines: Water & Sanitation
www.ifc.org/ifcext/enviro.nsf/Content/EnvironmentalGuidelines
Common FPS Standards
Forest Product Value Chain Segments
AttributesLegal Origin VLO VLC FSC-CW Lacey Act FLEGT/EU DirectivesManagement FSC CertFlor CertFor PEFC FSC/CoC
Safety OHSAS 18001 OSHA BS 880P2/CP/EMS FSC ISO 14001 EMASSocial/Labor ILO SA 8000 ISO 26000
Community VLO FM CoC CoC FairTradeClimate/Carbon
VCS CCBA LEED FICAT
Product Safety
FSC E1 FF ISO
Quality ISO 9001 ASTM
Forest Mgt Harvest Transit Milling Product Retail
IFC and FSC AlignmentIFC Performance Standards (2006)
FSC
Prin
cipl
es &
Crit
eria
(rev
201
0)
1 2 3 4 5 6 7 8
1 XXX
2 XXX
3 XXX
4 XXX XXX
5 XX
6 XXX
7 XX XX
8 X
9 XXX
10 XX XX XX
Forest Carbon Experience
• Green Resources/Tanzania (CDM, R/A)• 20-30 REDD deals reviewed, 1st in progress• Regional Forestry Funds look hopefully for addressing REDD• Energy efficiency across product cycle easiest• Forest carbon lifecycle assessment (FICAT)• Surge in growth in biomass from waste• Advisory Services
– Indonesia – reclamation of degraded areas thru plantations– Brazilian Amazon – combined SFM, renewables, – Mozambique (?) - plantations
11
Competing Land Uses and Their Impact
Negative Carbon Impact
Fina
ncia
l Ret
urns
Positive Carbon Impact
Carbon impact: Huge Negative and affects all three forest types
Plantation Management
Sustainable Forest
Management
Preservation of Tropical
Forests
Conversion to
Agriculture
11
Transaction Costs Remain High
ForestCarbon
Project Developer
20-30%
CarbonRegistry
20-50%
StandardBody
1-5%
Certifying/ Accredit
Body
2-5%
Lenders
10-20%
+
+
++
+
Rational Valuation & DistortionsExternal
Verification
Management Plans & Systems
Carbon, Water, Recreation
Biodiversity & Cultural Services
Timber & Non Timber Products
Composite Forest Wealth (incl. Inventory, Maps, Roads, Protection etc.)
REDD Changes Relative ValuesExternal Verification
Management Plans & Systems
Carbon, Water, Recreation
Biodiversity & Cultural Services
Timber /NTFPs Composite Forest Wealth
(incl. Inventory,
Maps, Roads, Protection
etc.)
Mature Land Markets
Secure Rule of Law
Fore
st G
over
nanc
e Sponsors Com
mitm
entLeakage
Permanence
Additionality
Essential Ingredients
Forest Carbon Conclusions
• Standards key to vague business case• Forest management standards fundamental• REDD still dependent on other $ sources• Transaction costs high & value front loaded• REDD will flow to proven carbon markets• Standards and accreditation key now• Integration of standards obvious• Standards for plantations & peat vital
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