Figure 4.1Average Annual Forest Commitments400350Commitment ($ millions)300250200150100500IBRD/IDAinvestmentsIBRD/IDADPLsGEFfinancedOthertrust fundsFunding1992–2001 2002–08Source: IEG.Note: DPL = <strong>Development</strong> Policy Loan; GEF = Global Environment Facility; IBRD = International <strong>Bank</strong> for Reconstructionand <strong>Development</strong>; IDA = International <strong>Development</strong> Association.Costa Rica has led the way in the design and piloting <strong>of</strong>market-based instruments to enhance the provision <strong>of</strong> forestenvironmental services. <strong>The</strong> <strong>World</strong> <strong>Bank</strong> has been apartner in this effort since the mid-1990s. By the end <strong>of</strong>the second phase <strong>of</strong> <strong>Bank</strong> support for Costa Rica’s PES program,the country will have put in place some 288,000 hectares<strong>of</strong> land with environmental service contracts (equal toapproximately 5.6 percent <strong>of</strong> Costa Rica’s land area), half <strong>of</strong>which will be financed by funding from service users. <strong>The</strong>program showed that PES schemes could be accomplishedat relatively low administrative costs. A GEF-commissionedindependent review (Hartshorn, Ferraro and Spergel 2005)found that the program had achieved its output goals. Butit also found that the program had not set up a monitoringprogram adequate to determine impacts.<strong>The</strong> need for sustainable, long-term financing mechanismsis one <strong>of</strong> the main lessons that has emerged from the piloting<strong>of</strong> PES systems in Latin America. In Costa Rica, the bulk<strong>of</strong> funding for the PES program comes from an earmarkedfuel tax subject to political decision making; most <strong>of</strong> thepayments are for limited duration, leaving no incentivefor continued forest care. New financing mechanisms areneeded to increase the long-term sustainability <strong>of</strong> the program.For instance, the second phase <strong>of</strong> <strong>Bank</strong> support forthe PES program in Costa Rica involves a water tariff that isexpected to generate $5 million a year in support <strong>of</strong> watershedconservation.Specifying whom to pay, and how much, is a major challengefor these programs. <strong>The</strong> economic logic <strong>of</strong> the programs requiresrewarding landholders according to the services theyprovide. This runs into scientific and political difficulties.First, the services themselves may be poorly understood andmeasured. A strong folk belief holds that forests generate water,while in fact forests typically are net consumers <strong>of</strong> water.Second, cost-effectiveness would require targeting paymentstoward forestholders most likely to be dissuadedfrom deforestation, with payment levels tied to the expectedbenefits <strong>of</strong> conservation. This may conflict with notions <strong>of</strong>equity that favor uniform payment rates (as occurred inMexico and Costa Rica) and favors payments to ownerswho are not inclined to deforest. Third, there is pressure totarget PES payments to poor people, thus combining socialand environmental goals. However, poor people may ownrelatively little forest, and the transactions cost <strong>of</strong> dealingwith many smallholders is a barrier to including them.Targeting and price-setting are majorchallenges for PES programs.Econometric analyses <strong>of</strong> the early experience <strong>of</strong> the CostaRica and Mexico programs found that they were disproportionatelytargeted toward lands with little risk <strong>of</strong> deforestation.In the first four rounds <strong>of</strong> the Mexican program,52–72 percent <strong>of</strong> PES contracts were in forests in the bottomtwo quintiles <strong>of</strong> deforestation risk. However, 72–83 percentwere located in communities in the two highest quintiles <strong>of</strong>economic marginality (Muñoz-Piña and others 2008).However, one study (Alix-Garcia, Shapiro, and Sims 2010)found that the program may have reduced the probability<strong>of</strong> deforestation by about 10 percentage points. An analysis54 | Climate Change and the <strong>World</strong> <strong>Bank</strong> Group
for Costa Rica for the period 2000–05 found that only0.4 percent <strong>of</strong> targeted landholdings would have experienceddeforestation in the absence <strong>of</strong> the program; similarfindings were found for earlier periods (Sánchez-Az<strong>of</strong>eifaand others 2007; Pfaff and others 2009). Sills and others(2008) find that PES recipients did not reduce deforestation,but increased reforestation. 4 It is possible that the PESscheme worked at a political level rather than at the plotlevel, by reinforcing decisions to stiffen penalties for deforestationand to market Costa Rica as an ecological touristdestination. Costa Rica’s deforestation rate declined to verylow levels by the late 1990s.Early programs targeted lands with littlerisk <strong>of</strong> deforestation, but program designshave since improved.In both countries, ongoing <strong>World</strong> <strong>Bank</strong>–supported programsare contributing to better targeting. One lessonlearned has been the need to incorporate better up-frontdesign for monitoring and evaluation in PES programs toallow more timely and reliable impact analysis. <strong>The</strong> RegionalSilvopastoral Project (see box 4.2) is an exemplary use <strong>of</strong>experimental determination <strong>of</strong> the impact <strong>of</strong> alternativepayment schemes and agr<strong>of</strong>orestry approaches on carbon,biodiversity, and farm pr<strong>of</strong>its. 5Bio<strong>Carbon</strong> FundLaunched in 2004, the Bio<strong>Carbon</strong> Fund provides carbon financefor projects that sequester or conserve GHGs in forestsand agro- and other ecosystems. <strong>The</strong> Bio<strong>Carbon</strong> Fundis mostly oriented to forest projects creditable under theKyoto Protocol: afforestation and reforestation. But it alsopays for credits generated from reduced deforestation andfrom soil carbon, which are not recognized under Kyoto.It is thus a prototype <strong>of</strong> REDD and other post-Kyoto proposedsystems.<strong>The</strong> Bio<strong>Carbon</strong> Fund has helped catalyzethe forest carbon market.<strong>The</strong> Bio<strong>Carbon</strong> Fund has helped catalyze the forest carbonmarket by contributing to the development <strong>of</strong> 3 <strong>of</strong> the 12approved afforestation/reforestation methodologies. <strong>The</strong>Bio<strong>Carbon</strong> Fund accounts for 5 <strong>of</strong> the 13 forestry projectsregistered with the CDM to date.Box 4.2<strong>The</strong> Silvopastoral Project: A Successful Demonstration<strong>The</strong> GEF/IBRD Regional Integrated Silvopastoral Approaches to Ecosystem Management Project (2002–08)—implemented in Colombia, Costa Rica, and Nicaragua—was designed to test the effects <strong>of</strong> payment schemes onthe adoption <strong>of</strong> conservation practices on cattle farms. <strong>The</strong> project, the outcome <strong>of</strong> which IEG rated as highlysatisfactory, identified a range <strong>of</strong> technical approaches in each country and tested four main categories <strong>of</strong>silvopastoral systems: forest plantations with livestock grazing; live fencing, wind protection shields, biologicalcorridors, and shade for animals; managed succession within silvopastoral systems; and intensive systems for cattleand other animal species.<strong>The</strong> implementation <strong>of</strong> these systems resulted in a large body <strong>of</strong> learning, including 70 reports, refereed journalarticles, and books about how to induce farmers to adopt biodiversity-friendly, carbon-fixing land uses. In somecases, technical assistance and credit are sufficient. In other cases, short-term payments are needed to coverfarmers’ initial investment costs, but not thereafter. However, land use changes that represent an ongoingopportunity cost for farmers require mid- to long-term payments for the environmental services being produced;those services could include watershed protection or secondary forest recovery in degraded pastures.Different combinations <strong>of</strong> silvopastoral practices have proven to yield varying internal rates <strong>of</strong> return; economicanalysis conducted in Esparaza, Costa Rica, revealed rates from 14 percent for a system with natural pasture anda fodder bank to 37 percent for a system with improved pasture and low tree density. Based on the attractiveness<strong>of</strong> a system to an individual farmer, some farmers may be willing to adopt certain systems even in the absence <strong>of</strong>short-term PES incentives.Lines <strong>of</strong> credit for scaled-up silvopastoral system implementation are now being made available through CostaRica’s Cattle Ranchers Association, Nicaragua’s Local <strong>Development</strong> Fund, and the Ministry <strong>of</strong> Agriculture in Colombia.However, it is unlikely that most farmers will be able to afford the high initial costs <strong>of</strong> introducing a new land usesystem or that credit will be able to be tapped across all farm households across varying silvopastoral applications.Additional and recurrent finance will be especially needed to promote investments in silvopastoral systems thatgenerate a high level <strong>of</strong> public environmental services compared to a more attractive private rate <strong>of</strong> return.Source: IEG.Beyond Energy: <strong>Low</strong>-<strong>Carbon</strong> Paths in Cities and Forests | 55
- Page 1 and 2:
Phase II: The Challenge of Low-Carb
- Page 3 and 4:
CLIMATE CHANGE AND THE WORLD BANK G
- Page 5 and 6:
Table of ContentsAbbreviations . .
- Page 7 and 8:
Figures1.1 GHG Emissions by Sector
- Page 9 and 10:
AcknowledgmentsThe report was prepa
- Page 11 and 12:
Executive SummaryUnabated, climate
- Page 13 and 14:
esettlement plans has been ineffect
- Page 15 and 16:
of some technologies, such as landf
- Page 17 and 18:
Scale up high-impact investmentsEne
- Page 19 and 20:
should have been strengthened in th
- Page 21 and 22:
Major monitorable IEGrecommendation
- Page 23 and 24:
Major monitorable IEGrecommendation
- Page 25 and 26:
Chairman’s Summary: Committee onD
- Page 27 and 28:
most places. Before we get there, w
- Page 29 and 30:
non-Annex I countries. The World Ba
- Page 31 and 32:
attention. In a couple of decades,
- Page 33 and 34:
GlossaryAdditionalityBankabilityBas
- Page 35 and 36:
Joint ImplementationA mechanism und
- Page 37 and 38:
Chapter 1evALuAtiOn HiGHLiGHts• T
- Page 39 and 40: of interventions, from technical as
- Page 41 and 42: would allow industrialized countrie
- Page 43 and 44: growth, poverty reduction (includin
- Page 45 and 46: Table 1.1 Map of the EvaluationSect
- Page 47 and 48: Chapter 2eValuaTION HIGHlIGHTS• W
- Page 49 and 50: Table 2.2Evaluated World Bank Renew
- Page 51 and 52: Figure 2.2Breakdown of 2003-08 Low-
- Page 53 and 54: Table 2.4 Commitments to Grid-Conne
- Page 55 and 56: Box 2.1The Economics of Grid-Connec
- Page 57 and 58: on average (Iyadomi 2010). (Reducti
- Page 59 and 60: and industrial policy. An increasin
- Page 61 and 62: Table 2.6Hydropower Investments by
- Page 63 and 64: costs for remaining unelectrified a
- Page 65 and 66: World Bank experienceTwo factors ac
- Page 67: Box 2.5On-Grid and Off-Grid Renewab
- Page 70 and 71: Energy EfficiencyThe first phase in
- Page 72 and 73: Box 3.1ESCOs and Energy Performance
- Page 74 and 75: have had limited causal impact on t
- Page 76 and 77: measurement of achieved economic re
- Page 78 and 79: Since the early 1990s, public entit
- Page 80 and 81: part with a $198 million IDA credit
- Page 83 and 84: Chapter 4eVAluATioN HigHligHTS• B
- Page 85 and 86: The WBG urban transport portfolio (
- Page 87 and 88: y conventional transport systems, i
- Page 89: include the forest carbon projects
- Page 93 and 94: After 20 years of effort, systemati
- Page 95 and 96: orrowers have demonstrated the abil
- Page 97 and 98: Chapter 5EVALuATioN HigHLigHTS• O
- Page 99 and 100: Consequently, the efficiency with w
- Page 101 and 102: technologies could accelerate diffu
- Page 103 and 104: A second issue, inherent to any adv
- Page 105 and 106: goal of promoting wind turbine impr
- Page 107 and 108: ConclusionsThe WBG’s efforts to p
- Page 109 and 110: Table 5.1Carbon Funds at the World
- Page 111 and 112: demonstration initiative. The Commu
- Page 113 and 114: Impacts on technology transferThe 2
- Page 115 and 116: Chapter 6Photo by Martin Wright/Ash
- Page 117 and 118: Figure 6.1800Economic and Carbon Re
- Page 119 and 120: Specifically, the WBG could:• Pla
- Page 121 and 122: Table 6.1Summary of Sectoral Findin
- Page 123 and 124: Table 6.1Sector Intervention Direct
- Page 125 and 126: Appendix ARenewable Energy Tables a
- Page 127 and 128: Table A.4Grid-Based Biomass/Biogass
- Page 129 and 130: Table A.5 (continued)Negative examp
- Page 131 and 132: Figure A.4A. Hydro/biomass capacity
- Page 133 and 134: Appendix bWorld Bank Experience wit
- Page 135 and 136: Table C.2Completed Low-Carbon Energ
- Page 137 and 138: TAble C.4Reviewed energy efficiency
- Page 139 and 140: the new capacity. Transmission syst
- Page 141 and 142:
Table E.2Climate obligationsCoal Pl
- Page 143 and 144:
Table F.2GHG objectiveModeNumber of
- Page 145 and 146:
IEG eliminated a few cases of doubl
- Page 147 and 148:
Table H.1Project andlocationBioener
- Page 149 and 150:
Appendix ICarbon and Economic Retur
- Page 151 and 152:
Appendix JRecent WBG Developments i
- Page 153 and 154:
y providing value to standing fores
- Page 155 and 156:
never had an explicit corporate str
- Page 157 and 158:
overnight. The Bank can provide ass
- Page 159 and 160:
Chapter 51. From the chief economis
- Page 161 and 162:
Hartshorn, G., P. Ferraro, and B. S
- Page 163 and 164:
______. 2007. World Development Ind
- Page 165 and 166:
IEG PublicationsAnalyzing the Effec