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Figure 4.1Average Annual Forest Commitments400350Commitment ($ millions)300250200150100500IBRD/IDAinvestmentsIBRD/IDADPLsGEFfinancedOthertrust fundsFunding1992–2001 2002–08Source: IEG.Note: DPL = Development Policy Loan; GEF = Global Environment Facility; IBRD = International Bank for Reconstructionand Development; IDA = International Development Association.Costa Rica has led the way in the design and piloting ofmarket-based instruments to enhance the provision of forestenvironmental services. The World Bank has been apartner in this effort since the mid-1990s. By the end ofthe second phase of Bank support for Costa Rica’s PES program,the country will have put in place some 288,000 hectaresof land with environmental service contracts (equal toapproximately 5.6 percent of Costa Rica’s land area), half ofwhich will be financed by funding from service users. Theprogram 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.The need for sustainable, long-term financing mechanismsis one of the main lessons that has emerged from the pilotingof PES systems in Latin America. In Costa Rica, the bulkof funding for the PES program comes from an earmarkedfuel tax subject to political decision making; most of thepayments are for limited duration, leaving no incentivefor continued forest care. New financing mechanisms areneeded to increase the long-term sustainability of the program.For instance, the second phase of Bank support forthe PES program in Costa Rica involves a water tariff that isexpected to generate $5 million a year in support of watershedconservation.Specifying whom to pay, and how much, is a major challengefor these programs. The economic logic of 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 of water.Second, cost-effectiveness would require targeting paymentstoward forestholders most likely to be dissuadedfrom deforestation, with payment levels tied to the expectedbenefits of conservation. This may conflict with notions ofequity 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 of dealingwith many smallholders is a barrier to including them.Targeting and price-setting are majorchallenges for PES programs.Econometric analyses of the early experience of the CostaRica and Mexico programs found that they were disproportionatelytargeted toward lands with little risk of deforestation.In the first four rounds of the Mexican program,52–72 percent of PES contracts were in forests in the bottomtwo quintiles of deforestation risk. However, 72–83 percentwere located in communities in the two highest quintiles ofeconomic marginality (Muñoz-Piña and others 2008).However, one study (Alix-Garcia, Shapiro, and Sims 2010)found that the program may have reduced the probabilityof deforestation by about 10 percentage points. An analysis54 | Climate Change and the World Bank Group
for Costa Rica for the period 2000–05 found that only0.4 percent of targeted landholdings would have experienceddeforestation in the absence of the program; similarfindings were found for earlier periods (Sánchez-Azofeifaand 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 of deforestation, but program designshave since improved.In both countries, ongoing World Bank–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. The RegionalSilvopastoral Project (see box 4.2) is an exemplary use ofexperimental determination of the impact of alternativepayment schemes and agroforestry approaches on carbon,biodiversity, and farm profits. 5BioCarbon FundLaunched in 2004, the BioCarbon Fund provides carbon financefor projects that sequester or conserve GHGs in forestsand agro- and other ecosystems. The BioCarbon 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 of REDD and other post-Kyoto proposedsystems.The BioCarbon Fund has helped catalyzethe forest carbon market.The BioCarbon Fund has helped catalyze the forest carbonmarket by contributing to the development of 3 of the 12approved afforestation/reforestation methodologies. TheBioCarbon Fund accounts for 5 of the 13 forestry projectsregistered with the CDM to date.Box 4.2The Silvopastoral Project: A Successful DemonstrationThe 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 of payment schemes onthe adoption of conservation practices on cattle farms. The project, the outcome of which IEG rated as highlysatisfactory, identified a range of technical approaches in each country and tested four main categories ofsilvopastoral 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.The implementation of these systems resulted in a large body of 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 of silvopastoral practices have proven to yield varying internal rates of 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 attractivenessof a system to an individual farmer, some farmers may be willing to adopt certain systems even in the absence ofshort-term PES incentives.Lines of credit for scaled-up silvopastoral system implementation are now being made available through CostaRica’s Cattle Ranchers Association, Nicaragua’s Local Development Fund, and the Ministry of Agriculture in Colombia.However, it is unlikely that most farmers will be able to afford the high initial costs of 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 of public environmental services compared to a more attractive private rate of return.Source: IEG.Beyond Energy: Low-Carbon Paths in Cities and Forests | 55
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Phase II: The Challenge of Low-Carb
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CLIMATE CHANGE AND THE WORLD BANK G
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Table of ContentsAbbreviations . .
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Figures1.1 GHG Emissions by Sector
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AcknowledgmentsThe report was prepa
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Executive SummaryUnabated, climate
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esettlement plans has been ineffect
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of some technologies, such as landf
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Scale up high-impact investmentsEne
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should have been strengthened in th
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Major monitorable IEGrecommendation
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Major monitorable IEGrecommendation
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Chairman’s Summary: Committee onD
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most places. Before we get there, w
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non-Annex I countries. The World Ba
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attention. In a couple of decades,
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GlossaryAdditionalityBankabilityBas
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Joint ImplementationA mechanism und
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Chapter 1evALuAtiOn HiGHLiGHts• T
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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
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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
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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
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Page 95 and 96: orrowers have demonstrated the abil
Page 97 and 98: Chapter 5EVALuATioN HigHLigHTS• O
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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
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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
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Table E.2Climate obligationsCoal Pl
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Table F.2GHG objectiveModeNumber of
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IEG eliminated a few cases of doubl
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Table H.1Project andlocationBioener
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Appendix ICarbon and Economic Retur
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Appendix JRecent WBG Developments i
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y providing value to standing fores
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never had an explicit corporate str
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overnight. The Bank can provide ass
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Chapter 51. From the chief economis
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Hartshorn, G., P. Ferraro, and B. S
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______. 2007. World Development Ind
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IEG PublicationsAnalyzing the Effec
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