6 - WB (2018) - Nesting and BS Experiences

Approaches to REDD+ Nesting
Lessons Learned from Country Experiences
April 2018
Approaches to REDD+ Nesting
Lessons Learned from Country Experiences
April 2018 Donna Lee
Pablo Llopis
Rob Waterworth
Geoff Roberts
Tim Pearson
Table of Contents
Executive Summary 3
Abbreviations 4
1.1. What Is Nesting? 5
1. Introduction: The What and Why of Nesting 5

1.2. Why Nest? 6
1.3. Objective of the Paper 7
2. Providing Incentives through Design of a Nested System 8
2.1. Ex Ante Finance versus Ex Post Rewards 9

2.2. If Ex Post Rewards, Whether to Allocate Finance or ERs 10
2.3. National (or Subnational) Action versus Local Action 13
2.4. Whether ERs Can Be Generated by Smaller Units 15
2.5. Combining Multiple Incentives 17
3. Technical Challenges of Nesting 19
3.1. Data and Methodological Mismatches 19

3.2. Baseline Setting or Allocation 21
3.3. Avoidance of Double Counting 23
3.4. Using Proxies Rather Than GHG Metrics 28
3.5. Why Has Nesting Failed in Some Cases? 30
4. Lessons Learned 31
Lessons Learned from Country Experiences 1

2 Approaches to REDD+ Nesting
Executive Summary
Mitigation of greenhouse gases in the land sector is subnational) programs, is increasingly being promoted
complex and has a unique set of challenges. The most as a way to include the land sector in national
significant challenges arise from the geographically mitigation actions. Having a mix of jurisdictional and
diffuse nature of the emissions sources (compared local activities (including, but not always comprising,
to, for example, point-based energy sources of carbon projects), however, raises the question: How
emissions), the vast array of potential management can local and jurisdictional actions seeking to reduce
responses, the ongoing effects of past actions, the greenhouse gas (GHG) emissions be integrated
interaction of human and natural processes, and into a single system that supports both low-carbon
the strong influences of policy and markets. These development and the transformation that countries are
factors result in a large number and diversity of actors seeking, and that the Paris Agreement requires?
involved, temporal variability in emissions sources
and volumes, and higher uncertainty associated with The Forest Carbon Partnership Facility (FCPF) Carbon
the processes generating the emission reductions. Fund and the BioCarbon Fund Initiative for Sustainable
Because of this, achieving large-scale mitigation in the Forest Landscapes (ISFL) provide results-based
land sector requires collective action involving multiple finance at the jurisdictional scale. Many jurisdictions
stakeholders undertaking different activities. now in the pipeline for performance-based incentives
include ongoing local-level activities—in some cases,
The history of the United Nations Framework existing operational carbon projects—as well as
Convention on Climate Change (UNFCCC) policies and programs that contribute to emission
negotiations, and why countries agreed to only reductions. Lessons from emerging experiences to
encourage jurisdictional (national or subnational develop nested REDD+ approaches are in general not
as an interim measure) REDD+ efforts, is complex. well known or communicated, but they could provide
Regardless, many now support jurisdictional REDD+ useful information and ideas for countries that wish to
because of its potential to be transformational— stimulate local actions that contribute to overall national
through reforming broader governance, landscape (or subnational) performance.
management, and government policies. Jurisdictional
approaches also have the ability to access and This paper synthesizes several lessons learned in
integrate a range of financial streams, not just carbon efforts to develop systems that integrate incentive
finance, ostensibly achieving more sustainable mechanisms at multiple scales. It illustrates a number of
outcomes. Without such transformation, it is argued, we lessons through examples and the appendix presents
can’t trigger the scale of reductions needed to reach individual case studies from a variety of geographies—
global climate goals. Acre (state in Brazil), Australia, Brazil (Amazon), the
Democratic Republic of Congo (DRC), Guatemala, and
In sum, it could be said that REDD+ has Zambia. The hope is that the experiences of emerging
transformational ambition, but the challenge of “nested” systems can provide inspiration to countries
managing diffuse actions and providing incentives developing REDD+ systems, particularly those which
across a landscape remains. “Nesting,” or integrating seek to catalyze across a landscape local actions that
smaller-scale activities into larger national (or contribute to national mitigation.

Abbreviations
A/R afforestation/reforestation
AAU assigned amount unit
BNDES Brazilian Development Bank
DRC Democratic Republic of Congo
ER Emission Reduction unit
ER Program Emission Reductions Program (DRC)
ERF Emissions Reduction Fund (Australia)
ERPA emission reduction purchase agreement
FCPF Forest Carbon Partnership Facility
FREL forest reference emission level
FRL forest reference level
FullCAM Full Carbon Accounting Model (Australia)
GHG greenhouse gas
IFM improved forest management
JI joint implementation
JNR Jurisdictional and Nested REDD+
KP Kyoto Protocol
MRV measurement, reporting, and verification
NDC Nationally Determined Contribution
NGGI national greenhouse gas inventory
PMU Program Management Unit
REDD+ Reducing emissions from deforestation and forest degradation and the role of conservation,
sustainable management of forests and enhancement of forest carbon stocks
UNFCCC United Nations Framework Convention on Climate Change
VCS Verified Carbon Standard
VCU Verified Carbon Unit
WWC Wildlife Works Carbon (DRC)

1. Introduction: The What and Why of
Nesting
1.1. What Is Nesting? ●● Local level: Carbon projects may also develop
baselines, measure performance, and generate
The reduction of forest-related emissions involves the and sell carbon credits based on measured
implementation of a range of activities, at times with emission reductions.
overlapping objectives and spatial impact. Within a
region, multiple activities using different methods are In most countries, drivers of deforestation and forest
likely to be implemented by various actors (national degradation vary, requiring multiple types of activities
and international), in different and overlapping and the participation of multiple stakeholders, as
geographical locations and over different times. For illustrated in figure 1.1. Government policies will also
example, communities may be engaged in a clean have impacts across the entire landscape.
cookstove program while implementing new climate-
The term “nesting” originated from a desire to integrate
smart agricultural practices and protecting forests in
existing forest carbon projects into larger-scale
a conservation area. Other groups may be actively
REDD+ programs while allowing them to continue
involved in reforestation or restoration activities.
generating and trading carbon units. Before large-
The government may also implement broad-based
scale approaches were endorsed by the UNFCCC,
mitigation programs (such as land tenure reform),
enforce policies, or implement better land use planning many forest carbon projects had been created
that impacts forests across large landscapes, including and moved forward more quickly than international
through local-scale activities. The process is made processes. Most of these projects use reporting and
more complicated as policies, programs, and local accounting rules (including methods for calculating
actions, though implemented independently, can baselines and accounting for displacement), apply
impact each other—making it difficult to assess and environmental and social safeguards, and maintain
quantify their individual effectiveness. registries that are inconsistent with emerging national
systems. Many of them were developed independently
While REDD+ activities are implemented at multiple of national policy and systems, with carbon rights
scales, REDD+ (or forest GHG mitigation) results may typically moving offshore. As such, they can be
also be measured and accounted at multiple scales. considered legacy projects, although many are still in
There are benefits and challenges that arise when GHG active development.
performance is measured at various scales, and further
challenges arise when entities claim, sell, or trade in the This paper does not take the traditional view of nesting
resulting emission reductions. These may occur at the (which focuses on integrating legacy projects);
national, subnational, or local levels: rather, it considers a broader view—looking at how
actions at smaller scales can best be catalyzed to
●● National level: Under the Paris Agreement, contribute to larger-scale jurisdictional (national
countries must account for domestic achievement or subnational) performance. The concept has been
of a Nationally Determined Contribution (NDC), considered as part of land sector mitigation policy by
or “target” level of emissions (or removals), which some countries since the late 1990s, particularly by
is a type of claim to the generation of emission those with Kyoto Protocol commitments. Countries
reductions. In addition, Article 6 allows the trading that considered using the land sector within domestic
of such units to meet targets. systems considered how carbon units generated
●● Subnational level: A state or province may within such systems could be consistent with, and
create a baseline against which performance is represented in, the national accounts. In other
measured, and seek payment for results (with no cases, considerations were driven by participation in
carbon asset or credit generated) or generate mechanisms such as Joint Implementation. However,
carbon assets and sell them to willing buyers while multiple options were floated, only a few of these
anywhere in the world. domestic systems were developed—for example,

Figure 1.1: Options for the allocation of funds from the sale of ERs
Cookstoves
Climate-smart
agriculture
Protected area
in Australia and New Zealand. For these systems, There are many different forms and definitions of
projects form part of a national policy response (for nesting, each developed for specific policy purposes.
example, a domestic carbon trading or tax system) and While focusing on REDD+, many of the issues
are therefore more likely to be consistent with national described in this paper also apply to the broader land
accounting and contribute to targets. This approach is sector—an important consideration in light of the Paris
more likely to represent the future of REDD+ nesting— Agreement and countries’ efforts to meet their NDCs.
for example, Colombia is pursuing a system that uses
revenues from a carbon tax to provide incentives for 1.2. Why Nest?
local-scale projects.
Nesting requires considerable policy and technical
By taking this broad view of nesting, the paper support from both the private and public sectors. As
assumes that it can include the following: such, it is important to understand why a country may
consider nesting and the potential costs and benefits.
● Benefit-sharing approaches, where a large-scale The many reasons to consider nesting include but not
program (national or subnational) generates are limited to the following:
emission reductions and/or receives carbon (or
REDD+ results-based) finance, and shares it with Providing early and future benefits. Local-scale
smaller-scale units to incentivize local actions activities (including carbon projects) can stimulate
private investment, provide operational on-the-
● Systems that engage in carbon accounting at ground capacity often lacking in countries, and offer
multiple scales—for example, countries that have lessons (and results) that, ideally, can be replicated.
GHG commitments at higher scales (such as If the conditions are right, such activities/projects
Kyoto Protocol or Paris Agreement NDCs) or may can support and become critical building blocks for
be generating carbon units or receiving results- jurisdictional programs. Some have been able to
based finance at higher scales, but also allow access finance from the voluntary carbon market.
smaller-scale units to generate benefits tied to
GHG performance Creating a pathway for governments to implement
policies to reduce emissions, particularly in countries
● The incorporation of local-scale activities/projects where mitigation is expected to occur on private or
into jurisdictional REDD+ schemes as well as community-controlled land. For example, a government
subnational programs into national REDD+ may enact a policy that provides incentives to
schemes landholders or managers who operate at a smaller

scale than a national or subnational scheme, thus Projects designed to fit within national programs are
engaging multiple players to contribute to jurisdictional more likely (though not always) to use reporting and
performance and track the impact of such policies. accounting rules consistent with those used at the
In this regard, nesting can create a standardized national scale. This is an important distinction when
framework to test a variety of implementation options— considering nesting.
including incorporating suitable technologies and
approaches—and to integrate lessons from lower-level 1.3. Objective of the Paper
units to the jurisdictional level in a structured way.
Nested systems may also provide the opportunity The objective of this paper is to share a few lessons from
to engage private sector actors operating land use– nested systems. While there are many positive benefits
based supply chains in a jurisdictional REDD+ policy. to nesting, experience suggests that countries struggle
with development of nested systems. Very few have
Reducing the cost of mitigation actions. This can
been operationalized (with exception to a few developed
occur through domestic trading of Emission Reduction
countries, such as Australia and New Zealand),
units (ERs), including the transfer of carbon units and
although several REDD+ nested systems are now
flows of funds back to a group; international trading,
emerging. Section 2 explores four high-level “typologies”
including tracking of ERs and moving them from
that countries may consider when developing a
one country report to another; and the reduction of
nested system. Section 3 summarizes three key
measurement, reporting, and verification (MRV) and
technical challenges that countries face: alignment of
transaction costs. A nested system may also provide
measurement systems, reference levels, and double
potential purchasers of ERs with greater certainty,
increasing demand (and price) for such units. counting. Both sections illustrate options using real-world
examples from countries pioneering nested approaches
Improving national MRV systems. Projects can and explain why certain choices were made. The paper
support subnational and national estimates by concludes with thoughts on overall lessons learned,
generating additional data at more refined scales. recognizing that the journey is still young.
Box 1.1 The Starting Point for Countries: International Commitments

Prior to the development of the Warsaw Framework (which supported REDD+ accounting at national
or subnational scales only) and the Paris Agreement, developing countries did not need to worry
about nesting. Projects within their borders could generate carbon units that could be sold offshore to
companies or countries without concern about how such sales affected their overall country-level mitigation
performance. The Paris Agreement, in particular, changes this situation, as most developing countries now
have quantified NDCs. Such commitments fundamentally change the picture for developing countries.
Countries that have stated in their first NDC that they will achieve a certain target “unconditionally” may be
limited in their ability to transfer units internationally.
In this situation, where a portion of emission reductions by a country must be used for the national
achievement of an (unconditional) NDC, there may still be opportunities to access financing for remaining
emission reductions (figure B2.1.1). The rest of section 2 builds on this context.
Figure B2.1.1: Countries achievement of an NDC and remaining ERs
Country achievement of emission reductions at national scale
ERs used for achievement of

the (unconditional) NDC Remaining ERs

2. Providing Incentives through Design
of a Nested System
The design of a nested system should consider first ●● Whether to provide smaller-scale (nested) units
and foremost how best to catalyze actions and actors ex post rewards for past actions/performance
needed to reduce emissions (or enhance removals)— versus ex ante finance to generate emission
that is, how to provide the most effective incentives to reductions
a variety of actors across a landscape. A secondary
consideration may be the availability of finance for ●● If providing ex post rewards, whether to share
various scales, that is, the demand for jurisdictional emission reductions or finance
versus project-based carbon, and the extent and types
of finance the country aims to access. The choice of ●● What portion of the finance or emission
scenarios may also depend on where effort for data reductions achieved at the higher level should be
collection and management will reside, how a system used to catalyze local actions (versus kept at the
can manage mismatches and non-delivery risks, and national or subnational level)
which potential projects (or smaller units) may participate
in a nested system. In sum, no one method of nesting ●● Whether to allow smaller-scale units the ability to
suits all circumstances. The exact methods will depend generate ERs separately, that is, not as part of a
on the political, legal, and market requirements of each top-down allocation scheme.
country. Despite this, a number of high-level decisions
will likely be common across multiple countries. In the sections that follow, each of the above points is
explained in greater detail and examples illustrate each
We have identified four fundamental decisions that of the options and the motivations behind why such
emerging nested systems appear to make: options were chosen.
Figure 2.1: Options for the allocation of funds from the sale of ERs

Country sells ERs
Allocation of funds
Two basic models:
Use of funds to achieve future Use of funds to reward past

reductions at subnational/project reductions at subnational/project
scale by providing ex-ante finance scale by providing ex-post rewards
to local actors in the form of finance

2.1. Ex Ante Finance versus Ex Post associated with the carbon finance received and
being allocated. There are a number of possibilities
Rewards for use of the funds (including noncarbon-related
uses). However, most schemes funded by donor
Countries may wish to consider what is the best way
governments (for example, the Green Climate Fund,
to generate action on the ground—either by providing
FCPF, bilateral agreements) have requirements for the
ex ante finance to local actors to achieve certain
“use of proceeds”—often they must support further
outcomes, or by rewarding ex post performance
progress on reducing forest-related emissions or
by local actors. In the first instance, carbon finance support low-carbon development strategies.
may be received at the higher level (national or
subnational) linked to emission reductions (or carbon In contrast, performance achieved at the higher
stock enhancement) performance, but how such funds scale can be used to reward past performance,
are then allocated are delinked from local performance thus incentivizing actors on the ground to engage
(carbon or otherwise). In other words, funds may be in activities that, ideally, help to generate emission
used to carry out activities that contribute to reducing reductions. This option—allocating funds (or emission
emissions (or increasing removals) in the future, reductions) through ex post performance metrics—is
but they are not tied to the (past) GHG reductions covered in section 2.2.
SUMMARY
Ex ante finance Ex post finance

Use of funds to incentivize actors by
Use of funds to generate additional (future)
DESCRIPTION providing rewards for (past) results-based
activities to sustain mitigation performance.
performance.
Simple: This option is the simplest from a Stronger incentives: Certain types
technical perspective. There are no concerns, of stakeholders may respond well to
for example, with double counting or aligning performance metrics (e.g., the private
multiple MRV systems. sector).
BENEFITS Flexible: A country can decide how to spend Catalyzes private investment: Because a
the funds in a variety of ways (including to potential return on investment can engage
achieve non-carbon benefits). This may also private finance, this option may be useful for
include using funding to leverage private governments with insufficient resources or
investments. that do not have strong fiscal levers.
Requires up-front investment: This finance Risk of non-performance: In some

will likely need to come from the government cases, the allocation of finance or emission
unless development assistance may be used reductions will only be as high as the
(without concerns of “double payment”). jurisdictional performance. In such cases,
there are risks to either subnational units,
Weaker incentives: Because it does not or the private sector and local actors, who
reward performance, it may be said to have engage in programs or projects that are
CHALLENGES weaker incentives; as such, it will be difficult to nested within the higher-level envelope—in
engage some private sector actors. particular, if a local project performs well,
but the jurisdiction does not perform equally
Allocation inefficiency: A key challenge is well, depending on the approach to nesting,
how to determine an equitable allocation of the financial rewards are limited. The risk of
the funds, and if funds are intended to further non-performance will need to be borne by
mitigation, how to ensure funds are used for the jurisdiction or projects—and in the latter
higher value efforts. case, will dampen local investments.

Figure 2.1 illustrates the two options available in the 2.2. If Ex Post Rewards, Whether to
case where a country achieves emission reductions at
a higher scale and then monetizes them. It can allocate Allocate Finance or ERs
funds to either: (a) provide ex ante (grant) finance Countries may wish to provide ex post rewards to
to achieve future emission reductions, or (b) reward smaller-scale units as a catalyst for implementing
actors that contributed to the emission reductions. Two
activities that contribute to larger-scale performance.
examples are provided of countries that chose to use
performance-based finance to provide ex ante grants These rewards may take two different forms: finance
to local actors: Brazil (box 2.2) and Guyana (box 2.3). or emission reduction units. In other words, countries
Examples of ex post rewards are provided in section 2.2. that generate emission reductions at the national or
Box 2.2 Brazil

Prior to the completion of the Warsaw Framework, Brazil set up the Amazon Fund to receive payments
for reduced emissions from deforestation in the Amazon region. The national government provides the
measurement and monitoring system that covers the entire Amazon biome, and BNDES (the Brazilian
Development Bank) manages “donations” to the fund. To date, Norway, Germany, and Petrobras (a Brazilian
petroleum company) have made donations, totaling more than US$1 billion. The distribution of these funds
is not related to past emission reductions. Instead, the funds are used to finance project activities intended
to further reduce deforestation. BNDES set criteria for the types of activities it wants to fund and then
invited organizations to apply for funding based on the criteria. Entities may propose a project in any of the
predetermined areas (see figure B2.2.1) and request support from the Amazon Fund. See the appendix for
more information on the original design of the Amazon Fund.
Figure B2.2.1 The Amazon Fund
DONORS Donots pay for There is no linkage between ex post performancethat

performance catalizes donor finance and the allocation to projects
that follows.
Positive
performance The Amazon fund supports projects in the following
of Amazon Amazon Fund areas:
region AMAZON FUND provides grants to
projects • Management of public forests and protected areas
Brazil
• Environmental control, monitoring and inspection
• Management of susuatinable forests
Amazon • Economic activities developed through sustainable
use of the forest
PROJECT PROJECT PROJECT • Ecological and economic zoning, land use planning
and land title regularization
• Conservation and the sustainable use of biodiversity
• Recovery of deforested areas
Box 2.3 Guyana

The Guyana REDD Investment Fund (GRIF) was developed along the same lines as Brazil’s Amazon
Fund, with the difference that finance is used to fund its low-carbon strategy more generally, not just for
forest-related investments. Norway has provided US$250 million in results-based finance, which has been
used to fund investments in low-carbon sectors, including a large hydropower project, grants and loans
to a variety of micro and small enterprises (from farming to various artisans), economic development in
indigenous communities, and also adaptation projects, such as reducing Guyana’s vulnerability to floods.
The World Bank has served as trustee of the fund.

Figure 2.2: Options to allocate ERs or funds

Country sells ERs

Allocation of ERs
Allocation of funds
Use of ERs to reward Use of finance to reward Use of finance to provide

past performance past performance ex-ante grants
Ex post rewards Ex ante finance
subnational scale may consider whether to: (a) issue, allocating a share of issued ERs (at the jurisdictional
sell, and monetize ERs, and then share that finance level) to local actors, or (b) allowing local actors to
with local actors; or (b) allocate ERs (figure 2.2). If a issue (for performance achieved at the local scale) a
country decides to fully monetize ERs from performance prescribed number of ERs themselves. In most cases,
achieved at the higher scale, there will likely not be ER a government will likely want to ensure that the total
generation at smaller scales (to avoid double counting). number of ERs issued (at local scales) is at, or below,
This is an instance where the jurisdiction is in full control the total number of ERs verified at the highest (for
of ERs generated and uses the subsequent finance example, national) scale.
received as part of a benefit-sharing system.
Boxes 2.4 and 2.5 illustrate two examples where a
If a country decides to share a portion of the ERs country has chosen to allocate finance or ERs as ex
with local actors, it may do so through two means: (a) post rewards.
Box 2.4 Brazil

In 2017, the Brazilian government decided to switch the incentive system for the Amazon from an ex ante
grant system for use of funds received for Amazon-wide performance (as explained in box 2.2) to an ex post
reward-based system. In July 2017, CONAREDD+ (the governmental body responsible for coordinating
and monitoring the implementation of Brazil’s National REDD+ Strategy) issued a resolution that outlines a
new allocation structure that provides incentives to the nine states of the Amazon region to achieve positive
performance. The government allocates a certain percentage of the ERs achieved at the Amazon-wide
scale to each state based on performance. Each state may then use their assigned ERs to collect payments
for results. This approach allows the states to access different potential sources of funding; for example,
Germany’s REDD Early Movers program is providing results-based payments to the states of Acre and Mato
Grosso.

Box 2.5 Democratic Republic of Congo
The DRC’s Mai Ndombe Emission Reductions (ER) Program has defined a benefit-sharing plan that
combines allocation of both finance and ERs.* The FCPF Carbon Fund intends to purchase some, but not
all, of the ERs achieved by Mai Ndombe Province. A portion of the funds received will be allocated to local-
scale activities, both ex ante grant finance to some and performance-based rewards to projects that have
demonstrated a contribution to the success of the overall jurisdictional program performance. Performance-
based payments are included to engage and incentivize, in particular, private sector players to contribute
to the overall performance of the jurisdiction. In the DRC, providing such incentives to nongovernment
actors will be critical given the limited operational capacity of the government. The structure of the benefit-
sharing plan is influenced by a “legacy” project and the potential for further private sector participation (for
example, timber concessions), and also community-driven projects.
Projects are capped with regard to how much they may receive from the Carbon Fund payments. This is
due to the risk that projects may perform extremely well compared to the overall jurisdictional (province-
wide) performance, and thus claim a high percentage of payments from the Carbon Fund. For this reason,
the remaining ERs not purchased by the Carbon Fund will go into a pool of in-kind ERs that can be
provided to individual projects (which may then monetize them) for performance achieved beyond that
rewarded by the Carbon Fund (for example, due to the imposed cap).
*The DRC case study is based on an advanced draft benefit-sharing plan developed by the country in consultation with ER
Program stakeholders. The negotiations between DRC and the FCPF Carbon Fund regarding an ERPA are ongoing; it is not
clear at this stage if the provisions (which are analyzed in this paper) will be accepted by donors for contract signature.
SUMMARY
Allocate finance Allocate ERs
ERs generated at the higher scale are either

ERs generated at the higher scale (national issued and allocated to smaller-scale units
DESCRIPTION or subnational) are sold and monetized, (subnational or project) or such units are
and the finance shared with local actors. allowed to issue ERs, but within a prescribed
envelope (of jurisdictional performance).
• Access to national (or subnational) • Management and administration of

results-based finance, which currently “distributed action.”
exceeds project-based finance and • May diversify access to finance, opening
provides higher bargaining power opportunities for subnational or project-
BENEFITS through negotiation at the national level; based finance for emission reductions (e.g.,
enables planning through the signing voluntary carbon markets); externalizes part
of a forward contract (e.g., an emission of the administrative cost to the smaller units
reduction purchase agreement or ERPA). (e.g., project developers would bear the cost
• Centralized financial accounting. of selling the units).
• Technical challenges related to allocation of

• Projects may not have an incentive to
ERs, that is, the need to develop technical
operate at their optimum.
approaches to monitor, report, and verify
CHALLENGES • The cost to administer allocation of GHG emission reductions at different levels.
financial resources may result in lower
• Imbalances in performance between private
amounts for actors generating GHG
and public initiatives can jeopardize the
emission reductions.
stability of the jurisdictional program.

2.3. National (or Subnational) Action at the jurisdictional (higher-level) scale. A government
may also wish to retain funding to cover the operational
versus Local Action costs of managing an ER program. In other cases, a
Another decision a government may take is related to government may wish to use a higher percentage of
the allocation of finance or ERs for catalyzing local (sub finance/ERs generated to spur local action—due to a
national or project) activity (figure 2.3). In some cases, the preponderance of private lands, a lack of government
national (or federal) government implements a variety of capacity to operate at local scales, or other reasons.
policies and programs that contribute to emission reduc
tions—and, in this instance, the government may argue Boxes 2.6 and 2.7 provide examples of allocating a
that it should receive a portion of the finance generated portion of finance for national versus local action.
Figure 2.3: Allocation of finance or ERs between a jurisdiction and smaller scale units

Country sells ERs

Allocation of ERs
Allocation of funds
Use of ERs to reward Use of finance to reward Use of finance to provide

past performance past performance ex-ante grants
% of $ to % of $ to % of $ to % of $ to % of ERs to % of ERs
higher level smaller higher level smaller higher level to smaller
jurisdiction scale units jurisdiction scale units jurisdiction scale units
Box 2.6 Brazil Figure B2.6.1 New Amazon

Incentive Structure
As mentioned in box 2.4, the Brazil Amazon incentive structure is
AMAZON
shifting to provide a different set of incentives. Under the new structure,
the federal government will receive 40 percent of the funds (figure Various source of carbon finance
B2.6.1). According to the resolution that sets up the new structure,
the federal government is allocated 40 percent of the emission
reductions justified by the efforts it makes at the national level to reduce Brazilian government sets limitations on
payments for emission reductions received by
emissions from deforestation, including conservation of native forest the federal government and states
in conservation units and indigenous lands. Currently, the portion
received by the government is being used to capitalize and continue
the operations of the Amazon Fund. The remaining 60 percent of the Federal Amazon States
emission reductions are allocated to the nine states that comprise the government (60%)
legal Amazon based on performance metrics (see the appendix or (40%)
sections 2.2 and 3.2 for further information on the new Amazon system).

Box 2.7 Democratic Republic of Congo Figure B2.7.1 Mai Ndombe Benefit-Sharing Plan
Under the DRC’s benefit-sharing plan for Mai MAI NDOMBE

Ndombe, the government will reserve a portion of Mai Ndombe province generates and issues ERs for
the funds received from sale of ERs to the FCPF jurisdictional performance
Carbon Fund to pay for “fixed (operational) costs” of
administering the Emissions Reduction (ER) Program.
This includes support for a Program Management
Unit (PMU) that assists the provincial government Carbon Fund ERPA In-Kind ERs
in managing the ER Program, including monitoring (purchase of X% of ERs (remaining Y% of ERs
and reporting, coordination with subprojects, achieved) achieved)
capacity building, assistance to the private sector
and communities, the sale of ERs, and monitoring of
safeguards. It also includes institutional support for
the provincial government. Such allocation is part of Payments to stakeholders or
Costs to administer
the “Category 1” payouts, that is, it has senior rights the program programs designed to benefit
to ERPA payments. This smaller portion of funds (for stakeholders
example, compared to the Amazon) is made possible,
in part, because the DRC is supported by programs CAFI support to
province
under the Central African Forest Initiative (CAFI).
SUMMARY
Sharing finance or ERs between the national (or subnational) government and local actors is a continuum from 0
percent to 100 percent; deciding the best proportional split will depend on needs and an assessment of the costs
and benefits of national versus local allocation as well as other available financial sources.
Finance or ERs to the higher-scale entity Finance or ERs to local actors
The share of finance/ERs distributed to the The share of finance/ERs distributed to local
DESCRIPTION national or subnational government for its actors (e.g., for their contributions to overall
contribution to performance. performance of the jurisdiction).
• The interventions are designed taking into

account the local context.
• National allocation incentivizes the
alignment of decision-making processes in • Subnational governments and projects have
the jurisdictional program. an incentive to perform at their optimum.
BENEFITS • There is no negotiation process with local • The upward feedback process is simpler.
entities. • Provides direct reward for performance,
• Increases national commitment to encouraging private sector engagement
achievement of REDD+. in REDD+ in the country and achieving
the efficient and cost-effective emission
reductions.
• The process of negotiation for the attribution
• Decision power is centralized and lobby
of funding to each local unit is much more
activities are easier, which can detract from
complex and can jeopardize the overall
CHALLENGES optimal jurisdictional performance.
operation of the jurisdictional system.
• The incentive for local entities to perform at
• Monitoring of financial flows is complex and
their optimum is lower.
may be subject to corruption, if it exists.

2.4. Whether ERs Can Be Generated by applicable in the situation where ERs are not dependent
on the higher jurisdiction succeeding in its emission
Smaller Units reduction aims. For example, systems such as that
In some instances, a country may wish to allow smaller- emerging in Colombia, or operating in Australia, where
scale units to generate emission reductions separately finances to reward projects are derived from carbon
from the higher-scale jurisdictional program (figure taxes or alternative government revenue, are not
2.4). Countries may use such carbon credit generation dependent on national emission reduction reporting.
as a policy or incentive mechanism to reward domestic
actors (for example, landholders; see box 2.8 for one Alternatively, instilling sufficient technical requirements
such example). It is anticipated that REDD+ countries on projects for baselines, or reference levels, and
(for example, Colombia) will develop internal carbon monitoring can minimize the risk to governments
project systems where finances, including carbon of overpaying for emission reductions. In Australia,
taxes, fund domestic projects that reduce national for example, the projects align closely with the
greenhouse gas emissions but do not generate carbon national inventory, while an auction system ensures
credits that can be traded internationally. the government receives the best cost emission
reductions. However, it is worth noting that to date only
Developing such systems may provide the highest developed countries have created such systems.
possible incentives to local actors, but these systems
also create risks that must be managed. These risks Finally, there are increased challenges where
include the potential for the higher-scale jurisdictional projects issue and trade emission reduction units
program to overcompensate emission reductions at internationally. If project proponents are allowed
smaller scales, or for the lower-scale jurisdiction or to generate, issue, and sell credits internationally, a
project to be inadequately compensated for achieved country must set up systems to avoid double counting
emission reductions due to failures at the higher level. (or “double claiming”), if it wishes to use the emission
It is possible to mitigate such risks through design of reduction for its NDC or Kyoto Protocol commitment.
the system. The risk of projects not receiving payments See section 3.3 for further discussion on double
due to the failure of the higher-level jurisdiction is not counting.
Figure 2.4: Illustration of stand-alone projects
Separately issued and ERs used for achievement of

traded ERs may need the (unconditional) NDC Remaining ERs
to be debited from
national registry
FINANCE
(e.g. from carbon taxes,
government budget)
Projects issue Domestic system

ERs and engage in that rewards projects
international trading
STAND ALONE PROJECTS

Box 2.8: Illustration of Australia’s Emission Reduction Fund
As a policy tool to support achievement of its international commitments, Australia allows landowners the
opportunity to generate Australian Carbon Credit Units and, through this, generate finance through the
sale of such units to the government’s Emissions Reduction Fund (ERF). Such projects feed into the overall
national performance and help Australia meet its Kyoto Protocol (KP) commitment (although not directly)
(figure B2.8.1). However, the national government takes the risk of overpaying for emission reductions by
projects (that is, if the aggregated, measured, and rewarded project performance is lower than the project’s
contribution to national performance, as measured by the national system). To reduce such mismatch, the
government imposes certain MRV requirements on projects.
Figure B2.8.1: Illustration of Australia’s Emission Reduction Fund
Australian government: KP target and NDC There may be mismatches

between what is paid to a
project under the ERF and
what is accounted by the
Projects government to achieve its
contribute Emission Reduction Fund KP target or NDC
to national
achievement of
commitments
MRV requirements
for projects to align
accounting, to the extent
Forest carbon Forest carbon Forest carbon possible, with the national
project project project system
SUMMARY
ERs generated by smaller-scale units separately from the jurisdictional program
The case where projects generate carbon units separate from the higher-scale, jurisdictional
DESCRIPTION
program
• Provides stronger incentives for local actors to perform.

• Catalyzes the investment of the private sector, which would be likely absent in the business-
as-usual scenario.
BENEFITS
• Research and development activities can be tested for their implementation in the
jurisdictional program, minimizing the necessary investment and creating incentives for the
private sector, and without any impact on the jurisdictional performance.
• MRV mismatch: Allowing projects to generate their own ERs may require development of MRV
rules and systems to minimize mismatch at different scales and for some entity to take on the
liabilities for mismatches.
CHALLENGES • Double counting: Where projects are allowed to sell carbon units internationally, systems are
needed to avoid counting the same unit twice within the same context (e.g., Paris Agreement).
• Special care needs to be taken to separate emission reduction certificates created by the
smaller units, that is, registry procedures need to be reliable.

2.5. Combining Multiple Incentives a nested system, or to provide finance for government
programs, while reserving a percentage of carbon
Allocation systems may also be designed to combine finance or ERs to distribute to various stakeholders (for
the concepts above. Doing so may be more complex, example, projects) based on performance metrics.
but it allows the flexibility to provide different types of
benefits and incentives to stakeholders. For example, Figure 2.5 illustrates the sum of all the options
the private sector responds well to performance-based described in sections 2.1 through 2.4. In box 2.9, we
metrics, whereas some government policies may be describe the DRC’s Mai Ndombe benefit-sharing plan,
more difficult to measure in quantitative terms and/or a system that combines multiple incentives. As can be
correlate strongly with carbon performance. A country seen, providing different types of incentives (ex ante
may decide to allocate a predetermined amount of finance and ex post rewards) is complex, but it allows
funding to the government to cover operating costs of the most appropriate incentives for different actors.
Figure 2.5: Illustration of key decisions in the design of nested systems
Flow of ERs
“Nested”
Flow of finance
activities
feed
back or
ERs used for achievement of Remaining ERs contribute,
the (unconditional) NDC to national
emission
reductions
Allocation of ERs Country sells ERs

Separately issued
and traded ERs may
need to be debited
from national
Allocation of funds
registry
Use of ERs to Use of finance Use of finance to

reward past to reward past provide ex-ante
performance performance grants
FINANCE
(e.g. from carbon
taxes, government
budget)
% of $ to % of $ to % of $ to % of $ to % of ERs to % of
Projects issue Domestic higher level smaller smaller
higher level higher level ERs to
ERs and engage system jurisdiction scale scale
jurisdiction jurisdiction smaller
in international that rewards units units scale
trading projects
units
STAND ALONE
PROJECTS

The DRC’s Mai Ndombe benefit-sharing plan is an example of a system that combines multiple incentives.
The plan defines two categories of “payouts” for funds received from performance at the highest level.
Category 1 has “senior rights” to ERPA payments, after which Category 2 payments are made. The Carbon
Fund will purchase some portion of the ERs generated, and finance from the sale will be allocated to both
Category 1 and 2 stakeholders. Additional ERs not purchased by the Carbon Fund may also be distributed,
including to projects that perform well but whose finance from the Carbon Fund ERPA is capped (figure
B2.9.1). In this regard, the plan includes the following:
●● Ex ante payments to indigenous peoples and local communities through two mechanisms: 2 percent
of the proceeds, respectively, under Category 1 payments and a dedicated finance window for new
community projects, as described in section 2.1
●● Ex post rewards, including finance and possibly also ERs, to private sector and possibly also
community projects, as described in section 2.2
●● The provincial government, as described in section 2.3
Figure B2.9.1 Mai Ndombe Benefit-Sharing Plan
Mai Ndombe province generates and issues ERs for jurisdictional performance
Carbon Fund ERPA (purchase of X% of ERs achieved) In-Kind ERs (remaining Y% of ERs achieved)
Possible
distribution of ERs
Allocation of funds to projects
Category 1 payments (senior rights) Category 2 payments
Fixed costs Variable costs Finance window Ex-post performance based

• Provincial govt • Indigenous peoples to support new • REDD+ projects
• PMU • Local Communities community projects • Timber concessions

3. Technical Challenges of Nesting
Different design pathways will result in different technical on REDD+, would be needed in order for jurisdictional
challenges or demands. Systems developed purely for REDD+ schemes to implement nested systems toward
the purposes of meeting UNFCCC requirements will the far right of figure 3.1. Such systems require MRV
likely be unable to support nesting (or other reporting systems that go beyond those designed only for
requirements) efficiently and will lead to inconsistencies. reporting to the UNFCCC, aligned baseline setting,
It is critical that countries looking to nest projects, be and means to avoid double counting. In addition,
they legacy or future projects, consider this fact in such systems must assign responsibilities for non-
the initial design of a national system. Where it is not performance and liabilities for mismatches that will occur
considered, there are likely to be more challenging between the different system levels, as well as manage
problems with alignment and double counting. potential non-permanence and force majeure events.
Allowing stand-alone projects, where carbon This section of the paper describes several of these
performance is measured and accounted at multiple challenges and gives examples of how different
levels in parallel, is the most challenging. When nested systems have tackled each issue—noting that
smaller units within the jurisdiction are generating resolving the technical challenges for, in particular,
and issuing carbon credits and/or directly receiving avoided deforestation—are still in the early stages.
payment for results, this situation may require aligned
Two of the examples (Acre, Guatemala) illustrate as yet
MRV systems. By contrast, nesting structures that focus
unsuccessful nested systems—and explain why this
on allocating finance or ERs generated at the higher
has been the case.
scale (that is, through benefit-sharing plans) are less
challenging, and they may range from simple systems
(for example, use of funds to provide ex ante finance to
3.1. Data and Methodological
projects) to more difficult systems (distribution of ERs Mismatches
based on ex post GHG performance). These variations
There are differences in the data used by the national
are illustrated in figure 3.1.
governments compared to forest carbon projects (table
A number of additional technical and governance 3.1). Such differences are typically more significant
elements, well beyond those required by COP decisions with legacy projects. Most national governments
Figure 3.1: Nested systems vary regarding the level of required MRV alignment
NESTED SYSTEMS
Allocating Allocating Allocating Allocating ERs Stand-alone Stand-alone
finance, finance, finance, based on GHG projects with projects with
ex-ante grants ex-post rewards ex-post rewards performance own MRV in own MRV and
using proxy based on GHG domestic only trading ERs
measures performance systems
Requires aligned MRV
EXAMPLES
Amazon Fund Mai Ndombe ER Program Australian ERF
(original)
Amazon (new)
GRIF

Table 3.1: Differences between national and project scale GHG estimates
National Project
• Uses (medium resolution) Landsat to measure • May use higher resolution imagery to measure
forest cover change forest cover change
• Carbon stock estimates from national forest • Often collects and uses own site-specific carbon
inventory or default values stock estimates
• Stratification based on national forest classes; • More strata than national GHG inventory due to
may combine strata to reduce uncertainties use of data with finer spatial scales
• Often only includes above- and below-ground • May choose or be obligated to measure
biomass; excludes non-CO2 gases deadwood, litter, soil, and non-CO2 gases
measure land cover change using Landsat imagery accuracy. In most cases, this led to the use of site-
and derive carbon stock and carbon stock change specific ground data and project-specific assumptions
estimates from national forest inventories, International of additionality and leakage.
Panel on Climate Change default emission/removal
factors (for gap filling), and, in some developed Given these differences, it is not surprising that
countries, existing growth models. In many developing national systems will produce different estimates of
countries, initial estimates from national systems forest-related emissions (and/or removals) compared
have only been developed over the past two to three to projects. At the national scale, a country may
years and will require ongoing improvement. When also aggregate data differently than smaller scales
forest carbon projects were being developed, many for various reasons. For example, some countries
developing countries could not provide national data for the purpose of developing a national forest
or systems to consider or work with. Furthermore, many reference emission level (FREL) have stratified their
of the guidelines applied, such as the Verified Carbon data into fewer forest classes—balancing availability
Standard (VCS), had very different requirements, such of data, measurement costs, and uncertainty, and
as shorter time series of data but a higher degree of also simplifying the implementation of an accuracy
Box 3.1 Australia

The Australian government’s Emissions Reduction Fund provides financial incentives for landholders to
mitigate climate change. The permitted activities and methods for quantifying abatement are aligned but not
identical to those in Australia’s national greenhouse gas inventory (NGGI). For example, the environmental
plantings method is premised on the establishment of forests with native endemic species on cleared
land; the method requires that the plantings be of sufficient size to be detected by the national inventory
system, with an identical definition of forest as used for Australia’s NGGI. Abatement is estimated using
the Full Carbon Accounting Model (FullCAM), the same modeling system that underpins Australia’s NGGI.
However, unlike the approach used for the NGGI, within the ERF methods, FullCAM is configured using
project-level information, not regional or national default values. For example, the project proponent enters
specific management events relevant to their forests (planting dates, fertilizer treatments, tree species,
and so on), as opposed to the management regime being applied based on statistical data. This approach
creates a mismatch between Australia’s NGGI and individual projects; however, across all the projects
within the scheme, it is expected that the two abatement estimates would be comparable. Furthermore, by
using the same underpinning framework it is possible, should it be decided, to ensure that the project-level
management is represented in the national inventory. The issue of how to include projects in the national
accounts was thought about early in the original system design (1998), providing the government with
considerable policy flexibility when designing its mitigation policies.

Box 3.2 Brazil Figure B2.6.1 New Amazon Incentive
In Brazil’s new Amazon system, states are Structure
allotted emission reductions based on each state’s
performance and allowed to raise funds based on this Government MRV system for the Amazon (PRODES)
allocation.
The monitoring of each state’s performance (of forest
National accounting of GHGs for the Amazon
cover and change) uses the same data used to
measure Amazon-wide GHG performance, that is,
the data generated by the federal monitoring system
PRODES through INPE (Brazil’s National Institute for Subnational (state-level) accounting of GHGs for the
Space Research). In this regard, data flows down from Amazon
national systems, not up from subnational units.
KEY POINTS
There are differences in data used by national governments, for example, for reporting GHG inventories
to the UNFCCC, compared to that used by forest carbon projects. Such differences are typically more
significant with legacy projects.
Data to measure results may flow top-down or bottom-up (or both). In Brazil, data are flowing from the
national system to the states; in Australia, a more sophisticated system integrates data flows in both
directions.
It is much easier to nest subnational units than projects. Alignment of data reduces the level of mismatches
that occur when measuring performance at multiple scales. Subnational jurisdictions typically use national
data and therefore are more easily aligned to national estimates. There may be instances where subnational
jurisdictions use higher-resolution spatial data or region-specific carbon stocks—in such cases, the national
system can integrate data into its systems more easily than project data, particularly if such units use
administrative boundaries that aggregate to cover 100 percent of the national territory.
assessment. Other differences may exist through use. Higher levels of accuracy may require resources
projects requiring data to be at more regionally or unavailable to a government, and more granular
locally specific scales. For example, carbon stock data can be a trade-off with uncertainty estimates—
estimates (typically from a national forest inventory, which at higher scales is sometimes larger than the
or NFI, plot system across the entire country) may expected change (or performance). The level of
differ when averaged up at the national scale versus accuracy of measurements required at multiple scales
provided at a project or regional scale. may also depend on the risk tolerance of the actors
involved (and who bears that risk). Precision may
If a country’s nested approach allows stand-alone be less of an issue so long as the system does not
projects, a higher level of accuracy and precision, generate biased results.
and a more granular stratification (of areas and
estimates of carbon stock for forest/land classes), 3.2. Baseline Setting or Allocation
may be needed at the national level. In some
instances, it is simply not possible for a project to Currently, the way in which carbon projects develop
use national-level data—for example, there may baselines and account for emission reductions is
be insufficient accuracy of the spatial data that is often fundamentally different to the methods used
required for the standard that the project wishes to for jurisdictional approaches. Large-scale reference

Box 3.3 Why Avoided Deforestation Projects Cannot “Apply the Jurisdictional Baseline”
Once a jurisdictional reference level is set, in most cases, it is not possible to simply “apply the jurisdictional
baseline to projects” (as is suggested in the Verified Carbon Standard Jurisdictional and Nested REDD+,
or VCS JNR, framework). Projects within a jurisdiction are based in areas with different dynamics and
deforestation (or forest degradation) pressures, such that it is not possible to simply “divide up” the baseline
based on, for example, a ratio of area coverage, unless the jurisdiction experiences a near-perfect mosaic
of deforestation or degradation. If projects are asked to apply a jurisdictional deforestation rate, the result is
incentivizing projects to choose the least risky lands as accounting areas (where expected deforestation is
lower than the overall jurisdictional deforestation rate).
Where legacy projects exist, nesting can become both politically and technically challenging—particularly if
projects developed baselines prior to the higher-level jurisdiction. Table B3.3.1 illustrates three very different
baseline methods used within Zambia (at project and national scales).
Table B3.3.1 Three Baseline Methods Used in Zambia
BCP’s Lower Zambezi COMACO’s Landscape National FREL

REDD+ Project Management Project
Ref. period: 2006–14
Ref. period: 1984–2009 Ref. period: 2002–13
Method: Historical average
Method: Logistic function Method: Modeled emissions
modeled after a “reference
region” TerrSet Land Change Modeler
was used to calculate expected
deforestation based on
assumption that small-scale
farmers are the main agent of
deforestation; the key variables
used in the model include
distance to settlements and
roads and topography.
If a project is located in an area of high-expected deforestation (for example, a “hot spot” or frontier), it is
fair to expect higher than average deforestation. However, it is also the case that several projects—applying
project-based methodologies and located within a single region—may quickly exceed a historical average
baseline of the region. In such cases, agreements will need to be made that often require projects to take
a “haircut” on their baseline (and thus their expected performance), sometimes putting at risk the business
models in place.
levels often use historical averages to calculate (or It is easier to nest afforestation/reforestation (A/R)
project forward) a reference level. Results-based and improved forest management (IFM) projects than
financing for large-scale programs (largely funded it is to nest avoided deforestation projects.
by donor governments) also has preferred the use of This is largely the case because for A/R, in most cases,
historical averages (with upward adjustment for high the baseline is zero since the starting point is an area of
forest cover, low deforestation, or HFLD, countries). land that is non-forest, which is similar to the baseline
By comparison, projects use a range of methods and assumed at the jurisdictional level (for example, the
models to project forward an assumed business-as- Kyoto Protocol’s accounting rules for A/R are “gross-
usual scenario. net,” which basically sets the baseline to zero). For

IFM, the baseline would be the historical GHG flux Boxes 3.4 and 3.5 provide examples of setting baselines
rate (which is analogous to FRELs under the Kyoto for smaller units within a jurisdictional program.
Protocol). In both cases, these baselines are more
aligned with national reference level approaches— 3.3. Avoidance of Double Counting
unlike the “counterfactual” baseline setting of avoided
deforestation or forest degradation projects. In Double counting (or double claiming) is a term used
addition, both A/R and IFM are spatially explicit and to describe the use of a single emission reduction unit
can more easily apply national carbon stock estimates more than once. If countries design nested systems
and growth rates, and drivers are not outside the that are based on allocating finance or ERs generated
accounting area (as is often the case for deforestation at the higher scale, there is no risk of double counting
and forest degradation). because the allocations are designed to fit within the

Mai Ndombe province exhibits the classic case where an existing legacy project—Wildlife Works Carbon
(WWC) Mai Ndombe project—was validated with a projected baseline methodology prior to the jurisdiction
determining its own baseline.* The jurisdictional reference level is an average historical baseline with a small
adjustment (per Carbon Fund guidelines). To nest the existing WWC project within the historical average
jurisdictional reference level, WWC was required to reduce its baseline over the ERPA period of 2018 to
2022. Differences between the two baselines are illustrated in figure B3.4.1 (see the appendix for more
details on the baseline calculation).
Figure B3.4.1 VCS Baseline and the Nested Reference Level
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10
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MtCO2
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VCS Baseline Nested Reference Level
In Mai Ndombe’s ER Program, projects will be able to receive a portion of payments from the Carbon Fund
based on performance. In return, such projects will be required to: (a) use agreed baselines, (b) only
generate credits against the agreed baseline (that is, they may not develop a separate baseline under, for
example, the VCS, and separately issue Verified Carbon Units), and (c) accept the capped amount that any
one private sector or large community project may receive from the Carbon Fund. The PMU is expected to
develop guidance and information on how future project baselines may be developed.
*The DRC case study is based on an advanced draft benefit-sharing plan developed by the country in consultation with ER
Program stakeholders. The negotiations between DRC and the FCPF Carbon Fund regarding an ERPA are ongoing; it is not
clear at this stage if the provisions (which are analyzed in this paper) will be accepted by donors for contract signature.

Box 3.5 Brazil
Under the new Amazon incentive system, states receive a portion (60 percent) of finance. This finance
is allocated to states using a stock-flow method. This method was developed to address the challenge of
different circumstances among states, that is, high versus low deforestation rates, high versus low forest
cover. The method provides incentives both to conserve standing forests (carbon stock) and to reduce
deforestation (that is, a reduction in the flow of emissions to the atmosphere). It does so by combining
two criteria: (I) the amount of forest area within each state as a percentage of the total forest area in the
Amazon, and (II) the amount that each state reduced its area of deforestation as a percentage of the total
area reduced in the Amazon. The addition of these two criteria forms the overall percentage of Amazon
emission reductions apportioned to each state (that is, the “catch” limit) for fund-raising. The metrics
used can be considered proxies for carbon performance—that is, forest conservation and reducing
deforestation.
This allocation method is illustrated in the table below (reproduced from the CONAREDD+ Resolution).
Each state is allocated at least 2 percent of the total finance received by the Amazon Fund. Thereafter, the
percentage is a function of performance on the two metrics.
Table 3.5.1 Amazon Fund Stock-Flow Allocation Method
Criteria I: Criteria II: % Distribution of

Criteria I +
STATE % of Amazon contribution to “catch” limits
Criteria II
native forest area reduced forest loss among states
ACRE 1.35% 0.60% 1.92% 2.00%
AMAZONAS 13.45% 0.60% 14.04% 13.28%
AMAPÁ 1.05% 0.0% 1.05% 2.00%
MARANHÃO 0.32% 1.6% 1.95% 2.00%
MATO GROSSO 2.93% 13.0% 15.93% 15.06%
PARÁ 8.22% 9.8% 18.01% 17.03%
RONDÔNIA 1.16% 3.7% 4.90% 4.63%
RORAIMA 1.43% 0.3% 1.70% 2.00%
TOCANTINS 0.09% 0.4% 0.49% 2.00%
TOTAL 30% 30% 60% 60%
When the resolution from CONAREDD+ was issued, 13 REDD+ projects developed in the Amazon biome
had already been validated under the VCS, and few of them had used PRODES data to identify their
baseline and build their reference levels. The CONAREDD+ Resolution means that projects within states—
specifically those states that will further allocate funds through a state-level nested system that provides
incentives to projects—will need to invest in remodeling the baseline and, in many cases, will have to
assume a lower generation of credits that may jeopardize their financial feasibility.
When the resolution from CONAREDD+ was issued, 13 REDD+ projects developed in the Amazon biome had already been validated under the VCS, and few of them had used PRODES data to identify their baseline and build their reference levels. The CONAREDD+ Resolution means that projects within states—specifically those states that will further allocate funds through a state-level nested system that provides incentives to projects—will need to invest in remodeling the baseline and, in many cases, will have to assume a lower generation of credits that may jeopardize their financial feasibility.

Box 3.6 Australia
Australia’s national system includes the baselines for Forest Management Reference Levels as well as for
reporting against the 1990 baseline for Kyoto. These baselines represent a historical average and a point-
based baseline, which current scenarios are compared against. Both baselines were in place prior to the
implementation of Australia’s domestic carbon market. This market generally uses national or state-based
information for determining additionality of an activity type (for example, environmental planting or avoided
deforestation when a certain permit is owned) and project-level information for quantifying the baseline scenario
in terms of tonnes of abatement. The methods used at the project level aim to only quantify abatement that
would be detected by Australia’s NGGI; however, the success of this is measured at the scheme level. That is,
an individual project may report more or less abatement than would be detected by the NGGI, but as a whole
it is expected that the aggregate estimate of projects’ performance would be comparable to the estimate of
abatement at the national level.
Box 3.7 Guatemala

Guatemala has three REDD+ projects validated under the VCS, two of them in the northern lowlands, in
the department of Petén, and one in the east of the country, in the department of Izabal. The two validated
projects located in Petén were designed using the subnational jurisdictional baseline that was generated
to comply with the requirements of the VCS JNR and which includes a geographically explicit logistic
future deforestation model, that is, a model forecasting where and how much deforestation will occur in
the future based on the tendency observed in the historical data. The development of a geographically
explicit subnational reference level and future deforestation model, in this specific case, incentivized the
establishment of public-private REDD+ activities. Guatemala developed in 2017 a national forest reference
emission level and forest reference level (FREL/FRL) to comply with the requirements of the FCPF, which
has been calculated as the aggregation of the FREL/FRLs of each of the five subnational jurisdictions
considered in the country’s National REDD+ Strategy. A future deforestation model remains to be developed.
In the current scenario, unless the specific FREL/FRL of each subnational jurisdiction can be used and
a geographically explicit future deforestation model is calculated and applied, projects do not have an
incentive to nest because they would have to assume a FREL/FRL that considers lower generation of emission
reductions per area unit, and this impacts the financial feasibility of stand-alone REDD+ projects.
KEY POINTS
For avoided deforestation or avoided forest degradation, because there are different dynamics and
pressures on forests occurring across a landscape, jurisdictional baselines (for example, average
deforestation rates) in most cases cannot be simply downscaled to project-level actions.
The stock-flow method used by Brazil is one solution to providing incentives for both standing stock (that is,
conservation of existing forests) and reductions in deforestation—but it is more easily applied to nesting of
subnational areas into a national system.
It is much easier to nest A/R and IFM projects than avoided deforestation because baseline or reference
level construction methods are more similar at small and large scales.
Smaller-scale baselines (and results measurements) do not necessarily need to perfectly match higher
(jurisdictional) baselines as long as, in aggregate, they add up and do not exhibit bias—that is, that smaller-
scale performance, on average, is aligned with the overall higher-scale performance.
Developing nested baselines can change significantly the incentives (and validity of business models) for
smaller-scale activities.

Box 3.8 Joint Implementation
Joint implementation (JI) under the Kyoto Protocol may also be thought of as a type of nesting. Under
JI, countries (typically with surplus assigned amount units, or AAUs) generate and sell emission reduction
units (ERUs) to countries that face deficits or find it more cost-effective to purchase ERUs than to reduce
emissions domestically. Once the project verifies emission reductions, the host country transfers ERUs to
the investing country (figure B3.8.1). In general, JI functions as a nesting scenario that allows stand-alone
projects—where individual projects generate units that are measured separately from the national monitoring
system but included within the national accounting scheme. This “flexibility mechanism” was developed
under the Kyoto Protocol to allow countries to lower the cost of meeting their target if additional abatement
was possible (at a lower cost) in other countries.
Table B3.8.1 Illustration of trading ERUs under Joint Implementation
Emission
Reduction Unit
(ERU) transferred
to Country B
Country A: AAU
Assigned surplus
amount
(KP target)
Country B: AAU
Actual deficit
emissions
Country A: Country B:
Actual Assigned
emissions amount
(KP target)
Mismatches between national GHG inventories and calculation of units by projects are generally unknown;
however, the relatively low volume of traded units compared to AAUs minimizes the risks of misalignment.
envelope of jurisdictional performance. However, not tied to the generation of credits (assets) or not
where jurisdictions and projects or subunits with the used in compliance systems. Where carbon finance
jurisdictional area are accounting simultaneously, there operates more akin to payments for (ecosystem)
needs to be a mechanism to avoid double counting. services, and no rights or titles are transacted, double
In addition, because often it is not possible to perfectly usage of the emission reduction is less problematic
nest projects within a jurisdiction, there will be a need to (although some donor governments are concerned
“true up” the accounting and manage liabilities for the with double payment for such reductions). Selling into
expected quantitative correction that may occur. This voluntary carbon markets—for example, to entities
requires clarity on which party or parties are responsible whose purchase of the offset does not appear under
both for managing the mismatches and for the liabilities any accounting within the UNFCCC—also is less
for any “overshoot” that occurs. Alternately, systems problematic. These may be considered as situations
(for example, buffers) may be developed to share the where double claiming may not be desirable, but it
burden up front of such overshoot. does not affect the integrity of any single system.
It is worth noting for this topic that these issues Boxes 3.8 and 3.9 describe examples of avoiding
are less critical for performance-based payments double counting.

Figure 3.2: Example of a REDD+ country selling ERs while achieving its NDC
REDD+ country
This requires:
Conditional ERs sold as part
NDC of the conditional
NDC? • Achieving (or overperforming against)
the NDC
• Robust GHG inventory

Unconditional Opportunity to
NDC
sell ERs due to
overperformance
• Possible alignment between REDD+
accounting and GHGI (if large
volumes are traded)
Actual
emissions
• National registry system to track ERs
Box 3.9 Australia

In Australia, the risk of double counting across different schemes is managed through the legislative
restrictions on projects that participate within the domestic scheme. The scheme does not permit projects
that are part of other offset schemes to participate. Similar provisions in voluntary schemes also reduce
the risk of double counting. For example, Australia did have forest protection projects registered and
operating under the VCS; however, when Australia started reporting on forest management under the second
commitment period of the Kyoto Protocol, the VCS suspended crediting of those projects to ensure the
avoidance of double counting. In this circumstance, the projects were transitioned through a specific method
under the domestic scheme. As Australia’s NGGI does not directly incorporate project-level reporting—it
relies only on the national inventory system for emissions information—there is no risk of double counting
abatement from project areas or activities within the NGGI.
To maintain consistency with Australia’s international obligations, the Emissions Reduction Fund project
proponents are issued Australian Carbon Credit Units, which are managed through a centralized registry,
the Australian National Registry of Emissions Units. These credit units are directly exchangeable for Kyoto
units, and then can be traded, surrendered, or canceled through the registry. Thus, if a project is issued a
credit that can’t be reconciled through the national inventory system, the Australian government has this as a
liability. The methods, therefore, aim only to recognize abatement that can be identified through the national
inventory system.
Box 3.10 Brazil

In Brazil’s new Amazon approach, the challenge of performance mismatch between the higher level (total
Amazon) and the states is managed through a system that does not create nominal (emission reduction)
units for each state’s performance; instead, it allocates a percentage of emission reductions from an overall
envelope based on jurisdictional performance. In other words, each state is given the right to raise funds for
a portion of the emission reductions generated at the Amazon region level. They are not provided a baseline
against which to generate and issue separate emission reductions.

KEY POINTS
Nested systems will need to consider how to avoid certain types of double counting; this will become
increasingly critical for countries as the Paris Agreement is implemented—although final rules are still
unknown.
Where volumes traded internationally are small, it may not be necessary to align measurement systems—
if credits traded can simply be deducted from national totals. However, this requires knowledge of
overperformance and the total number of available units for trading.
If a system is entirely domestic (that is, no international trading), it may not be necessary to perfectly align
measurement systems—since reporting to the UNFCCC, for example, can be considered separately from
the domestic carbon trading system. However, for reasons of efficiency, it may still be useful to require
projects to use certain data and methods to align as closely as possible with national-level accounting.
Double counting can also be avoided by allocating emission reductions, as in Brazil’s new Amazon
incentive system, which provides states with a percentage of emission reduction units achieved at the
higher scale rather than allowing the issuance of nominal units against baselines. This may, however,
reduce incentives for subunits to perform.
With regards to REDD+, countries with conditional 3.4. Using Proxies Rather Than GHG
NDCs may consider selling ERs as part of the
conditional portion of emission reductions. Or, if a Metrics
country expects to overachieve at the national level— If a jurisdiction is allocating finance or ERs based on ex
that is, exceed its unconditional NDC—it has the post performance, it will need to decide what metrics
flexibility to allow even more ERs to be sold (figure to use, and these may be best determined based
3.2). If a purchasing country uses these reductions on the actions or outcomes it wishes to incentivize.
to achieve its NDC, those reductions will need to be Carbon performance may be one option, or metric,
debited from the selling country’s national accounts, as used to allocate finance. Performance could also
in the Kyoto Protocol, to avoid double counting. be measured, for example, by hectares of forest
Box 3.11 Australia

In Australia, the government provides financial incentives through the Emissions Reduction Fund to promote
project-level action to mitigate climate change. Abatement must be estimated using methods that are
provided for through legislation. These methods must only recognize abatement that can be used to meet
Australia’s climate change targets, as determined by the national accounting framework. The adoption of
this scenario was influenced by the status of the NGGI system, forest management, and the associated
governance arrangements around these.
Australia has a spatially explicit NGGI system, which uses a Tier 3 model (FullCAM) to estimate the emission
and removals from forests. This modeling framework was designed to overcome differing governance and
data collection arrangements for the forests; where the national government is responsible for reporting
GHGs to the UNFCCC, it is the state governments who have constitutional responsibility for managing public
lands, including forests. As a result of this approach, for nesting, the spatially explicit nature of Australia’s
GHG inventory supports the adoption of payments based on project-level performance in reducing GHG
emissions, as all project areas are covered by the national system (that is, the same tools can be used for
projects as are used by the national system), and the national system can in turn be improved to better
match the project-level estimates.

protected, which allows for simpler measuring while higher level, the activities may not contribute to the GHG
still contributing to emission reductions. Other options, performance needed to access carbon finance. For
or metrics, could be considered, such as use of example, measuring forest cover change as a proxy
clean cookstoves to reduce charcoal consumption, may be strongly correlated with carbon performance
demonstration that improved agricultural practices are at the higher level, but it may also be problematic if
put in place that reduce pressure on forests, protection forests of lower carbon stock are protected while higher
of certain ecosystem services (for example, important carbon stock forests are cut. The optimal metrics differ
watersheds), and so on. If more than forest carbon is by context—for example, the use of carbon metrics may
being considered (for example, agricultural emissions), be strongly correlated with GHG performance, but it also
other criteria may be added, such as tillage, residue, or may be technically challenging for local communities and
burning practices. not well understood.
If non-carbon metrics are used, and if there is not a Boxes 3.11 and 3.12 illustrate examples where GHG
strong correlation to the mitigation measured at the metrics (Australia) are used versus proxies (Zambia).
Box 3.12 Zambia

COMACO, a nongovernmental organization operating in Zambia, has built a system to provide market
premiums to communities in Eastern Province. They have created what is called a “Conservation Compliance
Scoring” system that rates participating chiefdoms on a number of metrics: conservation farming practices
(for example, fire management, minimum tillage, crop rotation, use of residues and compost, non-burning of
farm), wildlife protection (for example, poaching, habitat protection), forest conservation (for example, illegal
logging, charcoal production), and conservation and community leadership.
Scoring is based on information from COMACO’s internal auditing of conservation farming practices as well
as additional information on wildlife conservation and forest management. Scoring is adjusted for the varying
landscapes in which chiefdoms reside. The plateau area chiefdoms have their sustainable agriculture and
forestry scores more heavily weighted, whereas the valley area chiefdoms have their sustainable agriculture
and wildlife protection scores more heavily weighted. This difference in weighting takes into account that the
plateau has lost most of its forests (deforestation), while the valley is home to a variety of wildlife.
COMACO acts as an off-taker of farm products generated by local communities. In the past, scores were
used to provide premium commodity prices (around 10-20 percent above market), and now are used to
support farmer cooperatives. One can envision that a system such as this could also be used as a basis for
distributing carbon finance. Building on other revenue streams, such as agriculture or tourism, allows for a
broader set of incentives than carbon and more diverse revenue streams, which can mitigate the risks of an
uncertain future carbon market.
Figure 3.12.1 COMACO’s Conservation Compliance Scoring System
Goods are sold at premium price

Farmers improve
practices that
include forest and
soil conservation
Profits are distributed back to farmers,
or their cooperatives, based on scoring

KEY POINT
The use of GHG metrics to reward smaller-scale activities within a jurisdiction may be viable for countries
with more advanced MRV systems that include spatially explicit data. For countries that do not have such
systems, or where carbon accounting may not resonate with local communities, use of a proxy measure
may be an option worth consideration.
The Zambia model (box 3.12) is not currently used to government of Acre as the jurisdictional REDD+
share carbon revenues; however, it is provided as an program proponent.
example of a potential model that could be adapted. It
shows how a system may be built on an already existing The government of Guatemala has been involved
system to provide benefits to local communities. directly or indirectly in the development of different
REDD+ projects and considered the certification of a
subnational jurisdictional REDD+ program under the
3.5. Why Has Nesting Failed in Some VCS JNR. The subnational baseline and the future
Cases? deforestation model developed for the jurisdictional
REDD+ program were geographically explicit and
In some cases, although there may be utility in
had different strata that represented the various forest
providing projects with incentives, circumstances types occurring in the subnational region. This created
have created barriers to developing a nested system. a significant source of economies of scale for the
In the Brazilian state of Acre, Law 2308 (SISA Law, implementation of private initiatives in the northern
October 22, 2010) created a legal framework for lowlands of Guatemala. The projects seeking validation
operationalizing a jurisdictional REDD+ program. in the subnational region could use the data and
This legal framework considered a registry in which information from the subnational baseline to construct
projects developed within the geographical scope of their own baselines and nest into the subnational
the jurisdictional program could be registered if they jurisdiction. When the Guatemalan government
were previously recognized and integrated into Acre’s decided to seek finance from the World Bank’s FCPF,
IES Carbon Program. When the legal framework of the the process of validation of the jurisdictional scheme
jurisdictional REDD+ program was promulgated, there under the VCS JNR was left on standby. This is
were already REDD+ private initiatives in Acre that had because the reference level developed under the VCS
been validated and verified (that is, had issued carbon JNR only considered the deforestation component; per
credits) under the VCS. The divergence between the approach assumed by the country under the FCPF,
technical aspects employed in the private initiatives forest degradation and carbon stock enhancement
and in the jurisdictional REDD+ program, however, components also would need to be included. As a
were significant and created disincentives for nesting— result, the projects were not nested and, instead,
for both the developers of private projects and the continued operating as stand-alone activities.

4. Lessons Learned
Experience with nesting is still in its infancy. This For most countries, a nested system will be
paper attempts to consider some of the early lessons “allocation” driven. Systems that allow stand-alone
emerging from efforts to develop nested REDD+ (or projects to trade internationally are more challenging—
forest GHG mitigation) systems. While jurisdictional from both the policy and technical point of views. For
REDD+ is assumed by many to be the pathway to this reason, many of the emerging nested systems—for
“transformation,” there are many policy reasons for example, in Brazil and the DRC—are based on how
considering the development of nested systems within to allocate either finance or emission reductions, but
jurisdictional programs. they do not recognize or allow projects to freely trade
emission reduction units.
The Paris Agreement suggests a rethink of the
concept of nesting for REDD+. Developing countries Donors can impact jurisdictional programs,
must now consider how to achieve national targets (that including nested systems. To date, the
is, NDCs), which fundamentally change the dynamic for establishment of jurisdictional REDD+ schemes
carbon projects operating within countries. Meanwhile, and support for new low-carbon economic models
governments must consider the right blend of policies would not have been possible without the crucial
and incentives that will drive change at scale, and role played by donor governments. Donors have
many lack the resources needed to implement multiple largely been responsible for establishing the
programs with and in communities. For this reason, this requirements to receive payments linked to REDD+
paper suggests reconsidering nesting—going beyond performance—which influences the way jurisdictional
the traditional concept of “project to jurisdictional GHG REDD+ programs are developed, including the
accounting integration” to the broader consideration of relative balance of resources spent on MRV systems
how to catalyze local actions to support national GHG compared to implementing activities to reduce
performance. emissions. This not only affects the quality of the
emission reductions claims and the co-benefits
If well structured, a nested system can increase the accrued, but also can impact the structure and
performance of large-scale jurisdictional mitigation sustainability of the program itself. In some instances,
efforts. The Australia example illustrates that such such as in the Brazilian state of Acre and Guatemala,
a system can mobilize investments and operational donors have, perhaps inadvertently, discouraged the
capacity that otherwise may not occur if only national development or continuity of projects, including those
government policies and measures are at play. that can support jurisdictional programs.
Development of such systems should consider how
best to allocate incentives across national, subnational, Nesting projects is as much a policy issue as it
and local actors. The variety of emerging systems is a technical one. There is a tendency to focus on
shows there is no one-size-fits-all solution. the technical implementation of nesting projects,
with less regard to the policy requirements. It is
Experience suggests that projects can best support evident from the examples that the national policy
jurisdictional efforts if they are part of the initial setting and directives have as much, if not more, of
design of a REDD+ system. It is easier to create a bearing on the approach to nesting as technical
a nested system if this goal is identified as a policy issues. Careful consideration of shifting costs, risks,
requirement early in the process. The initial choices and rewards must be undertaken in the design of the
on whether, and how, to nest efforts by smaller units framework for nesting before any technical solutions
have implications for the design of MRV systems. are researched.
As the DRC Mai Ndombe case suggests, technical
requirements are more easily incorporated from the That said, there are a number of lessons learned
start rather than retrofitting the system to accommodate related to technical issues:
legacy projects. The longer the delay to set up such
systems, the more challenges a country may face—as ●● Most project methodologies were developed prior
more projects with disparate systems are created. to the creation of jurisdictional methodologies.

As such, methods used by projects to measure A focus on the development of national (only)
performance do not align well with methods estimates of GHGs and FREL/FRLs may be less
used by national or subnational governments resource intensive at the start, but more costly in
to measure REDD+ results. Similarly, current the end—particularly if more highly stratified systems
methods for estimating carbon stock changes at lead to stronger incentives for action. There is a need
the national level are not always “fit for purpose” to balance the cost of an MRV system that can operate
for incentivizing action on the ground. Thus, at national and project scales effectively with the
flexibility on all sides is needed to transition benefits of enabling local actions, including catalyzing
legacy projects into a national (or subnational) investments and engaging local, operational capacities
system. to implement activities that reduce emissions (or
enhance removals).
●● Suggesting that projects “apply the jurisdictional
rate of deforestation” will not work in most One barrier to the development of nested systems
instances, as it does not provide the right is a lack of technical capacity within developing
incentives for projects to invest in high-risk country governments. There are clear asymmetries
areas—as is evident in the DRC Mai Ndombe of knowledge and information that exist between (often
case. Other options will need to be developed international) project developers and forest/REDD+
for, in particular, nesting avoided deforestation country governments, which can be an impediment
projects. to cooperation. Models should be investigated
that embed centralized technical support within
●● Nesting of avoided deforestation—where governments to ensure continuity over time, objectivity,
counterfactual baselines are more difficult to accuracy, and quality. It is critical to have technical
estimate—is more challenging than A/R (where a personnel aware of the jurisdictional context at different
baseline can be set to zero for non-forestland) or levels and trusted by political decision makers.
forest management (where similar methods can
be applied at small and large scales). Finally, the establishment of jurisdictional REDD+ is
a learning-by-doing process. It has been a decade-
●● The more spatially explicit information is available long journey to date for the development of national
(and can be applied to nested systems), REDD+ systems, and while there are some existing
the stronger the incentives, as illustrated by experiences, there remain many areas still in the early
the Guatemala case study. Conversely, the stages of learning, including how best to involve local
establishment of non-stratified, single-value actors and catalyze local activities to contribute to large-
FREL/FRLs often disincentivizes the protection scale jurisdictional results. This paper only scratches
of high carbon stock, deforestation-threatened the surface of issues in nesting—and we expect many
forests. more lessons to emerge in the years to come.

Box 4.1 Considerations for the Future
The authors and reviewers of this paper raised a number of additional issues critical to the design of a
nested system, but we couldn’t address them all in a single paper. Here are some questions to possibly
consider in further explorations of nested systems:
• What are the policy (setting of reporting/accounting rules, transparency requirements, whether and how
to integrate legacy versus new projects, etc.) and operational (sharing of data, process for transferring
funds/units, operation of underpinning systems, etc.) challenges of nesting and how can they be
overcome?
• What technical measurement and monitoring systems could best support nested approaches?
• What are the risks inherent in a nested system (for example, MRV mismatches, double counting, etc.)
and how should responsibility for them be shared? Who is willing to take on such risks? How can
registries help to manage some of these risks?
• What are the conditions under which a nested approach or system makes sense (for example,
centralized versus decentralized government systems, balance of private versus public lands, where
decision-making authorities lie)? What legal frameworks enable nesting (or not)?
• Where should the costs be borne for both the implementation actions that reduce emissions (or
enhance removals) and the MRV of GHG performance? Where does the intellectual property sit for
measurements of GHGs?
• What are the technical and administrative requirements expressed by demand-side actors (to date,
donor governments or voluntary standards) for the jurisdictional REDD+ initiative?

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Approaches to REDD+ Nesting

Lessons Learned from Country Experiences

1.1. What Is Nesting? 5

1. Introduction: The What and Why of Nesting 5

2. Providing Incentives through Design of a Nested System 8

2.1. Ex Ante Finance versus Ex Post Rewards 9

3. Technical Challenges of Nesting 19

3.1. Data and Methodological Mismatches 19

Lessons Learned from Country Experiences 1

Lessons Learned from Country Experiences 3

4 Approaches to REDD+ Nesting

Lessons Learned from Country Experiences 5

6 Approaches to REDD+ Nesting

Box 1.1 The Starting Point for Countries: International Commitments

Figure B2.1.1: Countries achievement of an NDC and remaining ERs

Country achievement of emission reductions at national scale

ERs used for achievement of

Lessons Learned from Country Experiences 7

Country achievement of emission reductions at national scale

ERs used for achievement of

Country sells ERs

Two basic models:

Use of funds to achieve future Use of funds to reward past

8 Approaches to REDD+ Nesting

Ex ante finance Ex post finance

Requires up-front investment: This finance Risk of non-performance: In some

Lessons Learned from Country Experiences 9

Box 2.2 Brazil

Figure B2.2.1 The Amazon Fund

DONORS Donots pay for There is no linkage between ex post performancethat

Box 2.3 Guyana

10 Approaches to REDD+ Nesting

Country achievement of emission reductions at national scale

ERs used for achievement of

Country sells ERs

Use of ERs to reward Use of finance to reward Use of finance to provide

Ex post rewards Ex ante finance

Box 2.4 Brazil

Lessons Learned from Country Experiences 11

Allocate finance Allocate ERs

ERs generated at the higher scale are either

• Access to national (or subnational) • Management and administration of

• Technical challenges related to allocation of

12 Approaches to REDD+ Nesting

Country achievement of emission reductions at national scale

ERs used for achievement of

Country sells ERs

Use of ERs to reward Use of finance to reward Use of finance to provide

Ex post rewards Ex ante finance

Box 2.6 Brazil Figure B2.6.1 New Amazon

Lessons Learned from Country Experiences 13

Under the DRC’s benefit-sharing plan for Mai MAI NDOMBE

Finance or ERs to the higher-scale entity Finance or ERs to local actors

• The interventions are designed taking into

14 Approaches to REDD+ Nesting

Figure 2.4: Illustration of stand-alone projects

Country achievement of emission reductions at national scale

Separately issued and ERs used for achievement of

Projects issue Domestic system