Implementation of the Lao PDR Emission Reductions Program through improved governance and sustainable forest landscape management
Lao PDR | Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH
26 June 2018
Please submit the completed form to [email protected], using the following name convention in the subject line and file name: “CN-GIZ-YYYYMMDD”
Project/Programme Title: Implementation of the Lao PDR Emission Reductions Program through improved governance and sustainable forest landscape management
Country(ies): Lao PDR
National Designated Authority(ies) (NDA):
Ministry of Natural Resources and Environment (MONRE),
Mr. Syamphone Sengchandala,
Deputy Director General, Department of Climate Change
Accredited Entity(ies) (AE): Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH
Date of first submission/ version number:
[2018-06-26] [V.1]
Date of current submission/ version number
[2018-06-26] [V.1]
PROJECT / PROGRAMME CONCEPT NOTE Template V.2.2
Notes The maximum number of pages should not exceed 12 pages, excluding annexes.
Proposals exceeding the prescribed length will not be assessed within the indicative service standard time of 30 days.
As per the Information Disclosure Policy, the concept note, and additional documents provided to the Secretariat can be disclosed unless marked by the Accredited Entity(ies) (or NDAs) as confidential.
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Accredited Entities and/or NDAs are encouraged to submit a Concept Note before making a request for project preparation support from the Project Preparation Facility (PPF).
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PROJECT / PROGRAMME CONCEPT NOTE Template V.2.2 GREEN CLIMATE FUND | PAGE 1 OF 13
A. Project/Programme Summary (max. 1 page)
A.1. Project or programme ☒ Project
☐ Programme
A.2. Public or private sector
☒ Public sector
☐ Private sector
A.3. Is the CN submitted in response to an RFP?
Yes ☐ No ☒
If yes, specify the RFP: A.4. Confidentiality1
☐ Confidential
☒ Not confidential
A.5. Indicate the result areas for the project/programme
Mitigation: Reduced emissions from:
☐ Energy access and power generation
☐ Low emission transport
☐ Buildings, cities and industries and appliances
☒ Forestry and land use
Adaptation: Increased resilience of:
☐ Most vulnerable people and communities
☐ Health and well-being, and food and water security
☐ Infrastructure and built environment
☐ Ecosystem and ecosystem services
A.6. Estimated mitigation impact (tCO2eq over lifespan)
25.8 million tCO2eq (estimated over 8-year project duration) 61.3 million tCO2eq (estimated over 30-year lifespan)
A.7. Estimated adaptation impact (number of direct beneficiaries and % of population)
Not applicable
A.8. Indicative total project cost (GCF + co-finance)
Total: USD 169 million GCF: USD 46 million Co-finance: USD 123 million (All numbers are indicative)
A.9. Indicative GCF funding requested
Amount: USD 46 million
A.10. Mark the type of financial instrument requested for the GCF funding
☒ Grant ☐ Reimbursable grant ☐ Guarantees ☐ Equity
☐ Subordinated loan ☐ Senior Loan ☐ Other: specify___________________
A.11. Estimated duration of project/ programme:
a) disbursement period: 8 years A.12. Estimated project/ Programme lifespan
30 years
A.13. Is funding from the Project Preparation Facility requested?2
Yes ☐ No ☒
Other support received ☐ If so, by
who:
A.14. ESS category3
☐ A or I-1
☒ B or I-2
☐ C or I-3
A.15. Is the CN aligned with your accreditation standard?
Yes ☒ No ☐ A.16. Has the CN been shared with the NDA?
Yes ☒ No ☐
A.17. AMA signed (if submitted by AE)
Yes ☒ No ☐
If no, specify the status of AMA negotiations and expected date of signing:
A.18. Is the CN included in the Entity Work Programme?
Yes ☒ No ☐
A.19. Project/Programme rationale, objectives and approach of programme/project (max 100 words)
This project is an opportunity to support a paradigm shift in the forest and land-use sector of Lao PDR. The country has embraced REDD+ to address its main source of GHG emissions and has introduced bold policies and reforms including an ambitious NDC forestry target (70% forest cover), a National REDD+ Strategy, a timber export ban and a new Forest Law. The project mitigates 25.8 million tCO2eq in eight years and benefits at least 500,000 people (250,000 directly). It promotes sustainable management of forests, landscapes and agricultural resources at scale in six provinces and strengthens the enabling environment including governance, enforcement, behavioral change, and sustainable sector financing.
1 Concept notes (or sections of) not marked as confidential may be published in accordance with the Information Disclosure Policy (Decision B.12/35) and the Review of the Initial Proposal Approval Process (Decision B.17/18). 2 See here for access to project preparation support request template and guidelines 3 Refer to the Fund’s environmental and social safeguards (Decision B.07/02)
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B. Project/Programme Information (max. 8 pages)
B.1. Context and baseline (max. 2 pages)
B.1.1. Context
Lao PDR4 is a landlocked Least Developed Country (LDC) with an area of 23.68 million ha. Forests are among the economically most important sectors, providing income for the rural population and, in particular, the rural poor and providing a source of nutrition and livelihoods. Some 80% of the population are heavily reliant on forests for timber, food, fuel, shelter, medicines, and spiritual protection5. Laos’ forests are at the heart of the globally recognised Biodiversity Hotspot Indo-Burma.6
Forest cover accounted for 58% of the country’s surface area in 2015, significantly lower than the 70% forest cover of the mid-1960s. In the past fifteen years, the net forest loss was approximately 680,000 ha (175 soccer fields per day). The situation regarding forest degradation – which encompasses reductions in forest stocking, changes in species composition and size structure, loss of wildlife and plant habitats, and declines in wildlife and plant populations – is as concerning as deforestation.7
The importance of forest resources and their sustainable management are enshrined in the country’s highest-level policies, including the 8th National Socio-Economic Development Plan (8th NSEDP 2016-2020), the Green Growth Strategy (currently being drafted), the Central Party’s Resolution on Land (2017), the Forestry Strategy 2020, as well as in Lao PDR’s Nationally Determined Contribution (NDC)8.
Laos’ NDC puts significant weight on the forestry sector, establishing a forest cover target of 70% as well as activities for regeneration of degraded forests. The underlying Forestry Strategy 2020 identifies the following sector targets:
- To improve the quality of forests by naturally regenerating up to six million ha and planting (including through assisted natural regeneration) trees in unstocked forest area of up to 500,000 ha as an integral part of a rural livelihood support system encompassing stable water supplies and prevention of natural disasters (floods and landslides).
- To provide a sustainable flow of forest products for domestic consumption and to generate revenue through sales and export, contributing to livelihood improvement, fiscal revenue and foreign exchange earnings whilst increasing direct and indirect employment.
- To preserve the many species and unique habitats which are, for different reasons, under threat.
- To conserve the environment, including protection of soil, conservation of watersheds and combating climate change.
In 2017, the Government complemented the NDC and Forestry Strategy with the National REDD+ Strategy (NRS) to 2025 and National REDD+ Vision to 2030 as the official Government documents for guiding REDD+ implementation. The National REDD+ Strategy and Vision aim to improve the quality and extent of forests nationwide to provide economic, social and environmental benefits. The policies require all stakeholders, including households, communities and the private sector, to actively participate in the reduction of deforestation and degradation, and the promotion of forest restoration and reforestation.
Laos has been a partner country in the Forest Carbon Partnership Facility (FCPF) since 2008. Its Readiness Preparation Proposal (R-PP) was accepted in late 2010. Laos was asked to submit an Emission Reductions Program Idea Note (ER-PIN) to the FCPF Carbon Fund in early 2015 to obtain access to potential performance-based payments for emission reductions. With the development of the ER-PIN and the acceptance into the Carbon Fund pipeline in March 2016, REDD+ has gained new momentum in Laos. With the signed FCPF Letter of Intent (LOI) in July 2016, the country had 18 months to elaborate a full Emission Reduction Program Document (ER-PD) and also needed to show substantial progress in terms of REDD+ Readiness. Since then, the Department of Forestry (DOF), together with development partners, has worked on the institutional framework at national and sub-national level. This framework includes the establishment of Technical Working Groups, REDD+ Offices and REDD+ Task Forces at provincial levels, the development of the National REDD+ Strategy, the Forest Reference Emission Level (FREL) and Forest Reference Level (FRL), the National Forest Monitoring System (NFMS) and the Strategic Environmental and Social Assessment (SESA), as well as the ER-PD. The ER-PD was submitted to the FCPF in January 2018.
In parallel, the Government of Lao PDR (GoL) has, in recent years, embarked on a number of reforms that provide a platform for launching GCF project interventions. In 2012, the GoL issued a suspension on granting of new concessions for mining, eucalyptus and rubber investments, which remains in effect today. A national moratorium on logging in production forests has been also in effect since 2013 in order to protect natural forests from unsustainable exploitation.
4 Lao PDR and Laos is used synonymously throughout the Concept Note 5 NAFRI (2006): Improving Livelihoods in the Uplands of Lao PDR – A Sourcebook 6 see https://www.cepf.net/our-work/biodiversity-hotspots/indo-burma and MAF (2010): Fourth National Report to the Convention on Biological Diversity 7 Thomas, I. L. (2015): Drivers of Deforestation in the Greater Mekong Subregion - Lao PDR Country Report 8 http://www4.unfccc.int/submissions/INDC/Published%20Documents/Laos/1/Lao%20PDR%20INDC.pdf
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The Prime Minister’s Order (PMO) No.15 of 2016 to strengthen enforcement of restrictions to halt illegal logging and illegal timber exports is already demonstrating significant impact, and is confirmed by the GoL’s official start of the Forest Law Enforcement, Governance and Trade (FLEGT) Voluntary Partnership Agreement (VPA) negotiations with the EU. In addition, the adoption of the Central Party Committees Resolution on Land in 2017, indicating the need for reform in land management, is paving the way for a new Land Law. With the Prime Minister Decree 57 of 2016, all responsibilities for forestry are back under one ministry, the Ministry of Agriculture and Forestry (MAF).
B.1.2. Project Area
The GCF project will contribute to the successful implementation of the ER Program. The project location covers the six provinces in northern Laos: Houaphan, Luang Prabang, Sayabouri, Luang Namtha, Bokeo and Oudomxay (see map in Annex 1). The project location constitutes approximately 35% of the national territory and 32% of the country’s forest cover. Each province shares an international border with one of the surrounding countries of Thailand, Myanmar, China and Viet Nam. The northern region of Laos is characterised by hilly topography, remote accessibility and limited public and industrial infrastructure, unique ethnic communities, and a persistent prevalence of poverty. The combined area of deforestation and forest degradation in the project area is approximately 72,000 ha/year (2005-2015). About 40% of total national deforestation and degradation takes place within the selected six provinces. Each of the six provinces has developed Provincial REDD+ Action Plans (PRAPs), which analyse key drivers of deforestation, major barriers and proposed actions and measures to reduce emissions from deforestation and forest degradation.
The PRAPs form the basis of the ER-PD. However, the GoL is not yet in a position to provide the financial resources needed to fully implement the ER Program. Hence, the GoL, in coordination with all relevant development partners, approached GIZ to jointly develop and submit a proposal to the GCF to support REDD+ Phase 2 and the successful implementation of the ER Program.
B.1.3. Baseline
Greenhouse Gas (GHG) Emissions profile
Laos’ Second National Communication to the UNFCCC 9 states that the Land Use Change and Forestry sector is responsible for 83% of all CO2 emissions, followed by agriculture with 15%. Hence, it suggests that mitigation efforts should concentrate on the Land Use Change and Forestry sector.
For the project accounting area encompassing six provinces of northern Laos (8.1 million ha, of which 4.3 million ha is natural forest in 2015), a Reference Level has been prepared following the FCPF Carbon Fund Methodological Framework, as part of the ER-Program preparation (see Section B.3). The forest reference emission level is 10.5 million tCO2eq per year, and the forest reference level for removals is -1.96 tCO2eq per year.
B.1.4. Barriers
Key challenges in the Land Use, Land-Use Change and Forestry (LULUCF) sector are related to legal and illegal extraction of wood products and uncontrolled expansion of agricultural activities into forests. The major underlying causes of deforestation and forest degradation are ineffective land-use planning, inconsistent policies, weak forest law enforcement, unclear land and forest resource use rights and land allocation, poor agricultural land management practices and the lack of alternate livelihood opportunities. Most of the rural population practice subsistence agriculture, with only limited investments being made in sustainable productivity. Poverty levels are high (see Section B.3) and rural farmers lack the knowledge and access to formal financial services to invest and improve land use. In addition, the government is highly indebted and, therefore, provides only limited public budget to its sectors and line agencies.
While the GoL is fully committed to implementing the ER Program and the broader National REDD+ Strategy, there are additional limitations that need to be addressed with external support to ensure the success of the planned initiatives. Such challenges in the public sector include weaknesses in cross-sectoral and vertical coordination among sectors and government levels (i.e. central to local), and limited human resources to coherently implement and enforce regulations and programs among the different levels. Insufficient and inappropriate land-use planning is a major underlying cause of deforestation, either through the complete absence of plans or through the lack of compliance with (usually top-down) designed plans. The absence of integrated spatial planning and village-level participatory land-use planning in some villages is a major underlying cause of deforestation from pioneering shifting cultivation. Uncertainty regarding land uses and border demarcation often leads to unclear rules and gradual encroachment into forests. Government monitoring has also been a challenge, particularly at the local level, as budgets and capacities for monitoring are insufficient. Without a strong culture of monitoring, and the periodic updating of policies and programs based on monitoring findings, many initiatives have failed to achieve their true potential.
9 http://www.la.undp.org/content/dam/laopdr/docs/Reports%20and%20publications/2013/SNC_Eng.pdf
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B.2. Project/Programme description (max. 3 pages)
The ambitious goal of this project is to support the Government and people of Laos in changing the present-day use of forests and landscapes and to ensure a transition to sustainable management at scale. This will reduce more than 60m tCO2eq over the project’s lifespan and more than 25m tCO2eq over the project’s duration (see Annex 2 for the Theory of Change). The project consists of four outputs:
B.2.1. Output 1: Creation of an enabling environment for REDD+
Output 1 addresses barriers at the national and sub-national levels, including development planning, policy and regulatory environment, law enforcement, MRV, and sustainable financing for the forest and land use sector.
Activity 1.1 – Deep integration of REDD+ in development planning (funded by BMZ): This activity supports the deep integration of REDD+ into national-level and sub-national-level five-year socioeconomic development planning (SEDP) and sector plans. The SEDP process provides the official mandate for MAF and the Ministry of Natural Resource and Environment (MONRE) and its line agencies to implement the PRAPs and allocates financial resources from the public budget.
Activity 1.2 – Regulation: Complementing the new Forest Law, this activity develops necessary regulations and guidelines to implement SFM, FLR and village forestry.
Activity 1.3 – Law enforcement: The activity supports law enforcement, including through institutional strengthening and capacity building for the Department of Forest Inspection and its sub-national line agencies. This includes:
− Revision of standard operating procedures, − Training for DOFI and POFI staff, − Introduce and support the use of remote sensing data (LANDSAT or Sentinel) as a basis for operational planning and
resource allocation for monitoring illegal activities, − Improvements of investigative procedures (including whistle-blower systems), − Improvement of anti-corruption safeguards, − Support the purchase of equipment (ICT, GPS, cars, motorcycles), − Support the implementation of PMO No. 15 (new timber export ban; for details, see Section B.1).
These interventions are closely linked to the country’s FLEGT initiative, whereby Laos currently negotiates a VPA (Voluntary Partnership Agreement) with the EU. The alignment of the above-mentioned areas of intervention to the respective funding by GoL, GCF and further development partners joining forces for this project is currently being finalised.
Activity 1.4 – Land-use planning and improved tenure security: Integrated Spatial Planning (ISP) and Land Use Planning (LUP) are essential prerequisites for SFM, FLR and deforestation-free agriculture:
− ISP takes place at provincial and district level under the lead of the Ministry of Planning & Investments (MPI). The GCF project will support the implementation of the existing guidelines on provincial and district level planning through capacity building, technical assistance and provision of equipment.
− LUP takes place using a participatory approach at village level under the lead of MONRE/Department of Land (DoL). The project will support the updating of LUP in the project area through capacity building, technical assistance and the provision of equipment for sub-national line agencies under MONRE/DoL. This will also include the harmonisation of LUPs with the ISP process.
− Mainstreaming the Guiding Principles of FLR into land-use planning (role for FAO under consideration).
Activity 1.5 – MRV (funded and implemented by JICA): The project supports the rollout and implementation of a newly developed National Forest Monitoring System (NFMS), including an MRV/MMR system. The project will use the NFMS to monitor activity data as well as drivers and effectiveness of interventions in the GCF project area.
Activity 1.6 – Sustainable financing for forest sector transformation: The project strengthens a national financial intermediary in order to act as a National REDD+ Fund. That Fund, initially, manages grant financing for the project with the assistance of the AE, and, subsequently, manages the GoL’s public financing and other funding contributions in order to permanently close the structural funding gaps of the sector. The Fund will be a key mechanism to drive the transition to SFM, FLR and deforestation-free agriculture (see Sections C.2 and C.3 for more details). Activities include:
− Institutional strengthening for the National REDD+ Fund, including improvements of funding strategies, management and operational structures, procedures and manuals (including review of accountancy standards, accountability, checks and balances and transparency) as well as necessary amendments to legal decrees;
− Capacity building, including training for the Fund’s management and staff; − Technical assistance for the GoL to unlock or increase public financing streams for the Fund (results-based payments,
taxes, fees, etc.); − Development of subsidies for communities and businesses contributing to FLR; Communication and outreach support
for the Fund.
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B.2.2. Output 2: Implementation of deforestation-free agriculture (on 70,000 ha and targeting at least 40,000 households)
Output 2 addresses key drivers of deforestation and degradation. It delivers emission reductions on the ground at scale through reducing the expansion of agricultural activities into forested landscapes.
Activity 2.1 – Promotion of deforestation-free agricultural practices and technologies Based on improved land-use planning, interventions focus on the promotion of deforestation-free agriculture, including a shift from unsustainable shifting cultivation practices. Interventions include the promotion of alternative cash crop production practices, crop diversification, soil conservation practices, agroforestry techniques such as terracing, and intercropping (to be confirmed in feasibility study). Project inputs include capacity building and equipment for the Department of Technical Extension and Agricultural Processing and its sub-national line agencies, including extension services. Inputs also include community-based learning and consultation activities with participating farmers and villages.
Activity 2.2 – Modernisation of small-scale irrigation infrastructure (funded and implemented by Asian Development Bank (ADB) Support to the construction and modernisation of small-scale irrigation schemes in selected catchments within the GCF project area. ADB will provide USD 30m in loans and USD 5m in TA grants. For details, see the Aide Memoire between GoL and ADB (Annex 3).
Activity 2.3 – Promotion of deforestation-free value chains and access to markets The project preparation team is in the process of assessing options for supporting access to markets for deforestation-free agricultural products. Findings will be integrated into the Funding Proposal. Activities may include:
− Support for marketing and market information, − Establishing a public-private dialogue platform to mobilise private sector investments and promote the dissemination
of improved practices and technologies, − Improved access to markets, − Strengthening cooperative structures to improve the negotiation power and business skills of local producers and
improve access to rural finance.
Activity 2.4 – Access to finance10 for deforestation-free agricultural value chains The project preparation team is in the process of assessing options for supporting access to (debt) finance for farmers and/or cooperatives for deforestation-free agricultural value chains. Depending on the target group and location of a village, different institutions and channels providing financial services are being considered for strengthening. Institutions may include village development funds, village banks and microfinance institutions. Findings will be integrated into the Funding Proposal. Strengthening and deepening the outreach of formal financial payment services will also be a crucial precondition for save and accountable fund allocation to the local level.
B.2.3 Output 3: Implementation of Sustainable Forest Management (SFM) and Forest and Landscape Restoration (FLR) on 330,000 ha
Output 3 aims to reduce emissions through SFM and FLR including the enhancement of carbon sequestration through the rehabilitation and restoration of mainly degraded forest lands.
Activity 3.1 – Implementation of village forest management and watershed management This activity builds upon the experiences and lessons learnt from the CliPAD (GIZ/KfW) project in Laos11 and consists of the following activities:
− Village Forest Management Planning (VFMP): boundary demarcation, mapping, development of 5-year plans and annual operational plans,
− Implementation of VFMP: silviculture activities, including stand improvement to thinning, natural regeneration and enrichment planting,
− Supporting the introduction of VFMP monitoring systems and protocols, − Technical assistance ; technical equipment for forest inventory equipment (GPS, clinometer, relascope, measures);
capacity building for villagers, including members of the Village Land Use and Forest Committees and forest officers at sub-national level; vehicles (cars, motorbikes); awareness-raising about sustainable forest management and the advantages for local communities.
Activity 3.2 – Implementation of SFM in production forests This activity builds upon the experiences and lessons learnt under the Forest Investment Plan (FIP), including the SUFORD-SU project12. It includes:
10 GIZ Laos has longstanding experience through its program Access to Finance for the Poor 11 Climate Protection through Avoided Deforestation (CliPAD), https://www.giz.de/en/worldwide/17463.html 12 Sustainable Forestry for Rural Development Scaling-Up (SUFORD-SU): www.suford.org/?page_id=24
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− Forest inventory and forest management planning, − Implementation of the management plan (silviculture activities including logging operations), − Follow-up on logging operations, − Checking consistency with approved harvesting quotas along chain of custody, − TA, technical equipment for forest inventory (GPS, clinometer, relascope, measures), capacity building for villagers
and forest officers at national and sub-national levels, vehicles (cars, motorbikes) and outdoor field equipment.
Activity 3.3 – Support of national conservation forest management (national protected areas) This activity builds upon, and complements if necessary, the results of existing NPA support projects such as Integrated Conservation of Biodiversity and Forests (KfW)13, Hin Nam No (GIZ)14 and LENS 2 (World Bank)15 and includes:
− Development of NPA management plans (joint border demarcation, etc.), − Implementation of NPA management plans (law enforcement, patrolling), − Co-management agreements with villages inside or adjacent to the NPA (core and buffer zone), − TA, equipment (vehicles, communication tools, GPS, outdoor field equipment), capacity building for NPA staff and
awareness raising for local communities.
Activity 3.4 – Promotion of private sector investments in community-based agroforestry (role for FAO under consideration) This activity mobilises private sector investments in community-based agroforestry in national production forests, including in the timber and fibre industries. The MAF has started to revise legislation to allow private sector companies to invest into mixed-species timber plantations on highly degraded land in National Production Forests – given villagers are willing to participate. The activity will strengthen the linkage between the private sector and community development and includes the following activities: − Upscaling initial piloting experiences of the GoL in conducting requests for SME proposals for community-based
agroforestry, − Develop subsidies/public incentive mechanisms to attract private sector investments and promote planting native tree
species, − Establishment of public-private dialogue and match-making platforms to promote community-based agroforestry
(including local-level identification of possible areas for restoration), − Technical assistance and capacity building for sub-national forest officers and awareness raising for local
communities.
FAO is currently implementing a GCF Readiness Program activity in Laos to explore and recommend options and opportunities to promote private sector investments in SFM and FLR. The project intends to use the FAO’s findings under Activity 3.4 and through the National REDD+ Fund (Output 1) to promote private sector investments in SFM and FLR. The project preparation team is currently exploring a potential role for FAO as an implementing partner in this context. Details will be further elaborated together with FAO during the feasibility phase.
B.2.4 Output 4: Project management, contingencies, coordination, monitoring and reporting
Output 4 includes management activities and other services, as well as a contingency fund:
− Project management by the PMU and GIZ HQ, including all arrangements and activities necessary for the effective commencement and implementation of the project,
− Implementation of the Environmental & Social Management Plan and Gender Action Plan, − Stakeholder engagement, − Monitoring, evaluation and reporting, − Coordination of implementation partners and development partners, − External communication and media activities, − Contingency budget to ensure the project remains able to react to unforeseen programmatic or financial changes
during the project duration of 8 years.
13 http://www.gfa-group.de/projects/Integrated_Conservation_of_Biodiversity_and_Forests_-_ICBF_3881756.html 14 https://www.giz.de/en/worldwide/39790.html 15 Lao Environment and Social Project (LENS 2): http://documents.worldbank.org/curated/en/104251468179365818/Lao-People-s-Democratic-Republic-Second-Phase-of-Lao-Environment-and-Social-Project-LENS2-Implementation-support-mission-May-4-to-27-2015
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B.3. Expected project results aligned with the GCF investment criteria (max. 3 pages)
B.3.1. Impact Potential
Mitigation potential Figure 1: Overview of mitigation potential attributes16
Project duration (2020-2028) Project lifespan (2020-2050)
Total 25.8 million tCO2eq 61.3 million tCO2eq
Annual 3.23 million tCO2eq 2.1 million tCO2eq
Buffers17 8.2 million tCO2eq total 1.0 million tCO2eq/a
19.4 million tCO2eq total 0.65 million tCO2eq/a
The assumption for the project lifespan is 30 years. Large areas of the project area are covered by regenerating vegetation with the possibility to recover to mature forest under sustainable forest management (based on expert consultations). In 2050, when all designated forest areas are completely recovered and under sustainable management, the project area will be characterised by zero net emission forestry.
Methodology
The project adopts the approved Reference Level (RL) of the GoL’s FCPF ER-PD18, because the project accounting areas are identical. It estimates annual GHG emissions of 10.50 million tCO2eq and carbon removals of -1.96 million tCO2eq (i.e. net annual GHG emissions of 8.53 million tCO2eq).
The estimated mitigation potential, too, is informed by the ER-PD methodology. It is adjusted by conservative effectiveness factors for different activity categories (see ER-PD Section 13 Table 13.2b for details).
The applied uncertainty buffer and reversal risks deductions are based on the ER Program buffer guidelines (see ER-PD Section 8). The buffer accounts for the following factors: (i) 4% uncertainty for deforestation/degradation ERs, (ii) 15% uncertainty for emissions due to logging, and 23% risk of reversals19.
Benchmark
The impact potential is significant and ambitious. The project area accounts for approximately 31% of Laos’ annual national GHG emissions and 26% of removals from LULUCF20. It will directly reduce annual GHG emissions from LULUCF by approximately 10% compared to the national RL.
Using emission reductions per hectare per year as a benchmark, the project performs well compared to other advanced FCPF programs (DR Congo 0.47, Costa Rica 0.30, Laos 0.27, Mozambique 0.25, Chile 0.17, Mexico 0.16).
B.3.2. Paradigm Shift Potential
The project’s goal is to catalyse a turnaround in the LULUCF sector and establish a new management model for the country’s forests and landscapes. The key performance indicator is reduced GHG emissions but, to achieve that goal, the project aims to facilitate change in human capacities and institutions, laws and regulations, behaviour and awareness, and also finances to enable and scale-up SFM and FLR in Laos at scale.
16 Calculated according to the FCPF Methodological Framework and the FCPF ER Program Buffer Guidelines; see also ERPD of Lao PDR section 13. Approved by the FCPF Carbon Fund Participants in 06/2018. 17 The applied uncertainty buffer and reversal risks deductions are based on the ER Program buffer guidelines (see ER-PD Section 8). The buffer accounts for the following factors: (i) 4% uncertainty for deforestation/degradation ERs, (ii) 15% uncertainty for emissions due to logging, and (iii) 23% risk of reversals. 18 see ERPD of Lao PDR section 8, Activity Data report and Emission Factor report. 19 see ERPD of Lao PDR, section 11 & 12 20 Lao PDR’s Forest Reference Emission Level and Forest Reference Level for REDD+ Results Payment under the UNFCCC
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Figure 2: Forest transition curve for the GCF project area
Potential for scaling-up and replication
The project is already ambitious in its scale, impacting over 30% of Laos’ annual GHG emissions, reaching over 500,000 people in six provinces (many of whom are poor and live in remote areas) and covering approximately 35% of the national territory where around 40% of the country’s deforestation and degradation occurs. However, the project also provides the basis for scaling up REDD+ beyond the project’s six provinces to ten additional provinces, in order to cover the entire country.
For Laos, essential enabling pre-conditions, both for the success of the project and also for future replication and up-scaling in other provinces, are: (a) human and institutional capacities, and (b) sustainable financing (see Sections B.2. and C.3). Both are cornerstones of the project’s Theory of Change, which focuses on capacity building, institutional strengthening and unlocking additional financing streams for transforming the sector.
Potential for knowledge and learning
A large share of the project’s activities are dedicated to knowledge, learning, exchange and interaction, including: (a) capacity building and training for communities and local populations, (b) participatory activities including in land-use planning involving communities and local populations, associations and cooperatives, (c) comprehensive stakeholder engagement throughout the project, (d) collection of data and information (for example, through MRV, remote sensing and improved local presence of government agencies), (e) capacity building and training for government staff at national and sub-national levels, (f) inter-agency coordination through the national and provincial REDD+ Task Forces, and (g) donor coordination (e.g. FSSWG). As per standard operating procedures, GIZ will produce a project-specific knowledge management plan as part of the funding proposal package.
The project supports the National REDD+ Office through capacity building in facilitating provinces sharing knowledge and learning through lessons learnt and best practices in PRAP implementation.
Contribution to the creation of an enabling environment
The project dedicates an entire Output to improving the enabling environment for sustaining the project’s activities and impacts beyond its duration (see Section B.2 for details). It addresses (among others):
− Sustainable financing for SFM and FLR in order to permanently close a structural funding gap for transforming the forest sector towards net zero emissions in 2050 (see below),
− Supervision and law enforcement in order to safeguard the project’s social and environmental impacts
− Socio-economic development planning in order to strengthen the authorities’ mandate to scale-up REDD+ across the country and receive public budget resources for doing so,
− Participatory land-use planning across national and sub-national levels to ensure the project meets all stakeholders’ legitimate needs.
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Contribution to the national / local regulatory framework and policies
The project strongly addresses the legal, regulatory and policy framework from the national to local levels under Output 1. Activities include:
− Deep integration of REDD+ into Laos’ 5-year socio-economic development planning and sector planning.
− Complementing the new Forest Law with necessary regulations and operational guidelines for relevant authorities to implement SFM, FLR and village forestry in the project areas.
B.3.3. Sustainable Development Potential
GIZ will determine the economic, social, and environmental benefits including with quantitative estimates through a socio-economic assessment in the context of a feasibility study. GIZ will also conduct a Gender Assessment to identify the gender sensitive impacts of the project. At this point in time, we assume the following sustainable development potential based on secondary studies including the ER-PD if not referenced otherwise21:
Economic co-benefits
The project will increase land productivity and the incomes of supported households. At the time of writing the CN, preliminary estimates indicated that:
- Households adopting deforestation-free agricultural production practices will increase their household income by an average of USD 516/year compared to current annual income levels,
- Villages implementing SFM will increase their average annual village income by approximately USD 7,379/year.
The project’s total benefit to households in USD will be estimated in the feasibility study.
Improved legality of timber production and forest law enforcement will increase Government tax revenues from legal logging and associated value chains/processing (this tax increase will be estimated in the feasibility study for the full project proposal). Improved access to financial services (monetary transactions, savings, debt financing) improves the rural population’s possibilities to handle and store money safely and efficiently. It also provides opportunities for increased income through loans invested in sustainable agricultural practices.
Social co-benefits
Preliminary assumptions are:
- Malnutrition is a permanent threat to the rural population in the project area, as the inhabitants depend on traditional smallholder rain-fed agricultural and shifting cultivation systems. The prevalence of undernourishment in Laos is currently 17.1% with higher rates in the project area22. The project will increase the nutrition and food security of beneficiary households (Output 2) through improved deforestation-free agricultural practices and irrigation.
- Deforestation and forest degradation aggravate the rural population’s vulnerability to extreme weather events and increase the risk of floods, landslides and soil erosion. The GCF project will reduce these risks.
- Some of the poorest districts of the country are in the project area. The poverty headcount-ratio (percentage of the population living below the national poverty line) in the project area ranges between 20.2% and 37%.23 The project will ensure the participation of poor and vulnerable households (Output 2 and 3).
Environmental co-benefits
Key environmental benefits include enhancing biodiversity through the protection of natural forests and the promotion of natural forest regeneration on at least 275,000 ha of land (see ER-PD p.31 for details on endangered species). Village-based management plan implementation and sustainable production forest harvesting practices will be implemented on 260,000 ha of land, which will further contribute to conserving and enhancing biodiversity. Landscape restoration and conservation will foster healthy ecosystems and help to establish biodiversity corridors.
Improved land-use planning, governance and enforcement will also help reduce unauthorised clearing of forested land, and ensure that land use is based on sustainable, participatory and accurate plans.
Gender-sensitive impact
In total, approximately 250,000 poor and forest-dependent men and women in the six project provinces will directly benefit from the project - mainly through diversified, deforestation-free livelihood options in the forest and agriculture sectors. Additional 250,000 households will indirectly benefit from project activities, especially under Output 1. The AE will conduct a Gender Assessment and produce a Gender Action Plan to determine appropriate measures to ensure that the diverse
21 For more details on non-carbon benefits, see ER-PD section 16. 22 https://www.adb.org/countries/lao-pdr/poverty 23 MPI (2015): Where are the poor? Lao PDR 2015 Census-based poverty map
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needs of all beneficiaries are accounted for. It should be noted that the population of the project area includes 23 officially recognised ethnic groups: the project will take full account of ethnic needs and sensitivities.
B.3.4. Needs of the Recipient
Climate risk and vulnerability
Not applicable for a mitigation project.
Financing needs
Laos is a landlocked least-developed country (LLDC) bordered by Myanmar and China to the northwest, Vietnam to the east, Cambodia to the southwest and Thailand to the west and southwest. Laos is ranked 138th on the Human Development Index. According to the IMF, Laos’ risk of external debt distress is high24. The country is in urgent need of a tightened fiscal policy, strengthened public financial management and implementation of a comprehensive debt management strategy. Northern Laos has historically been the poorest and most rural region of the country. The average annual income in the project area is approximately USD 1,200 per capita, compared with a national average of USD 2,330.25
The project will serve to strengthen financial institutions and address the structural funding gap facing the forestry sector in Laos. Please refer to Section C.3 for further details.
B.3.5. Country Ownership
National development strategies and the NDC
The importance of forest resources and their sustainable management are enshrined in the country’s highest-level policies, including the 8th National Socio-Economic Development Plan (8th NSEDP 2016-2020), the Green Growth Strategy (currently being drafted), the Central Party’s Resolution on Land (2017), the Forestry Strategy 2020, as well as in Laos’ Nationally Determined Contribution (NDC). Laos’ NDC puts significant weight on the forestry sector, establishing a forest cover target of 70% as well as activities for regeneration of forests. The National REDD+ Strategy to 2025 and National REDD+ Vision to 2030 are the official Government documents for guiding REDD+ implementation.
The project is fully in line with these policies and strategies. Further synergies exist with the country’s National Biodiversity Strategy and Action Plan (2016-2025), which aims to protect the country’s diverse and economically important ecosystems, including monitoring and enforcing forest protection.
MAF and the National REDD+ Fund will nationally execute the project. Under consideration are grants for additional Executing Entities such as MPI and MONRE provided that sufficient financial resources from the public budget are secured.
As an indication of the strong country ownership underlying the proposed project, this concept note is accompanied by a formal letter of support from the NDA of Laos (see Annex 4).
B.3.6. Efficiency and Effectiveness
Note: the details in this section are adopted from estimates calculated for the ER-PD. They will be refined for the full project proposal to reflect the precise design elements (duration, financial structure, etc.) of the project. Co-financing figures are subject to ongoing discussions and may change.
Estimated cost per tCO2eq (total investment cost/expected lifetime emission reductions)
The estimated cost per tCO2eq, based on the total project investment and assuming an emission reduction over 8 years (25.8 million tCO2eq) amounts to USD 5.4 /tCO2eq. The GCF cost per tCO2eq amounts to USD 1.9 /tCO2eq.
Co-financing ratio (total amount of the Fund’s investment as percentage of project)
Indicative co-financing at this stage amounts to USD 123, sourced from:
− Government of Lao PDR: USD 30 million.
− Asian Development Bank (ADB): USD 35 (USD 30 million loan and USD 5 million grant).
− BMZ: USD 12 million (due to the budget allocation procedures of BMZ, the German Government can only commit contributions every two years. USD 2.4 million will be secured through the government-to-government negotiations in 2018. It is anticipated that the same amount will be committed for the GCF project duration.
24 https://www.imf.org/en/Publications/CR/Issues/2018/03/23/Lao-Peoples-Democratic-Republic-2017-Article-IV-Consultation-Press-Release-Staff-Report-and-45750 25 http://www.worldbank.org/en/country/lao/overview
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− Others: USD 4 million.
− FCPF Results-based payments: USD 42 million.
At this stage, therefore, the GCF co-financing ratio is 73% of the total project investment. However, discussions are ongoing (and are at an advanced stage) with other potential co-financiers (including central and local government, donors and civil society organisations). In addition, JICA has shown high interest to join the project as co-financing partner. The total project budget is expected to increase and the proportion of GCF financing is expected to decrease.
B.4. Engagement among the NDA, AE, and/or other relevant stakeholders in the country (max ½ page)
The NDA has issued an endorsement letter for this CN (attached, see Annex 4).
This GCF project is included in the Laos GCF Country Pipeline.
The Minister of MAF sent a request letter to the Minister of the German Federal Ministry for Economic Cooperation and Development (BMZ), asking for support to develop the GCF proposal and subsequent submission by GIZ.
Under the FCPF process, the GoL and development partners conducted extensive consultations on drivers of deforestation and forest degradation and proposed measures to address these drivers with stakeholders in all provinces and districts and at community level. The consultations showed strong approval for the ER-Program and, by extension (since the GCF project serves to implement the ER-Program in a sub-set of provinces), for the GCF project.
Engagement with development partners: GIZ is in the process of signing Aide Memoires with ADB and JICA (see Annex 5) to formalise and agree respective roles and contributions to the project.
C. Indicative Financing/Cost Information (max. 3 pages)
C.1. Financing by components (max ½ page)
Component/Output Indicative cost
(USD)
GCF financing Co-financing
Amount
(USD)
Financial Instrument
Amount
(USD)
Financial Instrument
Name of Institutions
Output 1:
Creation of an enabling environment for REDD+
37,000,000 8,000,000 Grant
15,000,000 (tbc)
12,000,000 (tbc)
tbc
2,000,000
Public budget
Grant
Grant
Grant
GoL
BMZ (GIZ)
JICA
Others
Output 2:
Implementation of deforestation-free agriculture
57,000,000 14,000,000 Grant
8,000,000 (tbc)
30,000,000
5,000,000
Public budget
Loan
Grant
GoL
ADB
ADB
Output 3:
Implementation of sustainable forest management (SFM) and forest landscape restoration (FLR)
33,000,000 24,000,000 Grant
7,000,000 (tbc)
tbc
2,000,000
Public budget
Grant
Grant
GoL
JICA
Others
Output 4:
Project management, contingencies, coordination, monitoring and reporting
tbd tbd tbd tbd tbd tbd
Payment to the National REDD+ Fund
42,000,000 - - Up to
42,000,000 Results-based
payments FCPF Carbon
Fund
Indicative total cost (USD) 169,000,000 46,000,000 123,000,000
C.2. Justification of GCF funding request (max. 1 page)
After decades of losing tropical forest and emitting GHGs around the world, the REDD+ mechanism is now approaching implementation at global scale. Laos has committed substantial domestic resources in order to participate in REDD+ and transform its forest sector, but a funding gap remains. Laos still needs GCF support at an early-stage, REDD+ Phase 2 public investment in order to unlock additional results-based payments, domestic taxes and fees and to create a sustainable financing environment for scaling up REDD+.
No developing country has ever managed to achieve sustainable management of its forests and landscapes alone anywhere in the world. The degree and complexity of the necessary change is high. The need for financial and technical assistance is high. Laos needs GCF support in the form of a patient long-term commitment, which goes beyond the potential of Laos’s existing development partners:
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Alternative 1 – More public financing: The GoL has already committed to contributing a substantial share to close the funding gap. It will also increase its contribution over time, as the project helps to unlock additional funding sources including RBPs, taxes and fees.
Alternative 2 – More grants from other development partners: All of Laos’s current development partners in the forest sector already support the project to the fullest extent possible. Germany and Japan have both committed grant financing and ADB has committed a loan package. The FCPF Carbon Fund is offering Laos results-based payments.
Alternative 3 – More loans for the GoL: Laos is a landlocked least developed country (LLDC). Laos is ranked 138th on the Human Development Index. According to the IMF’s recent Debt Sustainability Analysis, “Lao PDR’s risk of external debt distress remains high, suggesting the urgent need to tighten fiscal policy, strengthen public financial management, and develop a comprehensive medium-term debt management strategy.” Despite these constraints, the GoL is willing to borrow USD 30m from ADB to complement this project. The fiscal space for additional borrowing for this project is exhausted.
Alternative 4 – Loans for households: The beneficiary groups - village foresters and subsistence farmers - are among the poorest population segments in Laos. They often have limited access to financial services and insufficient securities for the repayment of loans. A preliminary financial analysis for the FCFP indicated negative rates of return of the project’s village-level investment activities26.
In the absence of viable alternatives, the Government requests GCF grant financing.
To ensure efficiency, effectiveness and sustainability in the use of grants, the project applies the following principles:
1. The project will identify (feasibility) and strengthen (implementation) a national financial intermediary to be an additional Executing Entity and to manage GCF grants.
2. The AE and EE will disburse GCF grants in tranches, with the second and consecutive tranches conditional on results delivered.
3. The GoL will make available unlocked financing (results-based payments, tax, fees) to the EE, replacing GCF grants and closing the funding gap to transform the forest sector.
C.3. Sustainability and replicability of the project (exit strategy) (max. 1 page)
The entire project approach is designed around a distinct exit strategy: GCF grant financing will enable the GoL to: (i) initially and temporarily close the structural funding gap for transforming the forest sector through the provision of GCF grant finance 27, and (ii) permanently close the structural funding gap by unlocking and increasing additional financing streams for the sector. The current estimate of the funding gap for the project duration (8 years) is approximately USD 169 (to be confirmed in the full feasibility study). There is no estimate yet available for the project lifespan of 30 years until 2050.
Figure 3: Sustainable financing for closing the funding gap*
(*Schematic illustration only. “GCF project” includes co-financing)
26 See ERPD of Lao PDR, section 6.2. and annex 9 27 See Annex 6 for tentative sources and flows of funding
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The key elements of the exit strategy are:
− The project will support and strengthen the capacities of a national financial institution to act as an Executing Entity fund (i.e. as a National REDD+ Fund) to manage parts of grant financing for the project. Candidates are currently under consideration. The AE and GoL do not intend to create a new FI for this purpose but, rather, to leverage the expertise and track record of an existing institution. The project will channel GCF grant financing (in a staggered, performance-based manner) through the EE fund to participating villages and stakeholders for implementing SFM, FLR and deforestation-free agriculture.
− The GoL commits to gradually increase its contributions to the EE fund and thereby replaces the GCF grant financing (see Figure 3). The GoL’s contributions will come from different sources, which can be structured into the following categories:
● Public budget: this includes the provision of financial and in-kind resources from the public budget of Laos to the EE fund, beginning in year 1 of the project. The project’s interventions are expected to increase tax returns as a co-benefit (agriculture, commercial village forestry).
● Fees and other revenues: Some of the candidates for an EE fund are already legally enabled to receive payments from concession fees. The project will expand these revenue streams.
● Results-based payments: The project will help to unlock FCPF Carbon Fund payments of approximately USD 42m in the first accounting period (anticipated mid-term payment in 2023 and final payment in 2025). The RBP will be channelled through the EE Fund. If successful, the GoL commits that approximately 90-93% of the payments to the EE fund will be used as a permanent endowment to the fund, generating interest returns. The same will apply to other REDD+ compensation payments
In an indicative cash-flow projection, maximum development partner support including the GCF contribution will account for 70% of the funding gap (in years 4-5). However, by the end of the project (i.e. by the end of year 8), a progressive injection of newly-catalysed financing from taxes, timber revenues, fees and results-based payments will have more than replaced the GCF funding. A transition to sustainable financing, entirely independent of the GCF, will have been successfully achieved.
Additional measures to ensure sustainability include:
● Further mainstreaming REDD+ into development planning
● Regulation and land-use planning for enabling commercial use of forests at village level
● Promotion of village forestry associations
● Strengthening CSO involvement
D. Supporting documents submitted (OPTIONAL)
☒ Map indicating the location of the project/programme
☒ Diagram of the theory of change
☐ Economic and financial model with key assumptions and potential stressed scenarios
☐ Pre-feasibility study
☐ Evaluation report of previous project
☐ Results of environmental and social risk screening
Self-awareness check boxes
Are you aware that the full Funding Proposal and Annexes will require these documents? Yes ☒ No ☐
• Feasibility Study
• Environmental and social impact assessment or environmental and social management framework
• Stakeholder consultations at national and project level implementation including with indigenous people if
relevant
• Gender assessment and action plan
• Operations and maintenance plan if relevant
• Loan or grant operation manual as appropriate
• Co-financing commitment letters
Are you aware that a funding proposal from an accredited entity without a signed AMA will be reviewed but not sent to
the Board for consideration? Yes ☒ No ☐
