Since 2005, the parties to the United Nations Framework Convention on Climate Change (UNFCCC) negotiate how the protection of rainforests could be integrated into the climate regime (Reducing Emissions from Deforestation and Forest Degradation, REDD). This discussion paper primarily addresses the question of how financing of avoided deforestation should be organized. For this purpose, the authors first trace the negotiation process until the end of 2009. A short excursus then describes and analyses the integration of afforestation and reforestation activities into the Clean Development Mechanism. In the main part, the authors present the basic determinants for a possible REDD mechanism followed by a deeper look into financing options. Two main approaches can be identified: on the one hand, the introduction of a public fund, which acquires and manages financial means and distributes them to developing countries. On the other hand, financial resources could be raised via the international carbon market. The authors conclude that a combination of both financing approaches would not only raise the highest amount of financial means but also serve best to reduce several risk factors. In doing so, a temporal differentiation should be made by first raising financial means through a fund in order to gradually switch to a market integration. This process should be carried out with close connection to the other building blocks of the UNFCCC negotiations, especially concerning the setting of mid and long-term emission reduction goals. Certainty on these goals is essential to estimate possible implications of a market integration.
Wuppertal Institute for Climate, Environment and Energy