To Xuan Phuc Policy analyst, Finance and Trade Program, Forest Trends

02/03/2012

Current forest situation PES enabling conditions PES implementation in Lam Dong province Key issues Conclusion

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13 million ha, 39.1% forest cover

Special use forest (PA): 1.94 mil ha (14.9%) Protection forest: 4.38mil ha (33.7%) Production forest: 6.28 mil ha (48.3%)

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PES including REDD+ involving in Vietnam PES piloting policy (PFES) and Decree 99 Vietnam participate in UNREDD: National REDD+ Program under development Sub-national jurisdiction activities are involving (both at province and project level) Private initiative: Forest certification, SFM FLEGT VPA negotiation ongoing
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Phase 1 about to complete Phase 2 forthcoming

Vietnam Forest Fund Vietnam Forest Fund Trust Fund: no mainstreaming into the Trust Fund: no mainstreaming into the government budget government budget

Exemption, Reduction Exemption, Reduction

The whole area of The whole area of watershed located in more watershed located in more than 1 province than 1 province

Household with Household with allocated land allocated land

Identify Identify Service buyers (hydro, Service buyers (hydro, water supply) water supply) The whole area of The whole area of watershed area located watershed area located within a province within a province

Organization (SFEs, Organization (SFEs, SOCs, MBs, etc.) SOCs, MBs, etc.) HH with contracted HH with contracted land land

Provincial Fund Provincial Fund

K-factor; evaluation, determining K-factor; evaluation, determining payment level payment level

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10% management/ Operation fee Service buyers (hydro, water supply)

90% to households with contracted land

Forest user as organization (MBs, SFEs) Min. 85% as payment (as 100%) Max. 5 % contingent fee (reserve account) Maximum 10% management/ operation fee

Vietnam/ National Forest Fund

Provincial Fund

100% payment to forest user as nonorganization (households with allocated land)

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Enabling conditions (4) Proposed REDD+ BDS: regulated market

Viet Nam receives revenues into a National REDD Fund (stand alone fund, or subfund of an existing fund), overseen by a broad-based, multi-stakeholder governing body (1) Staff of National REDD Fund calculate provincial shares of the total revenues based on provincial performance (2) Staff of the National REDD Fund calculate implementations, transaction costs, and opportunity costs incurred by the central government and subtract these amounts from the gross revenues (3) Net revenues are distributed to Provincial REDD Funds (mirrored on the Option Option National Fund,1and also with participatory governance structures), according to RP 2 coefficients
A. Provincial REDD Fund staff repeat steps 1-3 to determine distribution of net REDD revenues to District Funds B. Provincial REDD Fund staff are responsible for disbursement to ultimate beneficiaries

Provincial/District Fund staff (depending on Option A or B) determine net revenues to be distributed to ultimate beneficiaries, and deliver payments or other benefits

Agencies monitor disbursement activities

Agencies responsible for providing recourse in the event of disputes undertake actions to ensure that all beneficiaries are able to register a complaint if desired

Staff of the National REDD Fund initiate independent external auditing of 02/03/2012 National, Provincial, and (if relevant) District REDD Funds

4 key buyers: 2 hydropower, 1 water supply, 1 tourist company Total PES/PFES revenue: 5 million USD Disbursement of the PFES payment to eligible groups in 2009 and 2010 202,251 ha of forest, 7,997 households (via contract with 18 forest users) Average payment: 350-400,000 VND/ha/year (17-20 US)

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Decision380
MinistryofAgriculture& RuralDevelopment, others EnergyofVietnam

People'sCommitteeofLam Dong

Water supply companies

ForestProtection andDevelopment Fund(central)

Department ofAgricultureand RuralDevelopmentofLam Dong

Dept. ofculture, sport,andtourism

40D/m3

LamDongForest Protectionand DevelopmentFund

1%

Touristcompany

Hydropower plant

20D/kwh 10%
Management Boards/forest company

10%
Households
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UNREDD Vietnam Program ongoing Vietnam National REDD+ Program is under development WB FCPF is undertaking Bilateral negotiation: sub-national jurisdiction Private sector investment: involving, at project level The government appreciate both regulated and voluntary markets

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Land tenure Service buyers Service providers Intermediaries Institutions Others

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Clearly defined rights are very important for the success of PES /REDD+ (particularly for voluntary market) Land tenure in Vietnam is not always clear:
8 forest user groups Contracted land and allocated land
Lam Dong: 18 main forest users; short-term contract signed with local households; no long-term guaranteed Son La: land allocated to households, but changes have not been updated before the implementation of PFES, thus potential for conflict; some land allocated to communities, yet communities have not gained legal status.

PES/REDD+ operates within the current tenure structures: lacking mechanism for benefiting the poor Local elite capture
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Different forest types (special use, protection, production), with different management regime Who own carbon rights in Vietnam is not clear, thus the lack of benefit sharing mechanism (for voluntary market/PES)

Hybrid between public and private, thus powerful buyers (e.g. Hoa Binh hydro/EVN) Payment is not performance-based, but made because Prime Minister requests ES payment should be built in price structure, but constraint thus uncertainty for PES revenue The lack of institutional and policy framework for facilitating carbon market, thus risks for investors but creating opportunity for elite capture?
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8 forest user groups with different quality of forest, thus different payment levels Ownership right: government Unequal distribution of PES/REDD+ benefits among users Payment to MB, SFEs/SCs? Payment to commune PC? Payment mode: individual households, group of households, or community? (transaction costs) How is payment used within community? Opportunity costs? Operational costs?
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Potentials for conflicts Difficulties in protecting the forest

Government as intermediaries, connecting buyers and sellers Government decide level of payment, how the payment is made on what basics The government regulates carbon transaction: Trading emissions is stipulated by the Prime Minister Local government: socioeconomic indicators are important for deciding how payment is made, thus
Potential conflicts between negotiation decision (performance-based) and local priorities

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Institution and policy framework for PES is evolving The lack of policy framework for regulating investment in carbon market Weak coordination among government agencies (e.g. MARD, MONRE) Weak coordination between government and private sector, government and CS. The lack of capacity and human resources within the government and non-government sector Unclear about post-Kyoto, thus governments hesitancy in carbon market
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Capacity building particularly for the local government PES/REDD+ should not be seen as money, but huge cost implications:
Operational costs Capacity Transaction Others?

PES/REDD+ should be seen as opportunity for improvement of forest governance PES/REDD+ as opportunities but also risks, thus adopting this with careful attention particularly on the issues land tenure and equity in benefit distribution Implementation of PES/REDD+ should be step-wise, starting with participatory payment while building up capacity. Result-based payment should be later, when the country is ready Policy framework for regulating carbon market should be developed, at least to regulating investment activities on the ground, thus mitigating negative impacts for local communities
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