Kalimantan Forests and Climate Partnership (KFCP) Design ...

take the form of a trust fund, which could later also support other IAFCP demonstration activities, or be
pooled with other donors‘ funds to form a joint trust fund. Payment mechanisms and associated
institutional arrangements are complex, with many moving parts to consider at different levels of
governance. The design process is simplified by breaking the overall mechanism into components, each
of which can be developed in parallel with the others and treated independently for purposes of
designing a workable mechanism, provided it can eventually be connected to the other components. In
the KFCP, components will be developed at village, district, and provincial levels. Work at each level
will be guided by emerging policy at higher government levels, up to and including national policy.
The design of KFCP payment mechanisms should draw on lessons and best practise from payment for
environmental services (PES), conditional cash transfer and social protection activities. Although such
activities have different purposes to the KFCP applicable lessons may be available in areas such as
working through partner government systems, targeting appropriate recipients for payments
(individuals or groups) and the advantages and disadvantages of cash versus in-kind payments. AusAID
Environment Advisors and the AusAID Social Protection Expert Panel can assist in the design of
payment mechanisms, particularly by providing advice to the KFCP implementation team, participating
in design and reviews of design and responding to specific technical queries.
In addition, the design process can be expedited by building or modelling REDD payment mechanisms
on existing institutions and systems, including traditional as well as more formal institutions.
At village and sub-district levels, the National Program for People‘s Empowerment (PNPM)
offers a mechanism to distribute funds for locally driven initiatives, which could be linked to
REDD interventions. Customary institutions of land and forest tenure may offer a way to
allocate some benefits.
At district level, a public service agency (BLU) may provide an institution for governing
REDD payments to lower levels. Licenses for managing environmental services are within the
purview of district government and could form a basis for REDD payments.
Forest management units (KPH) and the current framework of forest utilisation rights and
licenses provide a basis for apportioning forest use rights and payments linked to REDD.
Current law recognises community-based rights including concessions and customary forest.
Payments will have to be closely linked to monitoring of GHG emissions and socioeconomic impact in
order to verify and certify reductions, create a system that is credible, and inform the development of
INCAS. Payments may be distributed through more than one channel or differently at different levels of
governance. An option for the KFCP is for a district-level institution, such as a public service agency,
to act as REDD proponent in terms of the national regulation, while local resource users such as
community groups or other license-holders would act as proponents to the district. The local proponents
would thus be ―bundled‖ together under a single entity at district level, possibly with management
coordination from a forest management unit, to reduce transaction costs and improve monitoring and
supervision. REDD payments might be made from the trust fund to the district proponent and thence
distributed to the local proponents; or (some) payments might be made directly to local proponents. The
KFCP will model and test various approaches before scaling up.
Incentives aimed at changing land use or forest management should directly target resource users
(individuals or groups). The bulk of incentives under the KFCP are anticipated to be targeted in this
way. Incentives to encourage sustainable land use and forest management will take three forms:
Input-based: immediate remuneration or other direct benefits linked to adopting and
implementing interventions, such as building dams, planting trees, supplying dam-building and
tree-planting operations, or eliminating fire use on peat soils; 16
Performance-based: annual payments for sustaining interventions so as to achieve the desired
results, such as maintaining dams in order to keep water levels high, protecting forest from
encroachment, or reducing the incidence and extent of fire; or
16
Since canals now give access to land that is cleared with fire, canal-blocking will itself reduce such access and the
associated fire risk along the canals, whence fire often spreads. Thus, current land users may be entitled to compensation
for giving up that access.
36 KALIMANTAN FORESTS AND CLIMATE PARTNERSHIP (KFCP) DESIGN DOCUMENT