Institutional Mechanisms for REDD+ - Case Studies Working Paper

management. REDD+ simply provides a new space for debating this issue. If the project were to carve out a
larger role for the DDCs and DFOs–for example, by establishing a DFCC to play the advisory role at the
watershed level–significant investments in the capacity of local government will likely be necessary. To date,
the project focus has been on community level capacity building.
Furthermore, the financial sustainability of this model is highly dependent upon the availability of carbon
markets and the ultimate price per ton of carbon. The proposed institutional structure is likely to entail
significant set-up and transaction costs, since it does not rely on already existing institutions.
4.4.3 COMMUNITY ENGAGEMENT
This demonstration project provides a model for REDD+ benefit sharing that puts communities at the heart
of local implementation and decision making. The establishment of the Watershed REDD+ Networks
empowers communities by providing a space for multiple CFUGs within a given watershed to coordinate and
negotiate as a group. According the Network members interviewed, this type of institutional arrangement is
novel in their districts. Given that CFUGs are relatively small (typically less than 50 ha) and extremely
numerous in Nepal, this type of model will likely provide a useful option to reduce transaction costs of
REDD+ implementation at the national scale.
Based on this case study research, it is not clear whether the community consultation process facilitated by
FECOFUN would meet emerging international standards for FPIC that are being demanded by numerous
indigenous peoples organizations around the world for implementing REDD+. The fact that FECOFUN,
which is also a project proponent, facilitated the consultations raises questions about the neutrality of the
process. When posed questions about the potential downsides of the project or about concerns raised by
community members, the Watershed REDD Network members were not able to identify any issues. This
situation could be due to a failure of the FPIC process, or due to the fact that for this particular project, there
are actually very few (if any) opportunity costs faced by the communities.
At the time of research, published reports from the project proponents on the consultation process that was
carried out were not available. As a result, it was not possible to analyze the extent to which the process
adhered to emerging REDD+ safeguards in Nepal, such as the REDD+ Social and Environmental Standards
and the Strategic Environmental and Social Assessment of the FCPF.
4.4.4 DISBURSEMENT EFFICIENCY
At the time of research, payments had not yet been disbursed. It is anticipated that the first payments will be
made in late 2011. The disbursement procedures outlined in the operational guidelines involve several layers
of review, recommendation, and approval. While these procedures can enhance transparency and
accountability, they may be expensive in terms of time and transaction costs.
If scaled up to the national level, the proposed FCTF structure would likely be fairly efficient in terms of
limiting the number of intermediaries in payment distribution. However, this process raises an additional
challenge with respect to the capacity of a national FCTF to manage the distribution requests of a potentially
large number Watershed REDD Networks.
4.4.5 DISBURSEMENT EFFECTIVENESS
The payments are clearly linked to performance in terms of carbon sequestration, which is given the largest
weighting within the payment calculation criteria. Payments are also contingent upon verified compliance
with project standards during the previous year.
Nonetheless, it is unclear whether the proposed payments will significantly change the behavior of
communities with respect to forest management. First, the use of additional payment criteria that are based
on social indicators (e.g., poverty, gender, and ethnicity) rather than performance indicators is likely to dilute
86 PRRGP INSTITUTIONAL MECHANISMS FOR REDD: CASE STUDIES – WORKING PAPER