Benefit Sharing Note_August 2020_English_

Recommendations

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requirements. Benefit Sharing Plans should include a (brief) reflection on the Benefit DistributionMechanism’s capacity to implement the Benefit Sharing Arrangements and how gaps will be addressed,according to a timeline. In particular, attention should be given to the date by which the BenefitDistribution Mechanism will be fully operational (and evidence of this being the case) and how thistimeline corresponds to ERPA Payments – in other words, the mechanism must be fully operational bythe first payment, whether that is an upfront advance payment or regular ERPA Payment. In someinstances, an intermediate or alternative approach may need to be identified in the Benefit SharingPlan in the case that the Benefit Distribution Mechanism is not operational in time to receive an ERPAPayment. It is also useful to note that Program Entities will be required to report on theoperationalization of the Benefit Distribution Mechanism to the World Bank prior to the first ERPApayment, including through Annex 2 of the ER Monitoring Report. 22The Benefit Sharing Plan should clearly and succinctly describe how funds will flow from ERPA Paymentto end-Beneficiaries (including which entity/account will receive the ERPA Payments from the WorldBank). This process should distinguish when an entity will be providing benefits on behalf ofBeneficiaries (see lessons learned on benefits vs. funds flow in the box above). Funds flow diagrams,tables, etc. are encouraged.3.6 Management of ER Program Performance RiskWhile each ER Program aims to achieve certain results in the form of generated, verified and transferredERs, there is a risk that ER Programs may under-perform or not perform at all, for example due tounforeseen events and/or ER Program under-performance within the ER Program area. Throughoutconsultations, anticipated results and corresponding ERPA Payments are typically discussed withstakeholders, which may create expectations among Beneficiaries regarding the amount of Monetary andNon-Monetary Benefits available for Benefit Sharing under an ER Program. Risks of ER Program underperformanceor non-performance and efforts to mitigate these risks should be clearly communicatedthroughout this process.To manage expectations and plan for unforeseen circumstances, Benefit Sharing Plans should addresswhat will occur in the case of ER Program under-performance or non-performance, including:• How Monetary and Non-Monetary Benefits will be shared if results are insufficient to meetneeds or expectations. Benefit Sharing Plans should anticipate cases of shortfalls in results-basedERPA Payments due to ER Program under-performance or non-performance. Specifically, BenefitSharing Plans should outline the processes that will be undertaken if this occurs (who will beprioritized to receive benefits, how this will impact benefit distribution proportions, etc.).• Managing disparities in ER Program performance across Beneficiary groups. There is a possibilitythat for a given reporting period, some Beneficiaries may contribute to reduce emissions andothers may contribute to increase emissions to the point that the overall ER Program’s results arediminished or net-zero. Benefit Sharing Plans should include considerations for managingexpectations, particularly for those Beneficiaries that have helped contribute to reduce emissions,22The FCPF ER Monitoring Report template is available. A similar template will be developed for the BioCF ISFL, butit is expected that Annex 2 will remain largely the same as the FCPF’s.20
and how benefits are planned to be distributed under this scenario. These measures should speakto plans to mitigate ER Program under-performance risk overall.Some Benefit Sharing Plans include contingency plans to address these circumstances throughout thelifetime of the ER Program, including identifying alternative sources of finance and establishing a bufferreserve from generated ERPA Payments to address potential future ER Program under-performance ornon-performance. The majority of Benefit Sharing Plans reviewed to date include a buffer, which reservesa small proportion of ERPA Payments either on the gross ERPA Payments received or after operationaland/or fixed costs have been funded. The use of the buffer varies per ER Program but is generallyenvisioned to be used in cases of force majeure and/or ER Program under-performance in a reportingperiod. In any case, Benefit Sharing Plans should specify the process for the buffer, including how it isestablished and managed, the circumstances under which it is used, and how benefits are shared fromthe buffer. Program Entities are encouraged to consider this approach to manage ER Programperformance risks and stakeholder expectations.Lessons learned:Many Benefit Sharing Plans include ‘performance scenarios’, describing how benefits will bedistributed if ER performance during a reporting period is less than expected (e.g., 50% and 20%performance). Consideration should be given to which Beneficiaries will be prioritized – e.g., willoperational costs be covered regardless of performance to ensure continuity of the ER Program? Willcommunities be prioritized?As noted above, some Benefit Sharing Plans include ‘performance buffers/reserves/set-asides’. Thesereserves have generally been anticipated to total around 5% of ERPA Payments and can only beactivated after the first ERPA Payment (when the first set-aside occurs). They can be distributed invarious ways, but regardless, the circumstances and processes by which they will be utilized must beclear in the Benefit Sharing Plan:• Distribution processes could be the same as what is described in the Benefit Sharing Plan, butdistribution of the reserve only occurs when ERs are under-delivered in a reporting period• Distributions could be made to a subset of Beneficiaries (e.g., a province) that experienceforce majeure events during a reporting period• Distributions could be prioritized for communities or other Beneficiaries if there is overallunder-performance in a reporting period3.7 Fiduciary and Administrative Responsibilities and CostsInformation on implementation arrangements for ER Programs are referenced in various programdocuments, including ERPDs and POMs. It is recommended that information on institutionalarrangements relevant to Benefit Sharing, including the following issues, also be summarized in theBenefit Sharing Plan:• Ability to reach relevant Beneficiaries and the distribution channels required to do so. In somecases, Program Entities plan to distribute Monetary and/or Non-Monetary Benefits tocommunities that cannot be readily reached by existing financial channels. For example, it maynot be possible to transfer funding to a district government responsible for further distributingNon-Monetary Benefits. These issues should be identified in Benefit Sharing Plans and the effortsand associated costs for addressing these should be clear.21
Page 1 and 2: Note on Benefit Sharing for Emissio
Page 3 and 4: 1. Explanation of TerminologyRefere
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Page 7 and 8: Advanced draft BenefitSharing Plan
Page 9 and 10: well as the annexes to the Interim
Page 11 and 12: It is important to manage consultat
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Page 15 and 16: Program Entities have also consider
Page 17 and 18: Considering the various Beneficiari
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Benefit Sharing Note_August 2020_English_

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