#1Photo Source: Justin Raycraft, Flickr DOMINICAN REPUBLIC EMISSION REDUCTION PROGRAM THE WORLD BANK IBRD. IDA Rodrigo Martinez Fernandez Carbon Fund 20th Meeting Washington D.C., USA July 8-12, 2019#2Outline 1. Summary of ER-Program preparation support 2. ER-Program strategic fit with the Bank's portfolio 3. Status of due diligence a. Country Partnership Framework b. Leverage of other investments, Programmatic Approach c. Analytical and policy support d. Coordination with development partners Next steps and timeline 4. a. b. c. Outcome of and feedback form PCN meeting Development Objective Key Risks (SORT) d. Safeguards Assessment e. Program Financing#3Summary of ER-Program Preparation Support Milestones Date Dominican Republic's ER-PIN approval by the FCPF September 21, 2015 Concept Note approved by Country Director September 17, 2018 Final ERPD Submitted May 2019 Readiness Package endorsed at PC27 TAP assessment: rated 1 indicator as NOT met March 2019 June 17, 2019 WB Consultant support: 3 safeguard specialists, 2 lawyers, 1 carbon accounting Specialist, 1 Benefit Sharing Plan consultant, 2 management and financing analysis#4ER-Program Fit into WB's Support Strategy Country Partnership Framework CPF's (FY20-24) Focus Area 3: Promoting Environmental Sustainability and Resilience Objective 6: Improve natural resource management States that: Inadequate natural resource management has led to environmental degradation and increased vulnerability to climate change and can eventually negatively impact growth. The ER-Program is based on protected areas conservation and shade-grown cocoa and coffee and silvopastoral systems with nationwide coverage Calls to promote a: sustainable environment and a sustainable management of natural resources. In forest management, through "REDD+ interventions, will assist the government in the implementation of key readiness activities to develop a national REDD+ strategy in addition to reducing Greenhouse Gas (GHG) emissions from deforestation and forest degradation"#5ER-Program Fit into WB's Support Strategy World Bank Financing Support Program DR Resilient agriculture and integrated water resources management operation USD 80M + Council Approved GEF-7 Project, “Integrated productive landscapes through land use planning; restoration; and sustainable intensification of rice crops in the Yaque Norte and Yuna Watersheds," USD 4.5M REDD+ Readiness, USD 2.2M until December 2020 Prospective: MRV with private sector DR Cacao Foundation with European Space Agency USD 150K#6- - ER-Program Fit into WB's Support Strategy Analytical and Policy Support Forest Country Note with PROFOR USD 150k ER Program Gender Gap Analysis USD 100k NDC Support Facility funding looking at private sector involvement and GHG inventories of sectors including AFOLU USD 500k - Financing Plan for the ER-Program#7ER-Program Fit into WB's Support Strategy Coordination with Development Partners giz Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH FIAT PANIS Food and Agriculture Organization of the United Nations IDB Inter-American Development Bank UN-REDD PROGRAMME FOREST CARBON PARTNERSHIP FACILITY#8Dominican Republic ER-Program Due Diligence - The ER-Program follows the Bank's Investment Project Financing (IPF) standard. preparation Completeness check done by the FMT TAP country visit and ERPD reviews held, most recently in June 2019 Safeguards package sent to Environmental and Social Standards Advisory (ESSA), includes evaluation of capacity of the Executing Entities. Comments are being included in new version at the moment Next steps: - Fiduciary Due Diligence of the BSP on behalf of financial and procurement specialist of the Bank.#9Dominican Republic ER-Program Due Diligence Outcome and Feedback from the PCN Meeting Peer review and Country Management comments discussed during Project Concept Review Meeting held on September 17, 2018, chaired by the country director PDO and Project Design: Appropriate PDO, but project design needs more attention to the enabling policy structure and institutional capacity to address the drivers of deforestation and degradation. Costing: More information is required on the finance gaps of the program. Benefit Sharing Plan: Proposal for BSP will have detailed implementation arrangements. Safeguards: Clear implementation arrangements that outline who is responsible for what, and where the budget will come from are necessary. Clarified the role of the Bank to guarantee capacities to implement its safeguard policies are in place. Risks: Concerns about the impact of the elections on Political Governance and Macroeconomic risk. Ex-ante assessment on financial management arrangements will ensure BSP. The chair highlighted the importance of the project for DR, its alignment with the country's priorities and political agenda, and authorized the team to move ahead with preparation of the project#10Dominican Republic ER-Program Due Diligence Project Development Objective (PDO) The objective of the Program is to incentivize reduced deforestation, forest degradation and enhancement of forest carbon stocks (REDD+) at the national level in the Dominican Republic, through payment of verified emission reductions (ER) and to ensure that paid amounts are distributed according to an agreed BSP. PDO Indicators Unit Target Value 2. 1. Volume of CO2 Emissions Reductions that have been measured and reported by the Program Entity, verified by a Third Party, and transferred to the FCPF Carbon Fund Payment by the FCPF Carbon Fund for CO2 Emissions Reductions generated by the Program tCO2e 6.3 million tCO2e USD US$26M (expected) 3. ER payments distributed in accordance with an agreed benefit-sharing Yes/No Yes mechanism#11Dominican Republic ER-Program Due Diligence Key Risks The overall risk is rated Substantial Moderate Risk Political and Governance Substantial Risk Macroeconomic Fiduciary Sector Strategies and Policies Technical Design Institutional Capacity SORT Categories and Ratings (Systematic Operations Risk-Rating Tool) Environmental and Social Stakeholders#12Dominican Republic ER-Program Due Diligence Safeguards Assessment As part of the requirements established under the common approach, the Cancun safeguards and the Bank's operational policies, the DR has prepared the following assessments and safeguards instruments reviewed by WB ESSA: 1) Strategic Environmental and Social Assessment (SESA) 2) Environmental and Social Management Framework (ESMF) 1) Annex: Involuntary Resettlement Policy Framework and Procedural Standards (RPF) 3) Feedback, Grievance, Redress Mechanism (FGRM) 4) Safeguard Information System (SIS) 5) Environmental and Social Management Plan (ESMP) for the 5 prioritized REDD+ areas In total, more than five hundred meetings and/or workshops on consulting, validation, technical work and negotiation have been held, for a total of 3,325 participants.#13Dominican Republic ER-Program Due Diligence SESA Workshop Participation. A total of 451 people took part in the regional and national SESA participatory workshops. The map highlights the location of the 8 regional workshops held throughout the country: Mapa de Ubicación Talleres Regionales SESA Rep. Dom. 2018 Participation by Gender Women 33% Men 67% Haiti Monte Cristi Puerto Plata Valverde CLP-WI-PRONATURA Espaillat Dajabóny Santiago Rodriguez Hnas Mirabal 1 María Trinidad Sánchez Santiago Participation by Sector Duarte Samaná 140 Bahia de Samaná Elías La Vega Piña Sánchez Ramirez 119 120 San Juan Monseñor Nouel Monte Plata Hato Mayor El Seibo 100 San José de Ocoa Azua San Santo Cristóbal Domingo, La Altagracia Bahoruco San Pedro de Macoris Romana 80 Independencia Distrito Nacional Peravia Isla Catalina (La Romana) 60 Barahona Isla Saona (La Romana) 40 Pedernales Isla Beata (Pedernales) Número de taller regional SESA Provincias participantes en taller Lugar sede talleres regionales 20 92 93 5 0 Sector Público Sector Privado/Productores Academia y Grupos de Investigación Sociedad Civil/ONGS#14Dominican Republic ER-Program Due Diligence SESA Results SESA concerns that came up in the participation process below were taken into account for the National REDD+ Strategy and the ER-Program: Reduction of livelihoods and loss of income Involuntary displacements and removal Social and economic exclusion of vulnerable groups Distribution of the benefits and payments to small producers and local communities Restriction of access to the benefits and non-recognition of rights for those who do not have land property titles - Non-compliance on the part of the authorities and political cronyism Substitution of native and endemic species Discontent, resistance, and disputes as a result of unilateral decisions Phytosanitary measures and control#15ER-PROGRAM BUDGET AND FINANCING ER-Program Activities Classified into 2 Types: Enabling Environment Activities Strengthening of legal and institutional conditions for the reduction of carbon emissions, sustainable management of forests, and preparation for the receipt of REDD+ payments Expected to be financed with public resources Direct Investment Activities On the ground actions that contribute to carbon emissions reductions, protection of forests, restoration of degraded forest areas, and the transformation of agriculture and agroforestry areas Expected to be financed by both the public and private sector#16Government budget SOURCES OF FINANCING Enabling Environment Activities (in thousands of USD) Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 TOTAL Directorate of Protected Areas 1,134 1,134 1,134 1,134 1,134 5,670 Directorate of Reforestation 9,637 9,637 9,637 9,637 9,637 48,185 Directorate of Forest Management, which includes the Forest Fires division 997 997 997 997 997 4,985 Protection and supervision agency made up of forest and park rangers and environmental inspectors 723 723 723 723 723 3,615 Donations and subsidies (non-refundable contributions) Credit resources - IDB Credit: Agroforestry Program 12,980 19,369 21,869 12,593 6,534 73,345 Income from contracted reductions USD 5/tCO₂ (80% effectiveness)³¹ 11,319 19,816 31,135 TOTAL GOVERNMENT RESOURCES 25,471 31,861 45,679 25,084 19,025 19,816 166,939#17SOURCES OF FINANCING Financing on-the-ground REDD+ Actions The First 5 Years (2020-2024) Of the USD $248.6 million needed to execute the Program, approximately 75% has been secured, including the expected payments for emission reductions. The rest it is expected to be raised internally, through international cooperation, and incentives to deter expansion of livestock frontier. The breakeven point will start in year 5, and net positive returns will continue guaranteeing the long- term stability of REDD+ activities. Costs and Benefits Resulting from Direct Activities (Thousands of $US) Program Cashflows (benefits - costs) Year 1 Year 2 Year 3 Year 4 Year 5 Ys 6-10 Ys 11-15 Ys 16-20 Flow of net benefits = benefits - costs Cumulative net benefits - 9,481 - 9,481 - 7,199 -16,681 - 1,539 8,688 19,332 232,332 123,305 223,576 - 18,219 - 9,531 9,801 242,134 365,439 589,015#18Next Steps and Timeline Milestones ERPD endorsement at CF20 expected ERPA negotiation process expected Date July 10, 2019 July -November 2019 ERPA in country Workshop Quality Enhancement Review (QER) for Project Appraisal Document (PAD) and Benefit Sharing Plan (BSP) expected WB Decision Review Meeting ERPA signature expected Letter of Intent (LOI) signed expires August 15, 2019 August 21, 2019 August 27, 2019 November-December 2019 April 2, 2020#19THANK YOU Photo Source: Justin Raycraft, Flickr THE WORLD BANK IBRD. IDA Rodrigo Martínez, Dora Andrade, Ben de Jong, Lilian Pedersen, Laura Calderón, Gustavo Vargas, Julián Gonzalo