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Climate change is a core development challenge in Tanzania, and the potential costs of inaction are significant. Current climate variability (including extreme events such as droughts and floods), already leads to major economic costs in mainland Tanzania and in Zanzibar. Individual annual events have economic costs in excess of 1 percent of GDP, and occur regularly, reducing long-term growth and affecting millions of people and livelihoods. Future climate change could lead to large economic costs, equivalent to a further 1 to 2 percent of GDP per year by 2030. Given this context, there is a clear need for strong and sustained effort by the government to help establish a growth pathway for the country that is resilient to climate variability and able to adapt to future change, as well as help Tanzania take advantage of external and domestic finance opportunities for sustained action on climate risks. This policy note responds to a request by the United Republic of Tanzania for technical assistance on next steps for implementing the National Climate Change Strategy (NCCS) and Zanzibar Climate Change Strategy (ZCCS). With strategies in hand, both mainland Tanzania and Zanzibar are at a crossroads where strategic actions have been identified, yet not yet supported with resources or adequate frameworks for implementation. Development partners are active in financing and supporting climate change activities in general, but more than one year after its adoption, a unified approach in support of the NCCS has yet to materialize. Tanzania has requested guidance for mobilizing additional funds, using funding sources more strategically, and delivering results on the ground.

A significant portion of the world’s forests that are eligible for Reducing Emission from Deforestation and Forest Degradation, known as REDD , payments are community managed forests. However, there is little knowledge about preferences of households living in community managed forests for REDD contracts, or the opportunity costs of accepting REDD contracts for these communities. This paper uses a choice experiment survey of rural communities in Nepal to understand respondents’ preferences toward the institutional structure of REDD contracts. The sample is split across communities with community managed forests groups and those without community managed forest groups to see how prior involvement in community managed forest groups affects preferences. The results show that respondents care about how the payments are divided between households and communities, the severity of restrictions on firewood use, the restrictions on grazing, and the fairness of access to community managed forest resources as well as the level of payments. The preferences for REDD contracts are in general similar between community managed and non-community managed forest resource respondents, but there are differences, in particular with regard to how beliefs influence the likelihood of accepting the contracts. Finally, the paper finds that the opportunity cost of REDD payments, although cheaper than many other carbon dioxide abatement options, is higher than previously suggested in the literature.

Climate-related hazards have adverse effects on national growth and poverty reduction, affecting the poor and several sectors of the economy simultaneously. At its current rate of growth, Vietnam will become a major global greenhouse gas (GHG) emitter. The Government of Vietnam initiated the Climate Public Expenditure and Investment Review (CPEIR) to advance an understanding of the current policy and institutional architecture as well as to assess current spending on its climate change response to help guide future climate change-related expenditures and policy implementation. The report has three components: (i) a policy, institutional and methodological review; (ii) an analysis of climate change response (CC-response) spending in five line ministries and three provinces; and (iii) recommendations and an action plan. The main goal of the CPEIR is to provide an overview of the current CC-response activities and formulate recommendations for how to improve priority setting, capacity building, coordination, expenditure management, and mainstreaming of CC-response strategies into socio-economic development plans.

The international development community is increasingly demanding better evidence on the effectiveness of policies and programs across different sectors. The forest sector is no exception. Governments and donor agencies explicitly seek to link investment to proven impact. Yet the evidence base necessary to inform interventions in the forest sector that can successfully enhance the livelihoods of the forest-dependent poor, foster economic growth, reduce emissions from deforestation and degradation, and conserve forest biodiversity remains weak. There is a particular need to identify robust indicators to track and assess the impacts of forest-related investments. The Independent Evaluation Group (IEG) 2013 review of the Forests Strategy of the World Bank, the largest multilateral funding source in the sector, and the subsequent Committee on Development Effectiveness (CODE) report highlighted this need. The IEG recommended the development of outcome indicators on sustainable forest management to track progress across the World Bank’s Forests Strategy. The 2013 CODE report highlighted the imperative to develop short-term proxy indicators for long-term impacts in the forest sector. To date, however, there is little systematic knowledge on the availability of such predictive proxies in the sector, what form they should take, and the conditions under which they are effective. This PROFOR-financed study responds to this gap in knowledge and to broader demand from donors, government agencies, and implementing organizations to develop robust, yet practical means to better understand the impacts of forest sector investments. It focuses in particular on potential predictive proxies for longer-term term outcomes and suggests that such indicators do in fact exist. The report identifies a set of theory-based predictive proxy indicators (PPIs) relevant to one or more overarching development objectives: poverty reduction and economic growth, biodiversity conservation, climate change mitigation and adaption, and good governance.

The report provides quantitative and qualitative insights into the performance of different non-permanence approaches for consideration of parties. This note summarizes the results of the analysis presented in the report. Besides the existing mechanism for temporary crediting, the study analyzed a range of alternative approaches to addressing non-permanence, including those considered in prior deliberations of the United Nations Framework Convention on Climate Change (UNFCCC). The approaches address the risk of non-permanence in several ways. Under the tonne year accounting, credits are issued for the increments of carbon sequestered corresponding to a defined permanence period, and their quantity depends on the carbon stored in biomass each year of the permanence period. However, this approach has not been implemented by any standard. These approaches are not mutually exclusive, but can be used in tandem with each other.

This note examines how to maximize the benefits from the use of market instruments in support of developing countries' low-emission development priorities. First, it briefly surveys the current state and trends of the carbon market, highlighting the main achievements of carbon finance over its decade-long history. Second, it reviews updated scenarios of the scale of future carbon markets and associated financial flows, in light of developments in climate negotiations and domestic markets. Finally, it identifies the necessary steps to scale up carbon market flows in future, on both the demand and supply sides, including the reform of existing mechanisms, and innovation to broaden the scope, scale and reach of carbon markets. The most important determinant of carbon offset market flows to developing countries is clearly the level of international mitigation targets: the more ambitious the targets the greater the scope for such flows. Developed countries can also encourage flows by increasing supplementary limits, which are the proportion of mitigation targets that can be met by purchases from developing countries. Finally, there remains a considerable need for innovation, awareness-raising and capacity building in public and private institutions in developing countries, to increase their participation in the carbon market and build and enabling environment for low-emission development.

Nearly half the world's population and about 81 percent of Sub-Saharan African (SSA) households rely on wood-based biomass energy (fuel wood and charcoal) for cooking. This degree of reliance is far greater than in any other region. While the use of biomass fuels in China, India and much of the developing world has peaked or will do so in the near future, SSA's consumption will either remain at very high levels or even grow over the next few decades. Population growth, coupled with strong urbanization dynamics and relative price changes of alternative fuels, offset the important achievements made over the past decade by significant investments in energy access, rural and urban electrification, off-grid energy developments, and the promotion of alternative energy sources. With increasing economic development, the demand for energy is increasing as well and consumers depend on a broader portfolio of energy sources to satisfy growing energy needs. While electricity and other energy sources are needed to satisfy additional energy needs emerging with economic development, a vast majority of Sub-Saharan African consumers continue to use wood based biomass energy for cooking. Especially electricity is not regarded a suitable alternative for cooking given equipment and use costs. Biomass burning in cook stoves also emits black carbon (BC) as part of visible smoke, which is particulate matter that results from incomplete combustion. Climate science now views BC as the second or third largest warming agent after carbon dioxide, alongside methane. In the case of biomass cooking, the warming effects of BC and the cooling effects of organic carbon that is also emitted during the burning appear to be closely balanced. Given the present uncertainty about the net impact, additional research is currently underway. Black carbon has also an impact at the regional level: it accelerates melting of ice and snow, and contributes to regional pollution which can alter climatic conditions and precipitation patterns over a wide area. This paper advocates that any policy reform should entail a combination of clear rules, transparent enforcement, strong incentives and awareness-creation/capacity development. Key stakeholders and the general public need guidance by way of information campaigns, training, and demonstration projects to ensure that awareness-deficits or false perceptions do not curtail policy implementation. The bureaucratic and administrative barriers e.g. overcomplicated forest management planning requirements, complex fiscal systems and land tenure procedures may inhibit development and thus warrant critical reflection. The regulatory framework needs to integrate externalities in order to promote adequate pricing of charcoal, and thus enhance regional economies.

Carbon finance recognizes the contribution of projects to mitigating climate change. To be able to access carbon finance, projects can certify their emission reductions under a variety of standards, one of which is the Clean Development Mechanism (CDM) of the United Nations Framework Convention on Climate Change (UNFCCC). Project developers can sell their carbon credits either in the voluntary or the regulated market. Since 2002, projects from diverse sectors have been applying the CDM modalities and procedures to generate Certified Emission Reductions (CERs) that are traded in the carbon market Afforestation/Reforestation (A/R) is one out of the 15 sectors that can generate carbon credits under the CDM. The purpose of this document is to share the experience of the BioCarbon Fund (BioCF) of the World Bank in developing and implementing 21 A/R CDM projects in 16 countries. This experience shows that the benefits associated with A/R CDM projects support the livelihood of rural people and their local environment in a significant manner. However, depending on their capacity, projects may struggle with getting credit certification and the associated benefits. This report presents the opportunities and challenges A/R CDM projects face and presents recommendations to facilitate their design and implementation as well as to scale them up significantly.