Colombia REDD+ Finance and Markets Assessment

Durschinger, L., Fowle, C.
March, 2013

Colombia has made significant progress in designing and implementing its program for Reducing Emissions from Deforestation and Forest Degradation, conserve, sustainably manage, and enhance forest carbon stocks (REDD+). There is a committed core of participants at the national and local levels, supported by a constellation of international experts from industry and the non-profit world, working toward the development of REDD+ activities. While Colombia is moving toward the implementation of its REDD+ program, there are still a number of key elements needed to support market-based and payment-for-performance mechanisms that can attract private capital at scale.

The objective of this report is to assess and provide advice on Colombia’s preparedness for attracting private finance and participation in pay-for-performance and market-based mechanisms for REDD+. The analysis shows that the Colombian government has a relatively high capacity for REDD+, including the technical aspects managed within the Institute of Hydrology, Meteorology and Environmental Studies (Instituto de Hidrología, Meteorología y Estudios Ambientales-IDEAM). However, there is a lack of clear and streamlined authority within the government for decision making. This will make it difficult for Colombia to make the key policy and legal decisions to design and regulate their REDD+ program. Likewise, there is no comprehensive budget for finalizing the build-out and administration of its REDD+ program. Since it has been primarily donor funded, the government does not have complete control over implementation and cannot build a stable and permanent staff to administer its ongoing REDD+ program. Colombia does however have a very high potential for financing REDD+ and promoting markets and payment-for-performance. The stream of environmental taxes and fees within the country is a valuable asset that can leveraged for attracting upfront investment in REDD+ activities. The country has relatively advanced financial regulations and market systems to support the trading of carbon both on a listed and over-the-counter basis.  

If Colombia can build the critical missing component of its REDD+ program. it can maximize its participation in market-based and payment-for-performance mechanisms and allow investors to make affirmative investment decisions regarding investing in REDD+ in Colombia. If investors do move ahead and support REDD+ activities in Colombia, the demand side of the equation is not yet ready to absorb a large volume of REDD+ emissions reductions given the slow evolution of international compliance markets that accept forest carbon credits. This is positive, in that it gives the country time to develop measurement&monitoring activities and national versus regional carbon accounting systems. But it is less than optimal for the local communities that need support now in the face of deforestation and degradation.