Separated at Birth? COD Aid and REDD+

Over the last few months, in the context of my new affiliation with CGD, I’ve been making a transition from “Forestry World” — which I inhabited for six years at the Center for International Forestry Research in Indonesia — to “Development Finance World,” headquartered here in Washington with the World Bank, the IMF, and myriad think tanks and advocacy groups interested in development.

In many ways, it’s refreshing to be around people who don’t know what the “+” in REDD+ means, and who don’t realize that referring to “sustainable forest management” rather than “sustainable management of forests” means picking a side in a long-standing and sometimes acrimonious debate over the role of industrial logging in the tropics. I’m hopeful that my new colleagues find it equally charming when I reveal that I’m naïve to various nuances of the development finance discourse that have emerged since I last took part.

But the relative isolation of these two “worlds” has no doubt led to missed opportunities for cross-fertilization. I’ve been struck by the fact that work by CGD and other proponents of Cash on Delivery Aid has remained relatively unknown to proponents of REDD+ — and vice versa — even though “payment for performance” has always been the feature of REDD+ that prospectively distinguishes it from traditional development assistance to the forestry sector.

Birthday Buddies

What’s interesting is that these two streams of analysis and practice got started at about the same time.  The initial working paper by Owen Barder and Nancy Birdsall on COD Aid, “Payments for Progress: A Hands-Off Approach to Foreign Aid,” was published in 2006. This was just as consensus was building around what Ken Chomitz at the World Bank called in At Loggerheads, his 2006 study on the relationship between deforestation and poverty reduction, “a great opportunity for arbitrage.” The arbitrage he had in mind: matching industrialized countries’ willingness to pay for averted carbon emissions with low-return but high-emissions deforestation taking place in the tropics. The associated mechanism being negotiated under the UNFCCC — reducing emissions from deforestation and forest degradation — is what we now call REDD+.  (And for the uninitiated, the “+” connotes the inclusion of activities related to forest conservation, sustainable management of forests, and enhancement of forest carbon stocks.)

The evolutionary paths of the two concepts appear to have followed similar trajectories.  COD Aid builds on but is different from various other “results-based” aid instruments by focusing on payment for performance at the national level, thereby incentivizing removal of policy barriers and extra-sectoral constraints.  REDD+ builds on previous “payments for environmental services” schemes, and was initiated with project-level “demonstration activities,” but proponents recognized early on that unless it was successful in catalyzing transformational change across sectors, deforestation would continue.

Similar Solutions to Similar Problems

Because COD Aid and REDD+ have been evolving in parallel universes, there appears to have been a fair degree of simultaneous “invention of the wheel” taking place, as both communities have tackled common problems.  For example, selection of appropriate indicators of performance and monitoring metrics has been a key focus of the COD Aid literature; early REDD+ debates (which occurred under the rubric of “avoided deforestation”) focused on the degree to which technological advances in remote sensing were sufficient to provide accurate measurements of changes in forest carbon stocks. 

Both communities have had to grapple with how to establish appropriate baselines (or “reference emission levels” in the case of REDD+), how to determine the size of the payment, and how to avoid creating perverse incentives to game the system. 

Both COD Aid and REDD+ have faced resistance from those who worry that payment-for-performance would only worsen corruption, a concern addressed in a recent CGD working paper by Charles Kenny and Bill Savedoff, “Can Results-Based Payments Reduce Corruption? ” Both communities would do well to pay more attention to bureaucratic constraints on the donor side to allocating funds for pay-for-performance. One example: Nancy Birdsall’s recent blog post on how OECD DAC rules for “counting” aid disallowed Norway’s bilateral REDD+ agreement with Brazil based on which bank account committed funds were sitting in.  And the list goes on.

Learning from Each Other

It’s clear that there is a rich two-way learning agenda between these two communities. The newly launched CGD initiative on forests and climate change, Tropical Forests for Climate and Development, aims to, among other things, help ensure  that REDD+ proponents in Forestry World take advantage of the insights and experience of COD Aid in Development Finance World—and vice versa.

While all of the areas I’ve mentioned are fertile areas for comparative analysis, there are three that I think are particularly ripe:

• How to deal with safeguards:  A major concern in negotiations over REDD+ is how to ensure that payments for reducing forest-based emissions don’t result in unintended negative consequences for vulnerable human and ecological communities. Proponents of COD Aid have proposed various ways to ensure that delivery of the quantity of results in (say) the health and education sectors is not at the expense of quality; are there lessons that would be applicable to the forestry sector?
• Preconditions:  REDD+ skeptics point to the weak governance conditions in most forest countries and ask how payment-for-performance forest conservation could possibly work.  In the new preface to their 2010 book, Cash on Delivery: A New Approach to Foreign Aid, Nancy Birdsall and Bill Savedoff argue for minimum preconditions and assert that COD Aid may be “ideal” for fragile states with weak institutions.  Is it conceivable that the same could be true for REDD+?
• The degree to which the reframing of the donor-recipient relationship is the most significant feature of the new approaches:  Over the last year, when I’ve been asked to speak about REDD+, I’ve often projected these two contrasting images: The first shows IMF Managing Director Michel Camdessus, with his arms sternly crossed, famously looking over President Suharto’s shoulder as the latter signed a humiliating Letter of Intent with the IMF during the 1998 Asian Financial Crisis.

  Credit: Getty Images

  The second is of Indonesian President Yudhoyono and Prime Minister Stoltenberg of Norway, standing side by side as their ministers signed a Letter of Intent on REDD+ in 2010.

  Credit: Statsministerens kontor

  In my mind, the images show that payments for forest protection really can be the basis for a partnership of equals. They also illustrate Birdsall and Savedoff’s argument that “COD Aid is worth trying because it creates a better relationship between funders and recipients.”

In future blog posts, I’ll elaborate on areas where I think the forestry sector in general, and REDD+ in particular, may be different from the areas to which COD Aid has been applied, especially with respect to the political economy of the forestry sector.In the meantime, I welcome colleagues from Forestry World and Development Finance World to join me in acquainting with each other these two siblings, unfortunately separated at birth.