Colombia: BioCarbon Emission Reductions Program Orinoquia

pipeline

Country context Colombia's economic growth and poverty reduction were hindered by the COVID-19 crisis. Despite progress in reducing extreme poverty from 17.7 percent in 2002 to 6.6 percent in 2021, the economy contracted by 7 percent in 2020. However, it rebounded with 10.7 percent growth in 2021, and unemployment returned to pre-pandemic levels of 10.7 percent in 2022. Climate change negatively affects Colombia's economy and natural resources. Ranked 91st in the Notre Dame Global Adaptation Index, the country suffered damages from heavy rains in 2010 and 2011. Temperature increases, variable precipitation patterns, and glacier melt impact agriculture and water supply, including high-value crops like coffee and cocoa. Rural households are projected to experience higher income losses than urban households due to climate change. Biodiversity loss in Colombia is driven by climate change and unsustainable land-use. Despite being the second most biodiverse country, Colombia ranks 10th in deforestation, having lost 3.2 million hectares (ha) of natural forests from 2001 to 2021. Deforestation harms species reliant on forests, and many ecosystems are in critical condition or at risk of collapse. Unsustainable land-use and climate change further threaten non-forest ecosystems, exacerbating biodiversity loss. Over 1,300 species in Colombia face extinction. Colombia has committed to addressing biodiversity loss through the Kunming-Montreal Global Biodiversity Framework. Sectoral context. To address climate change, Colombia seeks to transition to a low-emission economy supported by sustainable productive landscapes over the next eight years. Its Nationally Determined Contribution (NDC) to the United Nations Framework Convention on Climate Change (UNFCCC) targets a reduction of projected GHG emissions by 51 percent by 2030 and achieving carbon neutrality by 2050. The Agriculture, Forestry, and Other Land Use (AFOLU) sector accounts for the largest share (59.1 percent) of the country’s total net GHG emissions. The mitigation potential of the AFOLU sector derives from both the reduction of GHG emissions through REDD+ and livestock good practices, as well as an enhancement of GHG removals. Deforestation and enteric fermentation from livestock represent the main categories of GHG emissions, while most (66 percent) of the GHG removals occur on forest lands, followed by crop lands, grasslands, and harvested wood products. The NDC pledges to reduce deforestation by 68.5 percent from 158,900 ha in 2019 to 50,000 ha by 2030; it also presents a US$200M strategy to reach zero-net deforestation. Institutional context. Multiple government entities at national and regional levels promote sustainable low-emission development in Orinoquia particularly since the change of the Government of Colombia (GoC) administration in August 2022. The Ministry of Environment and Sustainable Development (MinAmbiente) and the Institute of Hydrology, Meteorology and Environmental Studies (IDEAM) are leading the environmental and climate change agendas. They collaborate with other entities such as the two regional environmental authorities in Orinoquia, Autonomous Regional Corporations CORPORINOQUIA and CORMACARENA. In the agricultural sector, the Direction of Innovation, Health Protection, and Technological Development of the Ministry of Agriculture and Rural Development (MinAgricultura) works alongside the Unit for Rural Agricultural Planning (UPRA) and is broadening the collaboration to the Rural Development Agency (ADR) on extension services. Other relevant GoC entities include the National Planning Department (DNP), the National Land Agency (ANT), departmental governors, and municipalities. The Colombian Corporation of Agricultural Research (AGROSAVIA) spearheads knowledge generation and dissemination on low-emission agriculture practices. These institutions are part of the Regional Climate Change Committee for Orinoquia (NORECCO) within the National Climate Change System (SISCLIMA). NORECCO promotes and supports coordinated implementation of public policies, strategies, plans, programs, and projects. The World Bank has supported GoC's efforts to reduce greenhouse gas (GHG) emissions from the AFOLU sector since 2010, including readiness grants from the Forest Carbon Partnership Facility (FCPF) totaling US$8.73 million to establish foundational elements for REDD+ at the national level, namely the National REDD+ Strategy; Monitoring, Reporting, and Verification (MRV) system; and National Forest Reference Emissions Level (NFREL). From 2018 to December 2023, the World Bank's BioCarbon Fund Initiative for Sustainable Forest Landscapes (BioCF-ISFL) has provided US$20 million in investment financing through the Sustainable Low-Carbon Development in Orinoquia Region Project (BioCarbon Project, P160680). The BioCarbon Project has financed updates and qualitative upgrades to land-use planning instruments, intersectoral coordination, development of low-emission productive practices for rice, livestock (dairy and meat), cocoa, cashew, commercial forestry, and palm oil, private sector involvement in low-emission platforms, and design of the BioCarbon Emission Reductions Program Orinoquia (BioCarbon ERP Orinoquia or ERP). The GoC aims to pilot an integral, jurisdictional GHG initiative in the Orinoquia region, encompassing REDD+ and agriculture. In 2018, the Orinoquia region accounted for 15.1 percent of Colombia's total net GHG emissions (42 million tCO2e), with 15.9 percent attributed to emissions and 25.5 percent to removals. Within Orinoquia, AFOLU accounted for the largest share of emissions (78.7 percent), primarily from deforestation (73 percent), and enteric fermentation from livestock (24 percent). Relation to CPF. The ERP aligns with the World Bank Group's CPF 2016-2021 and contributes to Pillar 1 by enhancing natural resource management capacity in targeted regions. It supports the CPF's cross-cutting theme of "Constructing the Peace" by promoting an approach that combines peacebuilding and environmental sustainability goals. Developed under the Orinoquia BioCarbon Project, the ERP builds upon the FCPF Readiness Project (P120899). It synergizes with ongoing projects such as the ISFL-funded "Developing Climate-smart Agricultural Supply Chains" (P173540), the GEF-funded Orinoquia Integrated Sustainable Landscape Project (P167830) and the Forest Conservation and Sustainability in the Heart of Colombian Amazon Project (P171227), and the World Bank's Multipurpose Cadaster Project (P162594) and its Additional Financing (P172972). Additionally, the ERP complements an Advisory Services and Analytics (ASA) "Country Climate and Development Report" (CCDR, P178104). The Global Practice on Agriculture and Food Multi-phased Programmatic Approach includes the Sustainable Family Farming in Colombia Project (P180676) as phase 1, which aligns with the ERP in developing and implementing 41 sustainable agriculture practices prioritized for farmers in Orinoquia to achieve Emission Reductions (ER). The ERP The proposed ERP involves an Emission Crediting Transaction supported by an agreement called Emission Reductions Payment Agreement (ERPA). The ERPA will be signed between the Republic of Colombia, represented by MinAgricultura and MinAmbiente, and the World Bank as the implementing agency of the BioCF ISFL. Results-based payments for verified ERs will provide incentive financing for implementing a set of 41 low-emission and climate-smart ERP measures. The ERPA allows the GoC to sell ERs to the highest bidder. The ERP integrates grant funding from the UK Department for Environment, Food and Rural Affairs for a pilot on monitoring biodiversity results in productive landscapes with focus on rice, livestock, and palm oil value chains, and an additional BioCF-ISFL grant for ERP management. The Emissions Crediting Transaction does not directly finance the ERP measures that generate the ERs. The ERP leverages multiple