3. The solution: Outline of the Nested System
This scenario also presents multiple opportunities for Cambodia to leverage to support the integrity of carbon accounting and ensure a fair benefit distribution. Different sources of "results-based" finance are available at various scales. Projects, for instance, have a greater capacity to attract carbon finances from the markets. On the other hand, the government can pursue bilateral voluntary cooperation for the implementation of the NDC or apply to funds such as the Green Climate Fund (GCF) to receive REDD+ results-based payments at the national scale, or alternatively, at the jurisdictional scale during the interim period.
Cambodia acknowledges high integrity of carbon credit is a priority that demands environmental and social integrity, solid governance and science-based practices, as well as the need for clear rules regarding how actors interested in forest carbon finance operate, engage with, and report to the government. Therefore, to achieve the NDC’s forest targets and maximise opportunities for forests and people and overcome the above-mentioned challenges, Cambodia has developed a Nested System aims to:
1. Enable Cambodia to participate in mechanisms/opportunities as framed by the Paris Agreement’s Article 6, through fair rules, clear systems and transparency
2. Enable multiple sources of finance to support Cambodia’s forest and climate goals, including private sector finance and participation in voluntary carbon markets
3. Supplement government capacity to implement the NRS through support for site-based activities
4. Drive projects to areas of higher risk and promote equity among them
5. Promote alignment in how projects and the national government measure GHG performance
6. Support Cambodia’s NDC achievement and prevent the double counting of ERs
Cambodia's Nested System seeks to enable carbon crediting at multiple scales (project, sub-national, national). This required clarifying the processes, rules and methodologies to account for and keep track of ERs at multiple scales, and a fair system to reconcile forest carbon crediting and thus sharing REDD+ benefits at multiple levels. With these objectives in mind, Cambodia has developed the needed technical, procedural and regulatory components to implement the Nested System that are integrated into the REDD+ Regulatory Framework.
Cambodia's Nested System design encompasses a hybrid approach, incorporating both centralised and decentralised models of Nesting. Through the implementation of the Nested System, Cambodia will have the capability to allocate baselines to projects seeking participation in the voluntary market. These projects will generate ERs or removals based on their individual performance while ensuring alignment with the national monitoring system. Simultaneously, initiatives associated with the compliance market will facilitate the generation of ERs in accordance with national performance.
To put all the elements in place, Cambodia defined a staged approach to designing, integrating and enforcing the Regulatory Framework, which considers a Piloting to understand how the institutions and systems respond integrally and identify pending gaps and request capacity to operate the System nationally and provincially. This regulation will require REDD+ projects (or programs) to register in a National REDD+ Project Database and follow a set of requirements that will align REDD+ projects/programs with national framework, including the NRS, National Forest Monitoring System (NFMS), or Safeguard Information System (SIS).
BOX 2. Consultation Process of Nested System:
Cambodia has been making significant strides in developing a robust Nested System to address integrity concerns and foster forest finance. Beginning with a nested workshop in November 2018, the country embarked on a journey of extensive deliberations and discussions. By March 2019, fruitful conversations were held regarding the objectives of nested, scales of crediting, and the potential for carbon finance. Building upon this momentum, subsequent agreements were reached in 2019, focusing on the comprehensive design of the nested framework, adopting a staged approach to its implementation. Towards the end of the year, the REDD+ Secretariat took a momentous step by issuing a "Technical Note" on nested, outlining its objectives and establishing a timeline. 2020 and 2021 witnessed dedicated efforts to develop the regulation and essential elements that would underpin the Nested System, marking another milestone in Cambodia's commitment to sustainability and forest stewardship.
Source: Nested Report of Cambodia.
Nested System’s structure:
BOX 3. Cambodia and VCS's REDD+ consolidated methodology:
Verra is revising its approach to VCS REDD+ projects globally in response to identified issues with current methodologies and projects. These revisions aim to enhance the environmental integrity of REDD+ projects worldwide, aligning them with the latest scientific knowledge and evolving best practices. In Cambodia, the government is analysing this information to update or modify its draft Prakas and Nested System as necessary, ensuring compliance with market integrity requirements. The new REDD+ Consolidated Methodology is currently undergoing validation and is expected to be finalized in 2023. Once approved, all VCS REDD+ projects in Cambodia, both existing and new, would be mandated to adopt the new methodology. This work underway reflects Cambodia's dedication to upholding high standards of REDD+ implementation, thereby securing its prominent position in the voluntary carbon markets.
Sources: Own elaboration.
6. Staged approach for the implementation
8. The Way Forward
UNDP has engaged with the Government to collaborate in the development and implementation of the Nested System. The following actions will be critical to support Cambodia to reach its forest and climate goals:
Finalization of the Regulatory Framework for REDD+ Projects.
Prakas for REDD+ GHG Mechanisms in Cambodia is currently drafted and in the process of being signed, a milestone that marks the starting of the Early Nested stage.
Carry out the Nesting Piloting to integrate multiple efforts.
UNDP assists the REDD+ Secretariat in testing and refining operational components of the Guidelines for REDD+ Nesting on pilot sites, including aligning national and project baselines, project registration procedures, governance practices, and addressing operational challenges to establish the Nested System. Specifically, this piloting will cover:
Strengthen REDD+ institutional arrangements and improve intersectoral coordination and stakeholder engagement at national and subnational levels;
Enforce the Regulatory Framework for REDD+ projects and operation of the National REDD+ Project Database;
Detail operational procedures and processes to operate Nested and its elements nationally and provincially.
Clarify the MRV, NFMS and SIS operation, and monitor/report the progress of REDD+ implementation.
Mainstream safeguards and gender considerations in REDD+ implementation at national and subnational levels.
Mobilization of adequate finance for REDD+ implementation.
The volume of funding required to transition from REDD+ readiness to full-scale implementation necessitates the coordination of multiple sources of finance, from the national budget and development aid to private and public climate finance. To facilitate this process, UNDP is actively supporting the REDD+ Secretariat in:
Advance in the financial structure to channel forest finances, manage REDD+ revenues and share benefits through the Environment and Social Fund
Advance in a strategic framework to ensure the system's integrity and strengthen Cambodia’s position in the carbon markets and Article 6 implementation, with a particular focus on the FOLU Sector.
The information in this interactive document is derived from publicly available data on the Nesting Report of the REDD+ Secretariat within the Ministry of Environment (accessible here). The content presented in this document is part of extensive collaboration between the United Nations Development Programme and the REDD+ Taskforce Secretariat, facilitated by the Forest Carbon Partnership Facility (FCPF) program, which provided technical and financial support for the development of Cambodia's Nesting System. For additional details regarding the Nesting System and the National REDD+ Program in Cambodia, please visit the official website (linked here).
UNDP is supporting Cambodia to pilot the Nested System, with technical assistance through Climate Promise and the UN-REDD Programme