PROJECT INFORMATION DOCUMENT / INTEGRATED SAFEGUARDS DATA SHEET (PID/ISDS) CONCEPT STAGE . Report No.: 146416 Date Prepared/Updated: 05-Nov-2019 I. BASIC INFORMATION A. Basic Project Data Country: Dominican Project ID: P161182 Republic Parent Project ID (if any): Project Name: FCPF Carbon Fund: Dominican Republic Emissions Reduction Program (P161182) Region LATIN AMERICA AND CARIBBEAN Estimated Appraisal Date: 05-Mar-2020 Estimated Board Date: 30-Mar-2020 Practice Area Environment, Natural Financing Instrument: (Lead):PHGlbPracLbl Resources & the Blue Economy Borrower(s) Implementing Agency Ministry of Environment and Natural Resources Financing (in USD Million) Financing Source Amount Borrower/Recipient 0.00 Carbon Fund 37.50 Total Project Cost 37.50 Environmental Category: B-Partial Assessment Is this a Repeater project? No . B. Introduction and Context Country Context The Dominican Republic (DR) is an island nation located in the Caribbean that has been one of the fastest growing economies of the region in the past twenty-five years. The robust economic growth enjoyed by the Dominican Republic (DR) has positioned the country as the fastest growing economy in the Latin America and the Caribbean (LAC) region over the last 5 years . The economy has expandedat an average growth rate of 5.3 percent per year from 1993 to 2018 . Fueled by strong domestic demand, the pace of economic growth accelerated to an average of 6.6 percent annually between 2014 and 2018 . DR?s Gross Domestic Product reached US$ 81.3 billion in 2018 . Main economic sectors include agri-food (16 percent) manufacturing (9.9 percent), construction (9.8 percent), commerce (8.5 per cent), transportation (8.2 percent) and tourism (7.9 percent). Regardless of its consistent growth over the last decades, during the past 15 years the country has struggled to maintain fiscal balance. Between 1990-2016, the country averaged an overall fiscal deficit of 2.4 percent of GDP. Despite being one of the economies with highest growth in the LAC region in the last 15 years, poverty reduction in the DR has been relatively modest. Between 2008 and 2016, poverty decreased from 34.4 to 19.9 percent . In parallel, the country?s middle class increased from 24 to 37 percent . During the same period, the Gini coefficient decreased by 2.5 percentage points from 49.6 to 47.1 percent, placing the country?s inequality levels below that of other countries of the region . Despite these achievements, a large percentage of the population (41 percent) remains at risk of falling back into poverty if affected by external economic or environmental shocks. Moderate poverty is still proportionally more predominant in rural areas than urban (38 percent against 27 percent in 2016) . Low agricultural productivity and natural disasters are a recurring threat to the rural population. The DR?s geography endows the country with abundant natural resources on which its economy relies, but which also makes the country highly vulnerable to the impacts of climate change. The insular position of the country, abundant beaches and landscapes have enabled the development of a strong tourism industry. However, the country?s location makes it one of the most vulnerable to natural disasters that are expected to become more frequent and intense with climate change. The DR is highly exposed to rapid weather-related disasters (tropical storms, hurricanes, cyclones, floods and landslides), and to slow climate change processes, including sea-level rise and desertification. The country ranks as the 8th most vulnerable country to climate change . The northeastern region is exposed to floods and mudslides from severe storms, while arid regions of the northwest are experiencing increasing temperatures that pose risk of droughts that affect yields and reduce water supplies. Moreover, Hispaniola Island is at the center of a hurricane belt, and intense storms damage coastal infrastructure and beaches, leading to significant loss in tourism revenues. Between 1961 and 2014, natural disaster-related losses have costed 0.69 percent of Gross Domestic Product (GDP) per year . Recent estimates suggest that the impacts of storms, on average, last up to 15 months after occurrence, with substantial economic impacts: storms, on average, reduces gross domestic product by about US$1.1 billion (4.5 percent of gross domestic product in 2000 and 1.5 percent in 2016). A healthy forest cover can offset some of the impacts of climate-related disasters as they can function as green infrastructure against landslides, flood control and mangroves to minimize the effects of storm surge and sea level rise. Sectoral and Institutional Context The DR has been successful at pairing its outstanding economic growth performance with increasing its forest cover since the 1970s, but in recent years forests are facing important threats. From 1973 to 2012, the DR increased its forest cover from 22 percent to 39 percent of its territory . Although the DR is considered to have been successful at controlling deforestation, pressures on forests remain and exacerbate vulnerability to climate change. The DR?s forest policy rests on three main pillars: (i) the sustainable management of national forest resources through Sustainable Forest Management Plans (MFSP); (ii) commercial reforestation and the conservation of deteriorated areas (e.g. Quisqueya Verde, localized programs, projects with international support, among others), and; (iii) incentive and compensation systems to support forestry development and averted deforestation with Payments for Environmental Services (PSA), particularly in water recharge areas. The proposed ER Program is aligned with DR?s national development priorities. The National Development Strategy (END) 2010-2030 establishes in its 10th Article a strategic approach to promote ?sustainable management of natural resources and adequate adaptation to climate change?. The sustainable use of natural resources, including such as forests, soil, and water, is part of the commitments the government has made under the ?Mandate of Water? (Cuatrenio del Agua). The ER Program will directly contribute to reducing pressures on natural forests that will cut emissions from deforestation and forest degradation while promoting resilience and competitiveness for the forestry, agriculture and livestock sectors. The ER program looks at mainstreaming productive sectors to achieve national mitigation goals and simultaneously aims to contribute to enhancing the resilience of landscapes by compensating farmers, local rural development associations and government agencies that support the building up of climate smart value chains including, cocoa, coffee, silvopastoral and agroforestry arrangements. Relationship to CAS/CPS/CPF The ER Program is aligned to the Performance and Learning Review of the Country Partnership Strategy (FY15-FY18). In particular, it is aligned with Pillar 3: ?Building resilience? Outcome 6: ?Improved preparedness for disaster risk management and climate change? in line with the World Bank?s disaster risk management and climate resilience activities which include improving climate resilient infrastructure and supporting government to improve its investment planning to integrate DRM into national budget and program. These efforts include support through an integrated approach to natural resource management. The Government has declared its second mandate as the ?Mandate of Water? (Cuatrienio del Agua) and is committed to implement the principles of Integrated Water Resources Management for sustainable use of natural resources such as soil, water and forests by the agricultural sector. C. Proposed Development Objective(s) Development Objective(s) The proposed Development Objective is to incentivize reduced deforestation, forest degradation and enhancement of forest carbon stocks (REDD+) at the national level in the Dominican Republic, through payment of verified emission reductions (ER) and to ensure that paid amounts are distributed according to an agreed benefit sharing plan Key Results The achievements of the PDO would be measured through the following indicators: 1. Volume of CO2 Emissions Reductions that have been measured and reported by the Program Entity, verified by a Third Party, and transferred to the FCPF Carbon Fund; tCO2e 7.5 million tCO2e 2. Payment by the FCPF Carbon Fund for CO2 Emissions Reductions generated by the Program; USD USD$37.5 million 3. ER payments distributed in accordance with agreed benefit-sharing mechanism Yes/No Yes . D. Concept Description <strong>The ER Program is under preparation and will constitute the framework for a financial transaction involving the deliveryof ER by the DR, and payments for Emission Reductions (ERs) by the FCPF. </strong>The payment for ER will be based on ER against a Forest Reference Level (FREL) where avoided emissions will be accounted and verified and will be paid out using a Benefit Sharing Plan (BSP). To achieve the target of ER, the GoDR will use its own resources to implement activities included in the ER Program, currently under preparation, described below. <strong>DR ER Program will focus its efforts on avoiding deforestation, forest degra dation and enhancement of carbon stocks. </strong>Addressing forest degradation, which is affecting approximately four million hectares of the country’s forests, is of importance for the DR’s ER Program. In this regard, DR has made progress by developing initial tools to identify and monitor forest degradation, and the ER Program