Meeting of the Board 18 – 21 August 2020 GCF/B.26/02/Add.04 Virtual meeting Provisional agenda item 11 28 July 2020 Consideration of funding proposals - Addendum IV Funding proposal package for FP132 Summary This addendum contains the following seven parts: a) A funding proposal titled "Enabling Implementation of Forest Sector Reform in Georgia to Reduce GHG Emissions from Forest Degradation"; b) No-objection letter issued by the national designated authority(ies) or focal point(s); c) Environmental and social report(s) disclosure; d) Secretariat’s assessment; e) Independent Technical Advisory Panel’s assessment; f) Response from the accredited entity to the independent Technical Advisory Panel's assessment; and g) Gender documentation. GCF/B.26/02/Add.04 Page b Table of Contents Funding proposal submitted by the accredited entity 3 No-objection letter issued by the national designated authority(ies) or focal point(s) 96 Environmental and social report(s) disclosure 98 Secretariat’s assessment 102 Independent Technical Advisory Panel’s assessment 117 Response from the accredited entity to the independent Technical Advisory 141 Panel's assessment Gender documentation 143 Enabling Implementation of Forest Sector Reform in Georgia Project Title: to Reduce GHG Emissions from Forest Degradation Country: Georgia Deutsche Gesellschaft für Internationale Zusammenarbeit Accredited Entity: (GIZ) GmbH Date of first submission: 2019/08/13 Date of current submission 2020/06/4 Version number V.008 GREEN CLIMATE FUND FUNDING PROPOSAL V.2.0 | PAGE 1 OF 92 Contents Section A PROJECT SUMMARY Section B PROJECT INFORMATION Section C FINANCING INFORMATION Section D EXPECTED PERFORMANCE AGAINST INVESTMENT CRITERIA Section E LOGICAL FRAMEWORK Section F RISK ASSESSMENT AND MANAGEMENT Section G GCF POLICIES AND STANDARDS Section H ANNEXES Note to Accredited Entities on the use of the funding proposal template • Accredited Entities should provide summary information in the proposal with cross- reference to annexes such as feasibility studies, gender action plan, term sheet, etc. • Accredited Entities should ensure that annexes provided are consistent with the details provided in the funding proposal. Updates to the funding proposal and/or annexes must be reflected in all relevant documents. • The total number of pages for the funding proposal (excluding annexes) should not exceed 60. Proposals exceeding the prescribed length will not be assessed within the usual service standard time. • The recommended font is Arial, size 11. • Under the GCF Information Disclosure Policy, project and programme funding proposals will be disclosed on the GCF website, simultaneous with the submission to the Board, subject to the redaction of any information that may not be disclosed pursuant to the IDP. Accredited Entities are asked to fill out information on disclosure in section G.4. Please submit the completed proposal to: [email protected] Please use the following name convention for the file name: “FP-[Accredited Entity Short Name]-[Country/Region]-[Dates]” GREEN CLIMATE FUND FUNDING PROPOSAL V.2.0 | PAGE 2 OF 92 A PROJECT SUMMARY A.1. Project or A.2. Public or private Project Public programme sector A.3. Request for Not applicable Proposals (RFP) Mitigation: Reduced emissions from: GCF contribution: Enter number% ☐ Energy access and power generation: Enter number% ☐ Low-emission transport: ☐ Buildings, cities, industries and appliances: Enter number% 100% ☒ Forestry and land use: Adaptation: Increased resilience of: Most vulnerable people, communities and regions: Enter number% ☐ Enter number% ☐ Health and well-being, and food and water security: Enter number% Infrastructure and built environment: ☐ Enter number% ☐ Ecosystem and ecosystem services: Direct beneficiaries: 98,337 Indirect beneficiaries: 1,000,000 A.5. Expected mitigation A.6. Expected 16.14 million tCO2eq impact adaptation impact Direct beneficiaries: 3% of national population Indirect beneficiaries: 27% of national population A.7. Total financing (GCF 177.69 million Euros + co-finance) A.9. Project size Medium (Upto USD 250 million) A.8. Total GCF funding 32.79 million Euros requested A.10. Financial Grant 32.79 million Euros Equity Enter number instrument(s) requested ☒ ☐ Loan Enter number for the GCF funding ☐ ☐ Results-based payment Enter number ☐ Guarantee Enter number A.11. Implementation 7 years (84 months) A.12. Total lifespan 20 years period A.13. Expected date of A.14. ESS category AE internal approval 7/4/2019 B A.16. Has Readiness A.15. Has this FP been or PPF support been submitted as a CN Yes No Yes No ☒ ☐ used to prepare this ☐ ☒ before? FP? A.17. Is this FP included A.18. Is this FP in the entity work Yes ☒ No ☐ included in the country Yes ☒ No ☐ programme? programme? A.19. Complementarity Yes No and coherence ☐ ☒ GREEN CLIMATE FUND FUNDING PROPOSAL V.2.0 | PAGE 3 OF 92 A The Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH besides being the Accredited Entity (AE) of the project, acts as well as an Executing Entity (EE). Besides GIZ, there will be the following other Executing Entities: • National Forestry Agency (NFA), a Legal Entity of Public Law (LEPL) of the Ministry of Environmental Protection and Agriculture (MoEPA) (Georgia). A.20. Executing Entity • Department of Environmental Supervision (DES) representing the Government of information Georgia, State Sub-Agency of MoEPA (Georgia). • Environmental Information and Education Centre (EIEC), a LEPL of MoEPA (Georgia). • Agricultural and Rural Development Agency (ARDA)1, a Non-Entrepreneurial (Non-Commercial) Legal Entity (N(N)LE) of MoEPA (Georgia). MoEPA acts as the National Designated Authority (NDA) for GCF in Georgia. A.21. Executive summary 1. Georgia’s forests play a pivotal role in securing net removal of GHG emissions, which are expected to rise by approx. 70 % to 28,690 Gg CO2eq in 2030 in the BAU scenarios. However, LULUCF sector absorption capacity is rapidly decreasing. Climate change impacts and the demand for fuelwood from rural population puts significant pressure on Georgia’s forests: up to 90% of rural households (1.43 million people) rely on fuel wood for their energy needs. This leads to forest degradation and loss of carbon absorption capacity, which is projected to decrease by five times between 1990 and 2030. The Government of Georgia therefore prioritized the forest sector in its Nationally Determined Contribution (NDC) aiming at reducing GHG emissions by 6 million tCO2eq by introducing the sustainable forest management (SFM) on 250,000 ha of state-managed forest lands over a period of 2020-20302. 2. The project will enable the Government of Georgia to implement its transformational forest sector reform agenda to put the entire nation’s forests under the SFM framework. It will do so by supporting establishment of a nation-wide SFM system under Component 1 and in parallel, under Component 2, promoting market development for energy efficient (EE) and alternative fuels (AF)3 to address main driver of Georgia’s forest degradation, the unsustainable fuelwood consumption by rural population. Component 3, addressing potential adverse effects of the forest sector reform, safeguards the reform implementation by diversifying livelihood opportunities and strengthening local self- governance in forest adjoining rural communities. 3. The first component will help the Government put in place main building blocks of SFM at national level in the form of appropriate policy and regulatory environment, knowledge and data, as well as human and institutional capacities. At the regional level, the project will implement SFM in the three target regions of Kakheti, Mtskheta-Mtianeti and Guria. By doing so, the project will help develop an appropriate institutional structure and a business model for SFM, which will then be replicated to cover all forest areas in the country. Under second component, the project will accelerate growth of the nascent EE-AF sector in Georgia by pushing the development of supply chain and in parallel pulling the demand via consumer awareness raising, provision of financial incentives and consumer financing products in partnership with financial institutions, as well as creating conducive policy and regulatory framework for the sector in line with EU aquis, which the Government of Georgia has committed to implement. The third component will build up capacities of local authorities and citizens to participate in the sustainable management of forests and will enable communities of the target regions to benefit from diversified income opportunities by improved forest- related value chains and better access to forest-related knowledge and skills. 4. The project will cover 270,807 ha of state-managed forests in the target regions with SFM (over-achieving the NDC target of 250,000 ha).4 This will lead to the improvement of quantitative and qualitative characteristics of the forests and gradual build-up of carbon stock: Broader SFM implementation will lead to a reduction of forest degradation in the range of 0.8 t biomass per ha and year (1.3 tCO2/ha/year); in addition forest biomass will increase by 1.7 t biomass per ha and year (2.9 tCO2/ha/year) as a result of direct SFM measures. Further, availability of sustainably harvested fuelwood in the target districts will increase 5-fold from 50,000 m3 up to 285,575 m3 by the project end. 1 From July 1, 2019 the official title of Agricultural Projects Management Agency (APMA) was changed into Agricultural and Rural Development Agency (ARDA). 2 Conditional commitment. 3 Alternative fuels (AF) in the context of this Funding Proposal refer to different forms of upgraded solid biofuels (USB), which can be produced from woody or vegetable material by modern processes and technologies, such as briquettes, pellets, or chips sourced from forestry and agricultural residues (hazelnut shells, wine pruning, etc.). Please refer to Section 5.3.3.1 of the Feasibility Study for the full account of available AFs in Georgia 4 Note on the project area: The total forest area within the selected forest districts is 293,824 ha.