A methodology to estimate impacts of domestic policies on deforestation: Compensated Successful Efforts for “avoided deforestation” (REDD)

Climate change mitigation would benefit from Reduced Emissions from Deforestation and Degradation (REDD) in developing countries. The REDD mechanism, still in discussion, would be in charge of distilling the right incentives and promoting the right policies for fostering forest conservation. The estimation of reduced emissions induced by the mechanism has been raised as an issue, either for issuing the proper amount of carbon credits or for providing appropriate compensations of foregone revenues and other costs to host countries. This estimation would be based on the gap between observed deforestation and a counterfactual value. Although any prediction of deforestation rates (i.e. business-as-usual scenarios) is challenging, and any negotiated target is subject to obvious political influence, these two ways have been prioritirized so far to determine the counterfactual value. In other words proposals focused on a results-based approach, the relevance of which is questionable because estimations of avoided deforestation are hardly reliable. With this approach, issuance of carbon credits and distribution of financial compensations could threaten respectively environmental integrity of the scheme and equity outcomes. Rather than considering overall deforestation (predicted and observed), we argue that a REDD mechanism would gain from linking distribution of carbon finance to real efforts (opposed to “results”) that developing countries implement for slowing deforestation rates. This would provide strong incentives to design and enforce suitable policies and measures. The methodology we present to measure these efforts (labeled Compensated Successful Efforts) is based on the rationale that overall deforestation is partly due to structural factors, and to domestic policies and measures. This typology differs from others presented in the literature such as proximate/underlying causes, or economic/institutional factors. Using an econometric model, our approach estimates efforts that are (i) independent of structural factors (economic development, population, initial forest area, agricultural export prices), (ii) estimated ex post at the end of the crediting period, and (iii) relative to other countries. In order to illustrate the methodology we apply the model to a panel of 48 countries (Asia, Latin America, Africa) and four periods between 1970 and 2005. We conclude on the feasibility to estimate avoided deforestation using the Compensated Successful Efforts approach. In addition to being conservative from an environmental perspective, this approach tends to guarantee fairness by accounting for dramatic changes during the commitment period. Last, such estimations of avoided deforestation could provide guidance for decisions on further financing of national programs to curb deforestation, as it would help to distinguish between successful and unsuccessful policies.     

Property rights and liability for deforestation under REDD+: Implications for ‘permanence’ in policy design

Reducing Emissions from Deforestation and forest Degradation (REDD+) is critical in efforts to mitigate the effects of anthropogenic climate change. Despite uncertainty about the exact form of a future, international REDD+ system, REDD+ carbon property rights would need to be created and allocated with liability assigned for the potential loss of climate benefits in the event of carbon reversal from deforestation. This commentary explores the links between forest property rights and liability, to different REDD+ policy options and their implications for permanence. Should national governments retain liability for permanence then project-level activities that have individually-assigned REDD+ carbon rights may have a higher risk of carbon reversal than policies where rights are assigned to the state. Knowledge of pre-existing forest rights is necessary for some policies implemented with government-assigned REDD+ rights in order to compensate for potential income losses from policy implementation.     

Remittances and deforestation in developing countries: Is institutional quality paramount?

This study examines the impact of remittance inflows on deforestation in developing countries. We also investigate the role of institutional quality in enhancing remittances’ effect in reducing deforestation. Our results suggest that overall remittances reduce deforestation. We show that remittances’ reduction effect on deforestation is greater in middle-income countries than in low-income countries. Considering institutional quality, our findings suggest that, for the entire sample, and in low- and middle-income countries, control of corruption, political stability, government effectiveness and rule of law act to reduce deforestation. Moreover, institutional quality enhances the impact of remittances on reducing deforestation in the entire sample and in middle-income countries. In contrast, in low-income countries, institutional quality does not complement remittances to reduce deforestation.These results imply that, to reduce deforestation rates, the focus should not only be on economic development, but to an even greater extent, on institutional quality.     

From CDM to REDD+ — What do we know for setting up effective and legitimate carbon governance?

This article compares two carbon governance instruments - the Clean Development Mechanism (CDM) and Reducing Emissions from Deforestation and Degradation (REDD+) - to assess lessons from the former for the latter regarding effectiveness and legitimacy of such instruments. The article argues that the CDM has a relatively high degree of output-oriented legitimacy resulting in effectiveness and some input-oriented legitimacy, with few discernible tradeoffs between them. In contrasting this to REDD+, the hypotheses are advanced that (i) output-oriented legitimacy/effectiveness can again be achieved but that (ii) a higher degree of input-oriented legitimacy is necessary for REDD+ and thus also a certain trade-off between the two forms of legitimacy can be expected. This is shown through comparing the technologies and methodologies, economic rationales, political support, regulatory structures, and environmental impacts of both instruments.     

REDD+机制在中国扩大发展途径研究——基于菲律宾的案例分析

自2005年以来,REDD+项目在巴西等热带地区得到了广泛地计划和实施。然而,在后京都时代全球背景下,只有拓宽REDD+机制的实施途径才能在所有森林覆盖的国家起到减排作用,这也为中国提供了参与减排的重要机会。积极参与REDD+机制,不仅有利于进一步开发我国碳汇潜力,更有利于提高我国在国际气候谈判中的地位、掌握碳交易市场的话语权。将菲律宾作为REDD+在新兴国家发展的典型案例,进行REDD+机制在中国扩大途径研究,构建中国REDD+机制多元化框架,同时为REDD+在中国的发展提出可行性的政策建议。     

Deforestation and the real exchange rate

Deforestation is a phenomenon that has largely been concentrated in the developing world. We construct a theoretical model of deforestation that focuses on the factors affecting the incentives to transform forested land into agricultural land. We show that: (i) lower discount rates and stronger institutions decrease deforestation; (ii) a depreciation in the real exchange rate increases deforestation in developing countries whereas the opposite obtains in developed countries; (iii) paradoxically, better institutions may exacerbate the deleterious impact of a depreciation in developing countries. These hypotheses are tested on an annual sample of 101 countries over the 1961–1988 period, and are not rejected by the data. Our results suggest that short-term macroeconomic policy, institutional factors, and the interaction between the two, are potentially important determinants of environmental outcomes.     

REDD+ as Result‐based Aid: General Lessons and Bilateral Agreements of Norway

The initiative known as Reducing Emissions from Deforestation and Forest Degradation (REDD+) officially became part of the international climate agenda in 2007. At that time, REDD+ was an idea regarding payment to countries (and possibly also projects) for reducing emission from forests, with funding primarily from carbon markets. The initiative has since become multi‐objective in nature; the policy focus has changed from a payments for environmental services (PES) approach to broader policies, and international funding primarily originates from development aid budgets. This “aidification” of REDD+ has made the program similar to previous efforts using conditional or results‐based aid (RBA). However, the experience of RBA in other sectors has scarcely been addressed in the REDD+ debate. The alleged advantages of RBA are poorly backed by empirical research. This paper reviews the primary challenges in designing and implementing a system of RBA, namely, donor spending pressure, performance criteria, reference levels, risk sharing, and funding credibility. It then reviews the four partially performance‐based, bilateral REDD+ agreements that Norway has entered with Tanzania, Brazil, Guyana, and Indonesia. These agreements and the aid experience provide valuable lessons for the design and implementation of future REDD+ mechanisms.     

Nonlinearities and heterogeneity in environmental quality: An empirical analysis of deforestation

We use a panel data set of 59 developing countries over the 1972–1994 period to study the deforestation process. Relying on both parametric and semiparametric models, we examine nonlinearities and heterogeneity in the deforestation process. We first study the existence of an Environmental Kuznets Curve (EKC) and then analyze determinants of deforestation. Our data sample provides no evidence of an EKC. We also find that political institution failures may worsen the deforestation process in developing countries.     

Deforestation and national accounting

We construct a first best growing economy in which land is being switched continuously from use in forestry to an alternative use. We find that implicitly for such activity to take place there must be no net loss to land owners. This implies no deduction in the national accounts for deforestation. With soil erosion on deforested land, Pigovian taxes must be levied to sustain a first best. We also observe an optimal tax on households for their implicit use of forests as oxygenation sinks.     

Institutional design for improved forest governance through REDD: Lessons from the global environment facility

This contribution focuses on carbon mitigation and biodiversity conservation in the context of the UN initiative for Reduced Emissions from Deforestation and forest Degradation in Developing countries (REDD). The design of REDD is important as it may channel much of the international funding that will potentially be made available for future environmental problem-solving in developing countries. The most important multilateral environmental funding mechanism is the Global Environment Facility (GEF). With its basic structural similarity to the emerging REDD, it provides a good starting point for drawing lessons relevant to the design of REDD. In explaining GEF priorities and performance we discuss the role of key actors as well as the organizational and institutional structure of GEF. These factors do not encourage coalitions for addressing environmental problems in the poorest countries. The institutional setting of REDD in the Convention on Climate Change may further exacerbate this trend, as neither conservation nor socioeconomic concerns like the rights and well-being of indigenous peoples and local communities are addressed. Factors that favour utilizing a similar organization structure include scope for donor trust, for bringing in established competence and a comprehensive approach. REDD must be wary of catering solely to a Northern environmental agenda.     

A note on long-term contracts

The purpose of this paper is three-fold: (i) to interpret Townsend's (1982) long-term contract model as a labor contract model where a value of job matching for a worker is a private information, (ii) to contrast Townsend's long-term contract model with Holmstrom's (1983) long-term contract model in a common framework, and (iii) to explore the effect of workers' mobility on the contract configuration of the two models.Both Holmstrom and Townsend construct models in which a single-period contract is not viable, but a long-term contract is. However, reasons for this characteristic in the two models are quite different. This paper proposes a simple framework of labor contracts with illustrates the essential difference of the two models, and the role of mobility costs. Mobility costs in the two types of long-term contracts are shown to be beneficial for both workers and the firm. Results of comparative statics show how contract configurations in two models are influenced by changes in mobility costs.     

Rainfed mechanized farming and deforestation in central Sudan

Sudan is threatened by a serious deforestation problem. Total forested area decreased by about 20 percent over the last two decades, largely as a result of the expansion of rainfed mechanized farming (RMF). To safeguard against the problems of deforestation, the government's Mechanized Farming Corporation requires each farmer to leave at least ten percent of the total farm area under shelterbelts. Few farmers pay attention to this clause. This paper addresses the problem of RMF expansion and analyzes the effects of different factors on the preservation of shelterbelts. Results indicate that the following factors influence the decision to preserve shelterbelts: farmer's belief in the value of shelterbelts, the production of gum arabic, farm size, farmer's wealth, years a farm has been cultivated, and type of farm.     

Effects of health information on Nordic meat and fish demand

Increasing public concerns about health risks associated with dietary intakes of cholesterol are expected to have significant impacts on the demand for foods with high fat content. This paper investigates how information about cholesterol, as measured by two newly constructed indices based on published medical research, has affected the demand for meats (beef, chicken and pork) and fish in the Nordic countries (Denmark, Finland, Norway and Sweden). To compare the effects of information across countries and over time, the demand equations for all the countries are estimated within one system, and a complete set of price and expenditure elasticities is estimated. Our findings suggest that health information has affected consumption in a healthy way in all countries studied except for Denmark. We find positive effects on the demand for chicken in Finland, Norway and Sweden and for fish in Finland and Sweden. A negative effect on the demand for beef in Sweden also is found. First version received: May 2001/Final version received: December 2001 RID="*" ID="*"  The authors would like to thank Wen S. Chern and Bj?rn Sl?en for their assistance in the construction of the health information indices. The suggestions of two anonymous referees have also been of great assistance. The EU (contract FAIRS-CT97-3373) and the Research Council of Norway (grant no. 134018/110) provided financial support for this research.”     

OPTIMAL UNEMPLOYMENT INSURANCE,WITH HUMAN CAPITAL DEPRECIATION,AND DURATION DEPENDENCE*

This article introduces the possibility of a deterioration in job opportunities during unemployment into the standard optimal unemployment insurance (UI) design framework and characterizes the efficient UI scheme. The optimal program may display two novel features, which cannot be present in stationary models. First, UI transfers are bounded below by a minimal assistance level that arises endogenously in the efficient contract. Second, the optimal scheme implies a wage subsidy for long‐term unemployed workers. Numerical simulations based on the Spanish and U.S. economies suggest that both assistance transfers and wage subsidies should be part of the UI scheme in these countries.     

The Expanding Techniques of Progress: Agricultural Biotechnology and UN-REDD+

This paper provides a comparative analysis of agricultural biotechnology and the United Nations program for reduced emissions from deforestation and forest degradation (REDD). Despite the existing differences between the technical manipulation of biological systems and a conservation program aimed at reducing carbon and protecting forests, the two share commonalities in ideological origin, application, and values. Presented as positive developments, both seek to address large-scale issues such as global hunger and climate change, but while receiving national and international support they remain controversial issues. Both issues are critically assessed, beginning with a brief history, followed by the application of William Dugger's four invaluation processes: contamination, subordination, emulation, and mystification. This approach unravels the subtle social power of state and market forces that seek to control genetic material and forest frontiers as new outlets for growth and investment.     

Dynamite in the EKC tunnel? Inconsistencies in resource stock analysis under the environmental Kuznets curve hypothesis

Recent studies incorporating consumption into the relationship between GDP and conservation increasingly reveal that economic prosperity does not lead to improvements in environmental quality, even in cases where rich countries may appear to protect a greater proportion of their domestic resources. This study reinforces those findings for forest and species conservation across two groups of countries. Additionally, through explicit comparison with two previous EKC studies, I enable an illustration of precisely how EKC results are affected by the incorporation of consumption and highlight persistent problems with EKC analyses. Despite general linear modeling results showing that wealthy countries drive deforestation in poorer countries through the import of forest resources, EKC analyses can still indicate improvements in conservation for wealthier countries. Such contradictions suggest that recent methodological improvements to the EKC cannot guarantee the validity of evidence from EKC analyses. Poor quality of resource stocks data, the restrictive time scales that can be examined with those data, and the lack of consistent results across different groups of countries all speak to continued inadequacies of the EKC hypothesis and the need to focus on approaches that address actual behavior patterns exhibited by different income groups.     

Trade,tropical deforestation and policy interventions

Trade interventions are increasingly advocated as a means for controlling timber-related tropical deforestation. This paper analyzes the impact on deforestation of such policy instruments in a dynamic framework. The forest is modelled as a potentially renewable resource, and timber is extracted for purposes of export and domestic consumption. Optimality conditions for a variety of model specifications are derived, and the impacts of changes in the terms of trade and market structure on long-run deforestation are analyzed. The results of this analysis suggest that trade interventions that seek to affect the terms of trade against the export of tropical timber products are in the long run a second-best policy option for influencing the deforestation process.We would like to thank Joanne Burgess for contributing to discussions that resulted in this paper, which were held at the Beijer Institute of Ecological Economics of the Royal Swedish Academy of Sciences. We acknowledge the financial support given by the Beijer Institute and the hospitality of its staff, and in particular we are grateful to Prof. Karl-Göran Mäler for inviting us to use the facilities at Beijer and to Charles Perrings, Director of the Biodiversity Programme. Additional support for Edward Barbier's participation in the research was also provided by the International Tropical Timber Organization, under contract no. PCM(XI)/4, Economic Linkages Between the International Trade in Tropical Timber and the Sustainable Management of Tropical Forests. We are grateful to comments provided by two anonymous referees; however, the usual disclaimer applies.     

Limited observability as a constraint in contract design

Limited observability is the assumption that economic agents can only observe a finite amount of information. Given this constraint, contracts among agents are necessarily finite and incomplete in comparison to the ideal complete contract that we model as infinite in detail. We consider the extent that finite contracts can approximate a complete contract. The objectives of the paper are: (i) to identify properties of agents’ preferences that determine whether or not finiteness of contracts causes significant inefficiency; (ii) to evaluate the performance of finite contracts against the ideal optimal contract in a bilateral bargaining model.     

Social memory,evidence, and conflict

This paper examines an equilibrium model of social memory — a society's vicarious beliefs about its past. We show that incorrect social memory is a key ingredient in creating and perpetuating destructive conflicts.We analyze an infinite-horizon model in which two countries face off each period in a game of conflict characterized by the possibility of mutually destructive “all out war” that yields catastrophic consequences for both sides. Each country is inhabited by a dynastic sequence of individuals. Each individual cares about future individuals in the same country, and can communicate with the next generation of their countrymen using private messages. Social memory is based on these messages, and on physical evidence — a sequence of imperfectly informative public signals of past behavior. We find that if the future is sufficiently important for all individuals, then regardless of the precision of physical evidence from the past there is an equilibrium in which the two countries engage in all out war with arbitrarily high frequency, an outcome that cannot arise in the standard repeated game. In our construction, each new generation “repeats the mistakes” of its predecessors, leading to an endless cycle of destructive behavior.Surprisingly, we find that degrading the quality of information that individuals have about current decisions may “improve” social memory. This in turn ensures that arbitrarily frequent all out wars cannot occur.     

The value of information in a principal-agent model with moral hazard: The ex post contracting case

In a principal-agent model with moral hazard, a signal about the principal?s technology — the stochastic mapping from the agent?s action to the outcome — is observed before the contract is offered. The signal is either uninformative (null information), informative and observed only by the principal (private information), or also observed by the agent (public information). We show that, from an ex ante standpoint (before the signal is observed): (i) the agent prefers private to both null and public information; (ii) the principal sometimes prefers null to both private and public information; and (iii) when the principal prefers public to null information, she prefers public to private information, whereas the agent prefers private to public information. In this last situation, we also show that (iv) for any separating equilibrium with private information, there exists a contract with public information that both strictly prefer.