Designing REDD+ contracts to resolve additionality issues |
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Institution: | 1. Paris School of Economics (PSE) - University Paris 1 Panthéon-Sorbonne, PjSE, 48 bd Jourdan, 75014 Paris, France;2. Economie Publique, INRA, AgroParisTech, Université Paris-Saclay, 78850 Thiverval-Grignon, France;3. MRE, Univ. Montpellier, Montpellier, France;4. CEE-M, Univ. Montpellier, CNRS, INRA, SupAgro, Univ. Paul Valéry Montpellier 3, Montpellier, France |
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Abstract: | To address the issue of potential information asymmetries inherent in the estimation of deforestation baselines required by the current Reducing Emissions from Deforestation and Forest Degradation+ (REDD+) scheme, we offer a theoretical analysis of an extended scheme relying on the theory of incentives. We compare two types of contracts: a deforestation-based contract and a policy-based contract. Each of them implies a dramatically different information rent/efficiency trade-off due to domestic implementation and transaction costs. If the contract is deforestation-based (resp. policy-based), information rents are awarded to countries with the ex ante lowest (resp. highest) intended deforestation. We show that a general contract can be offered to recipient countries in which the type of instrument proposed is endogenous, independent of the historical trend, unlike the current REDD+ mechanism. Dividing countries into two groups corresponding to the deforestation-based instrument and the policy-based instrument helps the donor country to obtain efficient deforestation and avoided deforestation levels. |
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Keywords: | Conditionality Contract Deforestation Hidden information Incentives Performance Reducing Emissions from Deforestation and forest Degradation+ (REDD+) |
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