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The fight against deforestation (REDD)

Working Papers N°20/2008. Iddri, 2008. 14 p.
Résumé Economic implications of market-based funding

In the context of the 14th Conference of the Parties to be held in Poznan in December 2008, this paper discusses the REDD mechanism (Reducing Emissions from Deforestation and Degradation) which is currently under negotiation. As the role of the market is a central element in these discussions, the author explains the terms of the debate in order to enable a better understanding of the issues at stake in the upcoming decision-making process.

There are three main implications of a market mechanism:
• A precise quantification of emission reductions in comparison to a reference scenario is a challenge with consequences for the optimal allocation of financial resources (where efforts are made), and thus on the economic efficiency of the mechanism.
• The nature and status of the property rights on forest resources are key to the fair redistribution of benefits accrued from the sale of carbon credits. Generally, these rights (use and ownership) will greatly determine whether seemingly lower cost emission reduction activities will properly take into account the opportunity costs.
• The notion of reward is favoured rather than compensation, and governments are thus encouraged to maximise the profits of deforestation reduction. This could lead to a preference for domestic policies that favour a reduction in agricultural rents and, in consequence, a reduction of local revenues; rather than desirable policies that increase forest rents and as such are likely to be the only ones capable of increasing local revenues and tackling poverty.

Download : the Ideas 20/2008 IN ENGLISH

This text is also available in French.