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North / South Contractual Design through the REDD+ Scheme

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  • Mireille Chiroleu-Assouline

    ()
    (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris 1 - Panthéon-Sorbonne)

  • Jean-Christophe Poudou

    ()
    (LAMETA - Laboratoire Montpelliérain d'Économie Théorique et Appliquée - Université Montpellier I - CNRS : UMR5474 - Institut national de la recherche agronomique (INRA) : UR1135 - Centre international de hautes études agronomiques méditerranéennes [CIHEAM])

  • Sébastien Roussel

    ()
    (LAMETA - Laboratoire Montpelliérain d'Économie Théorique et Appliquée - Université Montpellier I - CNRS : UMR5474 - Institut national de la recherche agronomique (INRA) : UR1135 - Centre international de hautes études agronomiques méditerranéennes [CIHEAM])

Abstract

In this paper we aim at theoretically grounding the Reducing Emissions from Deforestation and Forest Degradation + (REDD+) scheme as a contractual relationship between countries in the light of the theory of incentives. Considering incomplete information about reference levels of deforestation as well as exogenous implementation and transaction costs, we compare two types of contracts : a deforestation performance-based contract and a conditional avoided deforestation-based contract. Because of the implementation and transaction costs, each kind of REDD+ contract implies a dramatically different information rent / efficiency trade-off. If the contract is performance-based (resp. conditionality-based), information rents are awarded to countries with the ex ante lowest (resp. highest) deforestation. In a simple quadratic setting, there is a reference level threshold in terms of efficiency towards less deforestation. In terms of expected welfare, conditional avoided deforestation-based schemes are preferred.

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Bibliographic Info

Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00747405.

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Date of creation: Sep 2012
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Handle: RePEc:hal:cesptp:halshs-00747405

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Keywords: Conditionality; contract; deforestation; hidden information; incentives; performance; Reducing Emissions from Deforestation and Forest Degradation + (REDD+).;

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  1. Philippe Delacote & Gabriela Simonet, 2013. "Readiness and Avoided deforestation policies: on the use of the REDD fund," Working Papers 1312, Chaire Economie du Climat.
  2. Solenn Leplay & Jonah Busch & Philippe Delacote & Sophie Thoyer, 2011. "Implementation of national and international REDD mechanism under alternative payments for environemtal services: theory and illustration from Sumatra," Working Papers 11-02, LAMETA, Universtiy of Montpellier, revised Feb 2011.
  3. Jean Tirole & Jean-Jaques Laffont, 1985. "Using Cost Observation to Regulate Firms," Working papers 368, Massachusetts Institute of Technology (MIT), Department of Economics.
  4. Hammond, Peter J, 1979. "Straightforward Individual Incentive Compatibility in Large Economies," Review of Economic Studies, Wiley Blackwell, vol. 46(2), pages 263-82, April.
  5. Charles Figuières & Solenn Leplay & Estelle Midler & Sophie Thoyer, 2010. "The REDD scheme to curb deforestation: A well-designed system of incentives?," Working Papers 10-06, LAMETA, Universtiy of Montpellier, revised Jun 2010.
  6. Maskin, Eric & Riley, John, 1985. "Input versus output incentive schemes," Journal of Public Economics, Elsevier, vol. 28(1), pages 1-23, October.
  7. Lederer, Markus, 2011. "From CDM to REDD+ -- What do we know for setting up effective and legitimate carbon governance?," Ecological Economics, Elsevier, vol. 70(11), pages 1900-1907, September.
  8. Mireille Chiroleu-Assouline & Sébastien Roussel, 2010. "Contract Design to Sequester Carbon in Agricultural Soils," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00505137, HAL.
  9. Combes Motel, P. & Pirard, R. & Combes, J.-L., 2009. "A methodology to estimate impacts of domestic policies on deforestation: Compensated Successful Efforts for "avoided deforestation" (REDD)," Ecological Economics, Elsevier, vol. 68(3), pages 680-691, January.
  10. Hannes Öhler & Peter Nunnenkamp & Axel Dreher, 2010. "Does Conditionality Work? A Test for an Innovative US Aid Scheme," Kiel Working Papers 1630, Kiel Institute for the World Economy.
  11. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, January.
  12. Tacconi, Luca, 2009. "Compensated successful efforts for avoided deforestation vs compensated reductions," Ecological Economics, Elsevier, vol. 68(8-9), pages 2469-2472, June.
  13. Collier, Paul & Guillaumont, Patrick & Guillaumont, Sylviane & Gunning, Jan Willem, 1997. "Redesigning conditionality," World Development, Elsevier, vol. 25(9), pages 1399-1407, September.
  14. Myerson, Roger B, 1979. "Incentive Compatibility and the Bargaining Problem," Econometrica, Econometric Society, vol. 47(1), pages 61-73, January.
  15. Varian, H,R., 1991. "A Solution to the Problem of Externalities when Agents are Well-Informed," Papers 10, Michigan - Center for Research on Economic & Social Theory.
  16. Samuelson, William F, 1984. "Bargaining under Asymmetric Information," Econometrica, Econometric Society, vol. 52(4), pages 995-1005, July.
  17. Charles Figuières & Estelle Midler, 2011. "Deforestation as an externality problem to be solved efficiently and fairly," Working Papers 11-17, LAMETA, Universtiy of Montpellier, revised Aug 2011.
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