Forest Preservation Under REDD+ Schemes With Incentives Distortions

This analysis is based on a model of REDD+ implementation where a sponsor, assumed to be either “benevolent” (altruistic) a toward farmers, or completely selfish, compensates a farmer for the protection of a patch of rainforest under the latter's control. This model is applied to cases with less effective (“diluted”) incentives, in two ways: the sponsor must compensate all farmers in a group instead of only the single farmer targeted (“group incentives”); and a fraction of REDD+ payments is captured by an elite not directly involved in forest protection, and not worthy of support by a benevolent sponsor (“elite capture”). I extend the traditional REDD+ literature by including “benevolent” sponsors who are fully concerned with the welfare of the target (farmer) group. Payments are then increased, perhaps dramatically; but reduced by a selfish sponsor. An efficient solution can then be attained by a benevolent sponsor, albeit only for a high PES payment. With elite capture, payments are reduced for all sponsors, and full efficiency never attained. With selfish sponsors no viable PES scheme may exist. When the group incentive scheme rewards only farmers who save their forests, incentives are not eroded by the scheme.