The Design of Payments for Avoided Deforestation Under Uncertainty: Insight from Real Option Theory
The objective of this paper is to analyse the implications of landowners’ option values in land allocation and derive policy recommendations for payments for Reducing Emissions from Deforestation and Forest Degradation (REDD). We examine the determinants of landowner participation in REDD implementation and consider particularly the effect of alternative designs of REDD payment schemes on permanence of emission reductions. It is shown that the common practice of making either fixed payments per hectare or linking payments to carbon markets is not a cost-effective approach. A given level of permanence can be achieved at considerably lower cost to the REDD service buyer if REDD payments are linked to an agricultural commodity index that correlates with landowners’ opportunity costs.
|Date of creation:||02 Sep 2011|
|Date of revision:|
|Contact details of provider:|| Web page: http://www.eaae.org|
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Dixit, Avinash K, 1989.
"Entry and Exit Decisions under Uncertainty,"
Journal of Political Economy,
University of Chicago Press, vol. 97(3), pages 620-38, June.
- Dangl, Thomas & Wirl, Franz, 2004. "Investment under uncertainty: calculating the value function when the Bellman equation cannot be solved analytically," Journal of Economic Dynamics and Control, Elsevier, vol. 28(7), pages 1437-1460, April.
When requesting a correction, please mention this item's handle: RePEc:ags:eaae11:114816. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.