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North / South Contractual Design through the REDD+ Scheme

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  • Chiroleu-Assouline, Mireille
  • Poudou, Jean-Christophe
  • Roussel, Sebastien

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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  • Chiroleu-Assouline, Mireille & Poudou, Jean-Christophe & Roussel, Sebastien, 2012. "North / South Contractual Design through the REDD+ Scheme," Climate Change and Sustainable Development 143119, Fondazione Eni Enrico Mattei (FEEM).
    • Handle: RePEc:ags:feemcl:143119
    DOI: 10.22004/ag.econ.143119
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    Cited by:

    1. Bård Harstad & Torben K. Mideksa, 2017. "Conservation Contracts and Political Regimes," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 84(4), pages 1708-1734.
    2. Timothy Cadman & Lauren Eastwood & Federico Lopez-Casero Michaelis & Tek N. Maraseni & Jamie Pittock & Tapan Sarker, 2015. "The Political Economy of Sustainable Development," Books, Edward Elgar Publishing, number 15773.
    3. Bård Harstad, 2020. "The Conservation Multiplier," CESifo Working Paper Series 8283, CESifo.
    4. Paula Cordero Salas & Brian E. Roe & Brent Sohngen, 2018. "Additionality When REDD Contracts Must be Self-Enforcing," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 69(1), pages 195-215, January.

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    More about this item

    Keywords

    Environmental Economics and Policy;

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q23 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Forestry
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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