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Will Buying Tropical Forest Carbon Benefit The Poor? Evidence from Costa Rica

  • Suzi Kerr
  • Leslie Lipper

    (Agricultural and Development Economics Division, Food and Agriculture Organization)

  • Alexander S.P. Pfaff
  • Romina Cavatassi

    (Agricultural and Development Economics Division, Food and Agriculture Organization)

  • Benjamin Davis

    (Agricultural and Development Economics Division, Food and Agriculture Organization)

  • Joanna Hendy
  • Arturo Sanchez

We review claims about the potential for carbon markets that link both payments for carbon services and poverty levels to ongoing rates of tropical deforestation. We then examine these effects empirically for Costa Rica during the 20th century using an econometric approach that addresses the irreversibilities in deforestation. We find significant effects of the relative returns to forest on deforestation rates. Thus, carbon payments would induce conservation and also carbon sequestration, and if land users were poor could conserve forest while addressing rural poverty. However, we find poorer areas are less responsive to returns. This and transaction costs could lead carbon payments policies not to be focused upon the poor. Other practical considerations may also dampen an understandable enthusiasm for service-based payments addressing both environment and inequality. Nonetheless, as the poor live in areas with more forest, they may benefit most from payments.

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Paper provided by Agricultural and Development Economics Division of the Food and Agriculture Organization of the United Nations (FAO - ESA) in its series Working Papers with number 04-20.

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Length: 37 pages
Date of creation: 2004
Date of revision:
Handle: RePEc:fao:wpaper:0420
Contact details of provider: Postal: Agricultural Sector in Economic Development Service FAO Viale delle Terme di Caracalla 00153 Rome Italy
Phone: +39(6) 57051
Fax: +39 06 57055522
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  1. Suzi Kerr & Alexander Pfaff & Romina Cavatassi & Benjamin Davis & Leslie Lipper & Arturo Sanchez & Jason Timmins, 2004. "Effects of Poverty on Deforestation: Distinguishing behaviour from location," Working Papers 04-19, Agricultural and Development Economics Division of the Food and Agriculture Organization of the United Nations (FAO - ESA).
  2. Oscar J. Cacho & Graham R. Marshall & Mary Milne, 2003. "Smallholder Agroforestry Projects: Potential for carbon sequestration and poverty alleviation," Working Papers 03-06, Agricultural and Development Economics Division of the Food and Agriculture Organization of the United Nations (FAO - ESA).
  3. Suzi Kerr & Shuguang Liu & Alexander Pfaff & Flint Hughes, 2003. "Carbon Dynamics and Land-use Choices: Building a Regional-scale Multidisciplinary Model," Others 0309005, EconWPA.
  4. Peter J. Parks & Ian W. Hardie, 1995. "Least-Cost Forest Carbon Reserves: Cost-Effective Subsidies to Convert Marginal Agricultural Land to Forests," Land Economics, University of Wisconsin Press, vol. 71(1), pages 122-136.
  5. De Jong, Ben H. J. & Tipper, Richard & Montoya-Gomez, Guillermo, 2000. "An economic analysis of the potential for carbon sequestration by forests: evidence from southern Mexico," Ecological Economics, Elsevier, vol. 33(2), pages 313-327, May.
  6. Stavins, Robert N & Jaffe, Adam B, 1990. "Unintended Impacts of Public Investments on Private Decisions: The Depletion of Forested Wetlands," American Economic Review, American Economic Association, vol. 80(3), pages 337-52, June.
  7. Douglas J. Miller, 1999. "An Econometric Analysis of the Costs of Sequestering Carbon in Forests," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(4), pages 812-824.
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