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North / South Contractual Design through the REDD+ Scheme

  • Mireille Chiroleu-Assouline

    (Paris School of Economics (PSE) - Université Paris 1 Panthéon-Sorbonne, Centre d'Economie de la Sorbonne)

  • Jean-Christophe Poudou

    (Université Montpellier 1, UMR5474 LAMETA)

  • Sébastien Roussel

    (Université Montpellier 3 Paul Valéry & Université Montpellier 1, UMR5474 LAMETA)

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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Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2012.89.

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Date of creation: Nov 2012
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Handle: RePEc:fem:femwpa:2012.89
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