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Growth, deforestation and the efficiency of the REDD mechanism

  • Helene Ollivier

    (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne)

This paper assesses the long term impacts of an international transfer called the Reduced Emissions from Deforestation and Degradation (REDD) mechanism, which aims at preserving tropical forests of the recipient economy. This two-sector economy faces a dilemma between economic growth and deforestation. The rural sector can substitute reproducible capital for agricultural land whereas the manufacturing sector only requires capital. The model shows that the REDD mechanism has a non-monotonic effect on steady state welfares. For low transfer schemes, the agricultural output increases with the transfer even though less land is under cultivation. For high transfer schemes, the increase in the transfer may not offset the decrease in the agricultural output. The open-loop symmetric Nash equilibrium in a dynamic deforestation game predicts that redistributing the transfer among a finite number of producers is less efficient in reducing deforestation than in the social optimum.

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Paper provided by HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number hal-00750718.

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Date of creation: Nov 2012
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Publication status: Published, Journal of Environmental Economics and Management, 2012, 64, 3, 312-327
Handle: RePEc:hal:cesptp:hal-00750718
Note: View the original document on HAL open archive server: http://hal.archives-ouvertes.fr/hal-00750718
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