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North / South Contractual Design through the REDD+ Scheme

  • Mireille Chiroleu-Assouline


    (Axe Macroéconomie Axe Economie ouverte Axe Environnement - CES - Centre d'économie de la Sorbonne - UP1 - Université Panthéon-Sorbonne - CNRS - EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics)

  • Jean-Christophe Poudou


    (LAMETA - Laboratoire Montpelliérain d'Économie Théorique et Appliquée - CNRS - Institut national de la recherche agronomique (INRA) - UM1 - Université Montpellier 1 - Centre international de hautes études agronomiques méditerranéennes [CIHEAM])

  • Sébastien Roussel


    (LAMETA - Laboratoire Montpelliérain d'Économie Théorique et Appliquée - CNRS - Institut national de la recherche agronomique (INRA) - UM1 - Université Montpellier 1 - Centre international de hautes études agronomiques méditerranéennes [CIHEAM])

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 HAL in its series Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) with number halshs-00747405.

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Date of creation: Sep 2012
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Handle: RePEc:hal:cesptp:halshs-00747405
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  1. Mireille Chiroleu-Assouline & Sébastien Roussel, 2010. "Contract Design to Sequester Carbon in Agricultural Soils," Documents de travail du Centre d'Economie de la Sorbonne 10060, Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne.
  2. Pascale Combes Motel & Jean-Louis Combes & Romain Pirard, 2009. "A methodology to estimate impacts of domestic policies on deforestation: Compensated Successful Efforts for "Avoided Deforestation" (REDD)," Post-Print hal-00351838, HAL.
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  6. Hannes Öhler & Peter Nunnenkamp & Axel Dreher, 2010. "Does Conditionality Work? A Test for an Innovative US Aid Scheme," Courant Research Centre: Poverty, Equity and Growth - Discussion Papers 34, Courant Research Centre PEG.
  7. Maskin, Eric & Riley, John, 1985. "Input versus output incentive schemes," Journal of Public Economics, Elsevier, vol. 28(1), pages 1-23, October.
  8. Lederer, Markus, 2011. "From CDM to REDD+ -- What do we know for setting up effective and legitimate carbon governance?," Ecological Economics, Elsevier, vol. 70(11), pages 1900-1907, September.
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  10. Collier, Paul & Guillaumont, Patrick & Guillaumont, Sylviane & Gunning, Jan Willem, 1997. "Redesigning conditionality," World Development, Elsevier, vol. 25(9), pages 1399-1407, September.
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  14. Roger B. Myerson, 1977. "Incentive Compatability and the Bargaining Problem," Discussion Papers 284, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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  16. Samuelson, William F, 1984. "Bargaining under Asymmetric Information," Econometrica, Econometric Society, vol. 52(4), pages 995-1005, July.
  17. Charles Figuières & Estelle Midler, 2011. "Deforestation as an externality problem to be solved efficiently and fairly," Working Papers 11-17, LAMETA, Universtiy of Montpellier, revised Aug 2011.
  18. Figuieres, Charles & Leplay, Solenn & Midler, Estelle & Thoyer, Sophie, 2012. "The REDD Scheme to Curb Deforestation: A Well-designed System of Incentives?," Strategic Behavior and the Environment, now publishers, vol. 2(3), pages 239-257, September.
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