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Designing REDD+ contracts to resolve additionality issues

Author

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  • Mireille Chiroleu-Assouline

    () (PJSE - Paris Jourdan Sciences Economiques - UP1 - Université Panthéon-Sorbonne - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics, ECO-PUB - Economie Publique - INRA - Institut National de la Recherche Agronomique - AgroParisTech)

  • Jean-Christophe Poudou

    () (LAMETA - Laboratoire Montpelliérain d'Économie Théorique et Appliquée - UM1 - Université Montpellier 1 - UM3 - Université Paul-Valéry - Montpellier 3 - Montpellier SupAgro - Centre international d'études supérieures en sciences agronomiques - INRA Montpellier - Institut national de la recherche agronomique [Montpellier] - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier)

  • Sébastien Roussel

    () (CEE-M - Centre d'Economie de l'Environnement - Montpellier - FRE2010 - INRA - Institut National de la Recherche Agronomique - UM - Université de Montpellier - CNRS - Centre National de la Recherche Scientifique - Montpellier SupAgro - Institut national d’études supérieures agronomiques de Montpellier)

Abstract

To address the issue of potential information asymmetries inherent in the estimation of deforestation baselines required by the current Reducing Emissions from Deforestation and Forest Degradation+ (REDD+) scheme, we offer a theoretical analysis of an extended scheme relying on the theory of incentives. We compare two types of contracts: a deforestation-based contract and a policy-based contract. Each of them implies a dramatically different information rent/efficiency trade-off due to domestic implementation and transaction costs. If the contract is deforestation-based (resp. policy-based), information rents are awarded to countries with the ex ante lowest (resp. highest) intended deforestation. We show that a general contract can be offered to recipient countries in which the type of instrument proposed is endogenous, independent of the historical trend, unlike the current REDD+ mechanism. Dividing countries into two groups corresponding to the deforestation-based instrument and the policy-based instrument helps the donor country to obtain efficient deforestation and avoided deforestation levels.

Suggested Citation

  • Mireille Chiroleu-Assouline & Jean-Christophe Poudou & Sébastien Roussel, 2018. "Designing REDD+ contracts to resolve additionality issues," Post-Print halshs-01643656, HAL.
  • Handle: RePEc:hal:journl:halshs-01643656
    Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-01643656
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    References listed on IDEAS

    as
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    Keywords

    Reducing Emissions from Deforestation and forest Degradation; Incentives; Performance; Conditionality; Contract; Deforestation; Hidden information;

    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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