Incentivizing REDD+: The role of cost-sharing mechanisms in encouraging stakeholders to reduce emissions from deforestation and degradation

Jichuan Sheng, Weizong Tang and Bangzhu Zhu

Ecosystem Services, 2019, vol. 40, issue C

Abstract: Many types of costs should be considered in the contract design of Reducing Emissions from Deforestation and Degradation (REDD+). However, the existing benefit-sharing mechanism in REDD+ ignores the fact that different types of costs are distributed among multiple stakeholders, leading to the adoption of command-and-control subsidies rather than market-based incentives to motivate stakeholders’ emission reductions. This study uses the Nash model and Stackelberg model to demonstrate the decision-making behavior of private investors and landholders under two REDD+ contracts and the effects on their own profits. Moreover, numerical simulations and sensitivity analyses were carried out to compare the effects of the two REDD+ contracts on the emission reduction and profit of private investors and landholders. The findings demonstrate that the cost-sharing REDD+ contract creates benefits by encouraging stakeholders to reduce emissions rather than one party’s deprivation of the other and is, therefore, a fair and effective mechanism. The neoliberal incentive structure constructed by this cost-sharing REDD+ contract helps to overcome the shortcomings of existing benefit-sharing mechanism in REDD+ that relies on command-and-control subsidies. Thus, such a contract is a feasible solution to encourage more countries to include REDD+ in their Nationally Determined Contributions and to ensure the attractiveness for the private sector.

Keywords: REDD+; Neoliberal environmentality; Incentive mechanisms; Payments for ecosystem services; Nationally Determined Contributions (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecoser:v:40:y:2019:i:c:s221204161930021x

DOI: 10.1016/j.ecoser.2019.101037

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