Structuring national and sub-national economic incentives to reduce emissions from deforestation in Indonesia

Jonah Busch (), Ruben Lubowski (), Fabiano Godoy (), Marc Steininger (), Arief Yusuf, Kemen Austin (), Jenny Hewson (), Daniel Juhn (), Muhammad Farid () and Frederick Boltz ()
Additional contact information
Jonah Busch: Conservation International, Arlington, VA
Ruben Lubowski: Environmental Defense Fund, Washington, DC
Fabiano Godoy: Conservation International, Arlington, VA
Marc Steininger: Conservation International, Arlington, VA
Kemen Austin: World Resources Institute, Washington, DC
Jenny Hewson: Conservation International, Arlington, VA
Daniel Juhn: Conservation International, Arlington, VA
Muhammad Farid: Conservation International, Jakarta, Indonesia
Frederick Boltz: Conservation International, Arlington, VA

No 201105, Working Papers in Economics and Development Studies (WoPEDS) from Department of Economics, Padjadjaran University

Abstract: We estimate the impacts that alternative national and sub-national economic incentive structures for reducing emissions from deforestation (REDD+) in Indonesia would have had on greenhouse gas emissions and national and local revenue if they had been in place from 2000-2005. The impact of carbon payments on deforestation is calibrated econometrically from the pattern of observed deforestation and spatial variation in the benefits and costs of converting land to agriculture over that time period. We estimate that at an international carbon price of $10/tCO2e, a “basic voluntary incentive structure” modeled after a traditional payment-for-ecosystem-services (PES) program would have reduced emissions nationally by 62 MtCO2e/yr, or 8% below the without-REDD+ reference scenario (95% CI: 45-76 MtCO2e/yr; 6-9%), while generating a programmatic budget shortfall. By making four policy improvements—paying for net emission reductions at the scale of an entire district rather than site-by-site, paying for reductions relative to estimated business-as-usual levels rather than historical levels, sharing a portion of district-level revenues with the national government, and sharing a portion of the national government’s responsibility for costs with districts—an “improved voluntary incentive structure” would have reduced emissions by 175 MtCO2e/yr, or 22% below the reference scenario (95% CI: 136-207 MtCO2e/yr; 17-26%), while generating a programmatic budget surplus. A “regulatory incentive structure” such as a cap-and-trade or symmetric tax-and-subsidy program would have reduced emissions by 211/yr, or 26% below the reference scenario (95% CI: 163-247 MtCO2e/yr; 20-31%), and would not have required accurate predictions of business-as-usual emissions to guarantee a programmatic budget surplus.

Keywords: Climate change; land-use change; REDD+; reference levels; economic incentives (search for similar items in EconPapers)
JEL-codes: Q20 Q23 Q50 Q54 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2011-06, Revised 2011-06
New Economics Papers: this item is included in nep-agr, nep-ene, nep-env and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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