Private sector participation and incentive coordination of actors in REDD+

Jichuan Sheng

Forest Policy and Economics, 2020, vol. 118, issue C

Abstract: How do different contractual arrangements affect the behavior of private investors in Reducing Emissions from Deforestation and Degradation (REDD+)? How to attract private investors to participate in REDD+? The complex entanglement between REDD+ and private investors has received relatively little attention in existing studies. To respond to this gap, this paper examines the dynamic effects of benefit-sharing, cost-sharing, and incentive-coordination contracts on actors' behavior during the project period by using a theoretical framework based on differential games. It argues that incentive-coordination contracts in REDD+ are a fair and effective mechanism, as they can not only motivate actors to reduce emissions, but also ensure the equality of all actors' decision-making status. The market-oriented incentive structure constructed by incentive-coordination contracts helps to overcome the shortcomings of the current REDD+ contracts that rely on command-and-control instruments, and helps to improve the total profits of REDD+ projects. While questions remain about how to integrate incentive-coordination mechanisms into REDD+, incentive-coordination contracts can improve private investors' understanding of the value and risks of REDD+ projects by negotiating the optimal benefit-distribution rate. Incentive-coordination contracts are, therefore, a viable solution to attract private sector participation in REDD+.

Keywords: REDD+; Private sector; Incentive-coordination contract; Benefit-sharing contract; Cost-sharing contract (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:forpol:v:118:y:2020:i:c:s1389934120301726

DOI: 10.1016/j.forpol.2020.102262

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