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Designing REDD+ contracts to resolve additionality issues

Mireille Chiroleu-Assouline (), Jean-Christophe Poudou () and Sébastien Roussel ()

Resource and Energy Economics, 2018, vol. 51, issue C, 1-17

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.

Keywords: Conditionality; Contract; Deforestation; Hidden information; Incentives; Performance; Reducing Emissions from Deforestation and forest Degradation+ (REDD+) (search for similar items in EconPapers)
JEL-codes: D82 O13 Q23 Q54 (search for similar items in EconPapers)
Date: 2018
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