Incentive Contracts for Environmental Services and their Potential in REDD

Abstract

The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.

Efficient, Sustainable, and Multifunctional Carbon Offsetting to Boost Forest Management: A Comparative Case Study

“…Paradoxically, the certification encourages bottom-up approaches that nurture mutual trust between project participants, the same trust that absolves them from relying on external certification. Similar observations have been made in other national contexts [40].…”

“…Conflict prevention also stemmed from social learning about the interdependencies of all the actors in the action arena [56]. While the FSES can be susceptible to various open conflicts because of the incoming subsidies [40], our case studies encountered relatively few confrontations despite tensions around the prioritization of forest ES. To avoid an explosive situation in which timber production or environmental conservation is hindered by the offset contracts, NF and Sylv'ACCTES worked for collective governance to balance the power distribution between FSES stakeholders.…”

“…Their approach, used in many other countries [23,38,39], aims to include the transaction costs of impermanence verifications in their estimated budgets. The organization either funds an external certifying body such as the Verified Carbon Standard [40] or pays for the costs of verifying the contracts itself. Only NF introduced a replanting clause in its contract in the event of destruction following a natural hazard, which was certainly motivated by its objective to prepare the timber industry for the upcoming decades.…”

“…Another key feature of the offset contracts is that they abide by the financial concerns of landowners and base the amount of the subsidy on the cost of the forestry operations. Strictly correlating an aid to international market prices for a ton of carbon dioxide would have created uncertainty and discouraged landowners, as observed in many REDD+ projects [40]. The meansbased design of the offset contracts of NF and Sylv'ACCTES ensured their legibility and visibility, thus increasing their appeal to forest owners.…”

A review of the participation of smallholder farmers in land-based carbon payment schemes

“…While contracts have been found to be an effective tool to improve participation among cohesive indigenous communities by providing additional avenues to cashflows, this effect is yet to be seen among private landowners with inconsistent social bonds (Porras and Blackmore, 2014). Project proponents could show greater flexibility in the design of contracts in order to make participation attractive to farmers by tailoring key aspects such as their duration (farmers prefer longer contracts), the contract providers (farmers prefer local actors), payment schedules (e.g., monthly payments) and conservation activities (preference for low-cost interventions) (Fortmann et al, 2016).…”