Structuring economic incentives to reduce emissions from deforestation within Indonesia

Abstract

We estimate and map the impacts that alternative national and subnational 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 to 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/ tCO 2 e, a "mandatory incentive structure," such as a cap-and-trade or symmetric tax-and-subsidy program, would have reduced emissions by 163-247 MtCO 2 e/y (20-31% below the without-REDD+ reference scenario), while generating a programmatic budget surplus. In contrast, a "basic voluntary incentive structure" modeled after a standard payment-for-environmental-services program would have reduced emissions nationally by only 45-76 MtCO 2 e/y (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 reference levels that match business-as-usual 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 been nearly as effective as a mandatory incentive structure, reducing emissions by 136-207 MtCO 2 e/y (17-26%) and generating a programmatic budget surplus.climate change | climate policy | land-use change | reducing emissions from deforestation and forest degradation A n emerging international climate policy mechanism called REDD+ would offer payments to developing countries that voluntarily reduce greenhouse gas emissions from deforestation below internationally agreed reference levels (1). Individual forested countries would decide upon the specific set of policies and measures to implement to achieve nationwide emission reductions. Accounting for these net emission reductions would ultimately take place at the national level, making national governments responsible for any internal geographical shifts of emissions (leakage), and providing incentives for systemic policy actions. However, although governments would receive payments under REDD+, it is actors at the regional, provincial, local, or household (subnational) scales who are directly responsible for many land-use change decisions. Thus, the effectiveness of REDD+ in reducing emissions and generating revenue will depend upon how national governments structure economic incentives so that subnational actors will be encouraged to reduce emissions and discouraged from increasing emissions.Emission-reduction policy in the energy and industrial sectors of developed countries has commonly been approached through mandatory, market-based incentive structures, such as cap-andtrade...

Reductions in emissions from deforestation from Indonesia’s moratorium on new oil palm, timber, and logging concessions

“…This was also the case in alternative geographically matched fixedeffects models (SI Appendix, Table S2). The finding that logging concessions increased deforestation contrasts with the findings of previous studies (4,35,39). The effect of oil palm, timber, and logging concessions was heterogenous across starting-forest cover quartile (SI Appendix, Table S3) and region (SI Appendix, Table S4).…”

“…4. In this model the effect of carbon payments on cell-level land-use change was inferred from the relationship between higher potential agricultural revenue and higher deforestation in panel regression analysis.…”

“…Following ref. 4, we estimated soil emissions from deforestation occurring on peat lands in Sumatra (64), Kalimantan (65), and Papua (66) to be the average 30-y nondiscounted emissions for the agricultural land type (large croplands, small-scale agriculture, shrublands) to which such forest are converted, weighted by the area of each of these land types in historical conversion across Indonesia (67). We did not consider carbon sequestered by regrowing plantation trees.…”

“…First, we expand the literature on quasi-experimental evaluation of the causal impact of conservation measures (30), such as protected areas (31)(32)(33), payment-for-ecosystem-services programs (33,34), logging concessions (35), and clearing bans (36), to include agricultural concessions. Even though agricultural concessions are used to legally sanction deforestation on at least 150 million hectares of forest in at least 12 countries (37), and curtailing the expansion of such concessions represents a potentially promising policy for reducing emissions from deforestation, the effects of agricultural concessions on deforestation have only been estimated obliquely in econometric studies exploring other topics (4,38,39). Additionally, to our knowledge our paper is the first to transform area-based treatment effects to emissions-based treatment effects.…”

Estimating the impacts of conservation on ecosystem services and poverty by integrating modeling and evaluation

“…Much of the policy-related science on ecosystem services evaluates how modeled (and usually hypothetical) changes in a generic conservation action would affect the quantity of one or more services, or people's willingness to pay for changes in these services (42,43). In these hypothetical scenarios, decision makers often are assumed to know where ecosystem conversion will occur and then can assign "protection" that stops this conversion.…”