Cost and equity implications of integrating sticks and carrots in

conservation programs in Brazil and Peru

Jan Börner (University of Bonn, CIFOR)

Eduardo Marinho (CIFOR)

Sven Wunder (CIFOR)

Background

• Mounting empirical evidence suggests that Brazil has effectively reduced deforestation to 70-80% of pre-2004 levels (Hargrave and Kis-Katos, 2013)

• Command-and-control (stick) policies are relatively cheap to implement (Börner et al., 2014)

• Effective C&C requires complementary incentive-based policies to be sustainable in the long-run (Nepstad et al., 2014)

Research questions

1. What tradeoffs in terms of cost-effectiveness and land user income do policy makers face when attempting to integrate sticks (C&C) and carrots (PES) for forest conservation (Brazil)?

2. How can the incentive component be designed to make conservation both cost-effective and fair (Peru)?

Policy Mix tradeoffs

Cost-effectiveness

Income

C&C

PES

PES design tradeoffs

Cost-effectiveness

Equity

• Concentration of land ownership• Historical deforestation patterns• Spatially variable opportunity costs• Targeting of payments

Study areas

Study areas

BRAZILIAN AMAZON

• High historical deforestation

• High concentration of land ownership

• Commercial agriculture and cattle operations at the agricultural frontiers

• Relatively well developed forest monitoring and law enforcement infrastructure

• Large-scale PES planned

PERUVIAN AMAZON

• Historically low deforestation

• Relatively homogeneous distribution of land

• Predominantly subsistence cattle production and small but growing commercial sector

• Relatively weak forest monitoring and law enforcement infrastructure

• Large-scale PES implemented

Modelling decisions

Land user

• Deforestation is a function of expected profits and policy incentives

EPA

• Enforcement is a budget constrained optimization of deterrence through in situinspections

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Spatial analysis

• District-based opportunity cost analysis

• Grid-based spatial simulation of:– Avoided deforestation (Brazil + Peru)

– Land user income change (Brazil + Peru)

– Command-and-control implementation costs (Brazil)

– Sticks & Carrot integration (Brazil)

– Alternative PES payment modalities (Peru)

Spatial overlay

Threatened

forests

Returns to

deforestation

Community

boundaries

Population

Policy mix tradeoff (Brazil)

Net revenue of alternative policy mixes

Welfare effects of alternative policy mixes

PES design tradeoffs

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Cost-effectiveness: Peruvian Soles per hectare of conserved forest

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current PNCB schemeav. p/ha opp. cost payment

compensation up to av. opp.costav. department p/ha opp. cost paymentav. province p/ha opp. cost payment

1 min. salary per year + pure compensation1 min. salary per year + average opp. cost payment

UNEQUAL & INEFFICIENT

EQUAL & EFFICIENT

Key findings

• Mixing carrots to sticks can make REDD+ fairer, but also more expensive (Brazil)

• If PES are intended to complement C&C (as common under REDD+) enforcement quality is key to cost-effectiveness (not necessarily fairness)

• Designing PES requires knowledge about spatial patterns of deforestation and opportunity costs

• Simple and feasible adjustments to the PNCB can boost its cost-effectiveness and equity effects