REDD+ sticks and carrots combined: simulating costs and equity effects

in Brazil and Peru

Jan Börner (University of Bonn, CIFOR)

Eduardo Marinho (CIFOR)

Sven Wunder (CIFOR)

Background

• Brazil has effectively reduced deforestation to 70-80% of pre-2004 levels

• Command-and-control (C&C) policies (=“sticks”) are budget-wise cheap – yet costly to land users (Börner et al., 2014)

• Effective C&C may require complementary incentives to remain politically sustainable (Nepstad et al., 2014)

Research questions

1. What tradeoffs between cost effectiveness and land-user income may integration of REDD+ sticks (C&C) and carrots (PES) trigger (Brazil case)?

2. How can incentives be designed to make conservation both cost-effective and egalitarian (Peru case)?

Policy mix tradeoffs

REDD+ cost-effectiveness

Landholder incomes

C&C

PES

PES design tradeoffsCost-effectiveness

Equality

• 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

• More 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 decision making

Land user• Deforestation is a function of

expected profits and policy incentives

Envir. Protection Agency

• 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 overlayThreatened

forests

Returns to

deforestation

Community

boundaries

Population

PES design tradeoffs

0 2000 4000 6000 8000 10000 12000

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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

Welfare effects of policy mixes

Key findings

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

• If PES are intended to complement C&C (as is common under REDD+) enforcement quality is key to cost-effectiveness

• 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