The Economics of International Policy Agreements to Reduce Emissions from Deforestation and Degradation

Motu Working Paper No. 12-12

34 Pages Posted: 20 Nov 2012

See all articles by Suzi Kerr

Suzi Kerr

Motu Economic and Public Policy Research Trust

Date Written: November 19, 2012

Abstract

This paper provides a synthesis of the key conceptual insights from economics that can contribute to the design of effective, efficient, and fair international policy that creates incentives and strengthens capability to reduce deforestation and forest degradation and promote reforestation (REDD in United Nations terminology) as part of the international climate change mitigation effort. Most of the emphasis is on the contribution of economics to effective design of results-based policies that introduce a price incentive for strong states to address deforestation, degradation, and reforestation. The paper emphasizes the value of large-scale agreements to minimize leakage and adverse selection, the importance of allocating uncertainty with care, and the need to differentiate clearly among potentially conflicting objectives. It explores the conflicts between cost sharing and efficiency that arise because of private information and the inability of states to make long-term commitments. It also canvasses policies that complement price incentives, and, for weak states only, substitutes for results-based agreements.

Keywords: Greenhouse gas emissions, climate change, deforestation, developing countries, REDD, reducing emissions from deforestation and degradation

JEL Classification: Q54, Q58

Suggested Citation

Kerr, Suzi, The Economics of International Policy Agreements to Reduce Emissions from Deforestation and Degradation (November 19, 2012). Motu Working Paper No. 12-12. Available at SSRN: https://ssrn.com/abstract=2178263 or http://dx.doi.org/10.2139/ssrn.2178263

Suzi Kerr (Contact Author)

Motu Economic and Public Policy Research Trust ( email )

Level 1, 93 Cuba Street
P.O. Box 24390
Wellington, 6142
New Zealand
+64 4 383 4250 (Phone)
+64 4 383 4270 (Fax)

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