Selected research frontiers in the economics of REDD+

Jonah Busch, Ph.D. (Conservation International)12th Annual BIOECON Conference

Venice, ItalyWednesday, September 29, 2010

With appreciation to…• Arild Angelsen, Norway University of Life Sciences (UMB)• Ralph Ashton, Terrestrial Carbon Group• Andrea Cattaneo, OECD• Philippe Delacote, Laboratoire de Economie Forestiere, INRA• Daniel Morris, Resources for the Future (RFF)• Brian Murray, Nicholas Institute, Duke University• Ramon Ortiz, Basque Centre for Climate Change (BC3)• Erin Sills, North Carolina State University• Charlotte Streck, Climate Focus• Michael Wolosin, Climate Advisers

Source: MIT Joint Program on the Science and Policy of Global Change

Timeline of International Climate Negotiations

1992 1996 2000 2004 2008 2012

Rio Treaty

UNFCCC enters into

force

Kyoto Protocol

negotiated

1st Commitment Period (2005-2013)

COP-13 Bali

COP-14 Poznan

COP-15 Copenhagen

Kyoto Protocol

enters into force

PNG and Costa Rica

propose RED

COP-16 Cancun

Source: REDD+ Training Course (Cortez et al)

The TragedyOf the COP

The ActionHeroes

0.1/yr 0.25

0.075

0.4

0.25

4.5

1

0.25

1

25/yr

15/yr

0.1/yr

0

1

2

3

4

5

6

0 0.5 1 1.5 2 2.5 3 3.5 4 4.5 5

Approximate size of emerging REDD+ systems(US$1 billion)

Voluntary market (annual)FCPFUNREDDFIPGEFREDD+ partnershipNorway-BrazilNorway-GuyanaNorway-IndonesiaUNFCCC (annual)USA (annual)GCF (annual)

Voluntary/“pre-compliance”

MultilateralReadiness

Bilateral InternationalCompliance

Timeline of International Climate Negotiations

1992 1996 2000 2004 2008 2012

Rio Treaty

UNFCCC enters into

force

Kyoto Protocol

negotiated

1st Commitment Period (2005-2013)

COP-13 Bali

COP-14 Poznan

COP-15 Copenhagen

Kyoto Protocol

enters into force

PNG and Costa Rica

propose RED

COP-16 Cancun

REDD+ policy

developed rapidly

Silver lining of tragic policy

inaction:Time for scholarly

input

Avoided deforestationexcluded fromKyoto Protocol

Efforts to stop deforestation are not new. What is novel about REDD+?

Payment for performance National (or jurisdictional) scale incentivesMagnitude of fundingPositive (one-sided) incentive structure

The untested hypothesis:“Greenhouse gas emissions from forests can be stopped with money”

What does this mean for economic researchers?

We can test the hypothesis…We can quantify the impacts…We can develop new sub-hypotheses…

1. How much would REDD+ really cost?2. How to design elements of an international REDD+ mechanism to be

effective, efficient and equitable?3. Which national policies and measures reduce deforestation?4. How to incentivize local actions?5. Leakage: what drives it? How can it be addressed?6. How do macroeconomic factors impact deforestation?7. How can REDD+ support broader low-carbon development

aspirations?8. How to achieve mitigation in forests beyond deforestation?9. How to achieve multiple benefits?10.How to achieve natural mitigation beyond forests?11.Political reality: Can REDD+ be built from the bottom up?12.The long view: What happens to REDD+ into the future?

Some open economic questions on REDD+

Source: IPCC 4AR

Source: McKinsey, 2009

How much would REDD+ really cost?Reviews: Norway Options Assessment Report

(Angelsen et al, 2009)Murray, Lubowski and Sohngen, 2009

More primary data needed estimating and mapping opportunity costs

Opportunity costs represent minimum, not typical cost of REDD+ (Gregersen et al)

Startup costs, transaction costs, costs of institutional and cultural changes

What is the functional relationship between opportunity cost and deforestation probability?

100%

0%

“opportunity cost”

How to design an international REDD+ mechanism that is effective, efficient and equitable?scale, leakage, reference levels, finance, MRV...

• Parties’ proposals (Little REDD+ Book, Global Canopy Programme)

• Technical overview of options (CIFOR, Moving Ahead with REDD+)

• Comparisons of reference level designs Busch et al., 2009, Env Res LettersGriscom et al., 2009, Env Sci TechHuettner et al., 2009, Carbon Balance Mgmt

Reference levels affect the equity, effectiveness and efficiency of REDD+

Adapted from Mollicone et al, 2007

Reduction inEmissions

payment receivedby country

Increase inEmissions no penalty

Emis

sion

s

Reference Period

AccountingPeriod

Reference Level

Emissions

National policies and measures: Which can be shown empirically to

reduce deforestation? At what cost?

Source: Peskett et al., “Making REDD work for the poor”

National policies and measures: Which can be shown empirically to

reduce deforestation? At what cost?Overview: “Realising REDD+” (CIFOR)

Overview: “Policy Impacts on Deforestation” (Duke Nicholas Institute)

• Protected areas (Bruner; Ferraro; Andam; Soares-Filho, PNAS, 2009…)

• Roads (Pfaff, Amazonia, multiple)• Forest product certification• Alternative livelihood programs; ICDPs

“Global Comparative Study on REDD+”: What works in six countries? (CIFOR, in prep.)

REDD+ as a multi-level PES program: Incentivizing local actions

• “National accounting, sub-national implementation”

• “Nested” approach (Pedroni et al 2009)

• National REDD+ incentive design (Cattaneo, in review)

• Estimating and mapping impacts of incentive policies (Busch et al, in preparation)

• PES vs. regulation: Advantages of scale? (Angelsen, in prep.)

• Opportunity costs vs. carbon price (Leplay et al, in prep.)

• Analytical models of forest frontier dynamics (Delacote, Laboratoire de EconomieForestiere)

Source: Angelsen, A., C. Streck, L. Peskett, J. Brown, and C. Luttrell. 2008. What is the right scale for REDD?In: Moving Ahead with REDD: Issues, Options and Implications.

Without REDD+ (modeled)Deforestation: 4.68 mha/5yrsEmissions: 3.79 gtCO2e/5yrs

With REDD+: $5/tCO2eDeforestation: 4.11 mha/5yrsEmissions: 3.24 gtCO2e/5yrs

With REDD+: $15/tCO2eDeforestation: 3.00 mha/5yrsEmissions: 2.26 gtCO2e/5yrs

Deforestation Probability MapIndonesia, 2000-2005

Leakage: how much occurs; what drives it; how to address it?

• Review piece: Murray, 2008

• Vietnam logging ban and imports (Meyfroidt and Lambin, PNAS, 2009)

• Modeling of global timber market (Gan and McCarl, Ecological Economics, 2008)

• Mapping forest carbon at risk: triple filter of biophysical, economic, legal accessibility (Terrestrial Carbon Group)

• Biofuels and indirect land use change

Macro-economic factors and REDD+

Economic growth and the forest transition (Environmental Kuznets Curve)

Demand-side management (Commodity roundtables; consumer pressure campaigns)

Import restrictions (FLEGT; Lacey Act; CITES)

National indebtedness

National investment security

How can REDD+ support broader low-carbon development aspirations?Poverty alleviation: Making REDD+ work for the

Poor (Poverty Environment Partnership)

More sophisticated integration of forest policy in CGE models (Amazon, BC3; Global, Cornell)

What does “low-carbon economic growth” look like? What is a “green economy?”

• Suriname Green• Ecuador SocioBosque• Guyana Low Carbon Development Strategy• Indonesia National Council on Climate

Change (DNPI) Reports (www.dnpi.go.id)

In many forestcountries, REDD+ envisioned within context of broader

low-carbon development

Forest mitigation beyond deforestationForest degradation (TNC/Rainforest

Alliance)

Conservation – how to pay to protect forests not under historical threat?

Carbon stock enhancement afforestation/reforestation/assisted regeneration

Sustainable forest management –carbon management in logging regimes

Which instruments? Quantitative limits?

How can REDD+ fit with programs to provide multiple forest benefits?Potential co-benefits of REDD+ in the Amazon (Stickler et al, Global

Change Biology)

Achieving biodiversity co-benefits through REDD+ (Harvey et al, Conservation Letters)

Financial mechanisms to increase biodiversity benefits of REDD+ (Busch et al, in prep

Testing community benefits of REDD in India (BC3/TERI)

REDD+ Social and Environmental Standards (CCBA/CARE)

Protected areas and REDD+ (Dudley, WWF)

Ecosystem-based carbon mitigation beyond forests

AFOLU: “Agriculture, Forests and Other Land Uses”

AgricultureGrasslandsWetlandsPeatlands

“Blue carbon” (UNEP)

Policies for blue carbon (RFF, in prep.)

Different policy mechanisms required?

Political realities:REDD+ may develop “bottom

up,” not top-down

Can multi-lateral agreements build to a global mechanism?

What can national REDD+ mechanisms learn from site-level “demonstration activities?”

Realistic view of governance and institutions: What works?

Political economy: Optimizations, or political competitions?

REDD+ into the futureLong-range predictions of BAU

forest loss and national readiness (Boucher, UCS; Climate Focus for DFID)

Reference levels over time

What is the endgame? Post-REDD+ mechanism for conserving forests

Permanence, climate change and tipping points (Lubowski et al, in prep.)

1. How much would REDD+ really cost?2. How to design elements of an international REDD+ mechanism to be

effective, efficient and equitable?3. Which national policies and measures reduce deforestation?4. How to incentivize local actions?5. Leakage: what drives it? How can it be addressed?6. How do macroeconomic factors impact deforestation?7. How can REDD+ support broader low-carbon development

aspirations?8. How to achieve mitigation in forests beyond deforestation?9. How to achieve multiple benefits?10.How to achieve natural mitigation beyond forests?11.Political reality: Can REDD+ be built from the bottom up?12.The long view: What happens to REDD+ into the future?

Some open economic questions on REDD+

to find out more…• Arild Angelsen, Norway University of Life Sciences (UMB)• Ralph Ashton, Terrestrial Carbon Group• Jonah Busch, Conservation International• Andrea Cattaneo, OECD• Philippe Delacote, Laboratoire de Economie Forestiere, INRA• Daniel Morris, Resources for the Future (RFF)• Brian Murray, Nicholas Institute, Duke University• Ramon Ortiz, Basque Centre for Climate Change (BC3)• Erin Sills, North Carolina State University• Charlotte Streck, Climate Focus• Michael Wolosin, Climate Advisers

(contact information available upon request)

Thank you!

Comments and feedback welcome:http://www.conservation.org/osiris

jbusch@conservation.org