REDD Sticks and Carrots in the Brazilian Amazon


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Presented at the 2011 Colorado Conference on Earth Systems Governance 19 May 2011 in Fort Collins, CO, US

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REDD Sticks and Carrots in the Brazilian Amazon

  1. 1. REDD sticks and carrots in the Brazilian Amazon: assessing costs and livelihood implicationsJan Börner (CIFOR)Sven Wunder (CIFOR)Sheila Wertz-Kanounnikoff (CIFOR)Glenn Hyman (CIAT)Elizabeth Barona (CIAT)Edward Guevara (CIAT)Nathalia Nascimento (UFPA)The CGIAR Research Program on Climate Change, Agriculture and Food Security (CCAFS), is a strategic partnership of theConsortium of International Agricultural Research Centers (CGIAR) and the Earth System Science Partnership (ESSP). The programis supported by the European Union (EU), the United States Agency for International Development (USAID), the CanadianInternational Development Agency (CIDA), New Zealand’s Ministry of Foreign Affairs and Trade, the Danish InternationalDevelopment Agency (Danida) and the UK Department for International Development (DFID), with technical support from theInternational Fund for Agricultural Development (IFAD). The views expressed in this document cannot be taken to reflect the officialopinions of these agencies, nor the official position of the CGIAR or ESSP. Fort Collins, 19.5.2011
  2. 2. Outline• Post-Cancún REDD+ and the Brazilian context• Scope for carrot policies in the Amazon• An approach to analyze stick policies• Scenarios and results• Wrap up and implications Fort Collins, 19.5.2011
  3. 3. Post-Cancún REDD+Policy approaches and positive incentiveson issues relating to:Reducing Emissions from• Deforestation• Degradation+ Conservation of forest carbon stocks+ Sustainable forest management+ Forest carbon stock enhancement Fort Collins, 19.5.2011
  4. 4. REDD perspectives• Over US$ 27 billion in pledges• National governments as prime recipients• National autonomy in policy instrument choice Fort Collins, 19.5.2011
  5. 5. Context: Brazilian Amazon Reduce annual average deforestation (19,500 km2, 1996-2005) by 80% until 2016 Fort Collins, 19.5.2011
  6. 6. Features of the Brazilian REDD Approach1. Regulatory mechanisms „Command- and-Control (C&C)“ - Sticks • Improving existing measures2. National program of payments for environmental services (PES) - Carrots • Complementary conditional compensation3. Improved territorial planning Fort Collins, 19.5.2011
  7. 7. What scope for PES?Over 1.4 million km2 threatened until 2050 Fort Collins, 19.5.2011 Börner et al, 2010, Ecological Economics, 69
  8. 8. What scope for PES?Over 50% of threatened forests exhibit offsetmarket competitive opportunity costs. Total annual cost > R$ 17 billion ~ US$ 9 billion Fort Collins, 19.5.2011 Börner et al, 2010, Ecological Economics, 69
  9. 9. What scope for PES? Only 25% of threatened forest land boast institutional preconditions for conditionalincentives (i.e., well defined property rights) Fort Collins, 19.5.2011 Börner et al, 2010, Ecological Economics, 69
  10. 10. Follow-up research questions1. How much would it cost to achieve the 80% reduction target through stick type of policies?2. How would such policies play out in terms of welfare and equity impacts? Fort Collins, 19.5.2011
  11. 11. The workings of stick policiesTo deforest or not to deforest…. 0 for Π − penf F ≤ 0 unprofitable d1, 0 =:  1 for Π − penf F > 0 profitable Opportunity costs Enforcement probability Fine Based on Becker, 1968 “Crime and punishment: an economic approach”, JPE Fort Collins, 19.5.2011
  12. 12. Cost-effectiveness of stick policies ∑ (D ) I i − D Bii R Additionality EREDD = i C REDD Implementation costs Fort Collins, 19.5.2011
  13. 13. Measuring the costs of stick policies at the farm forest frontierCost categories Liability establishment  penfi TCiL Di( )  I  Coercion and  administrative processes ∑ i =1  + DiRTCiC + Pi c =C REDD   − penfi F Fine revenues  Spatial unit Fort Collins, 19.5.2011
  14. 14. Welfare effect of stick policies ( − Π i Di − DiR ) Opportunity cost I ∆WREDD = ∑ i   − DiR penf F Fine payments Fort Collins, 19.5.2011
  15. 15. Travel time (costs) in the Amazon Fort Collins, 19.5.2011
  16. 16. Determining penf – a resource allocation problem I P Maximizing deterrence bymax vi AREA = ∑∑ vi s p ,i targeting largest offenders i =1 p =1 Subject to: IBUDGET ≥ ∑ TCi vi , vi ≤ 1 Operational budget limitations when acting at i =1 remote forest frontiers Fort Collins, 19.5.2011
  17. 17. Data sourcesData type SourceAnnual deforestation polygons (2002-9) INPE-PRODES (2002-9)1Municipal-level average profits from agricultural activities Börner et al. 2010and timber extraction (i.e. REDD opportunity costs)Location and size of land-reform settlements, protected IBAMA (provided in 2007)areas, and indigenous territories. IBAMA, at:Location and size of protected areas and indigenous (accessed in 2009)Costs and locations (districts) of C&C enforcement IBAMA records, provided inoperations (2003-2008) June 2009 IBGE2 Agricultural CensusPopulation estimates (Amazon region) 2006 Fort Collins, 19.5.2011
  18. 18. Actual and optimal enforcement strategies Observedenforcement Simulated enforcement 70% overlap Fort Collins, 19.5.2011
  19. 19. penf as a function of deforestation polygon size and distance 1.20 Percentile rank score (penf) 1.00 0.80 0.60 0.40 0.20 0.00 -20 -10 0 10 20 30 40 Shadow values [km 2] Fort Collins, 19.5.2011
  20. 20. Implementation costs and C&C effectiveness - aggregate 1,000 500[million R$] 0 -500 Cost (clarified rights) -1,000 Cost (status quo rights) Net revenue (clarified rights) Net revenue (status quo rights) -1,500 0 20 40 60 80 100 C&C effectiveness [%] Fort Collins, 19.5.2011
  21. 21. C&C cost-effectiveness in space Fort Collins, 19.5.2011
  22. 22. Welfare effects in space Fort Collins, 19.5.2011
  23. 23. Summary• Scope for positive REDD incentives at national level is limited – pre-existing use right restrictions – weak/poorly defined property rights at many forest frontiers• C&C policies much cheaper to implement than PES (<US$700 million versus >US$ 9 billion annually), but with contentious social welfare implications. Fort Collins, 19.5.2011
  24. 24. Implications for the design of REDD+ sticks• The current enforcement strategy follows the “Becker paradigm” of low enforcement pressure and high fines – i.e. lower fine levels and higher enforcement pressure may increase both compliance and cost-effectiveness• Stronger focus on cross-compliance mechanism• In states with poor transport infrastructure, C&C enforcement cannot be self-financing, i.e. sub- national compensation mechanisms Fort Collins, 19.5.2011
  25. 25. Implications for the design of REDD+ carrots• Positive incentives can only take the form of “compliance subsidies”• Given pre-existing C&C enforcement pressure, actual opportunity costs may be lower that most profit-based estimates suggest• Imperfect enforcement of direct compensation payments (like currently under C&C) may produce huge inefficiencies in REDD schemes• History of lax enforcement represents a political economy barrier to compensation based on pure additionality criteria Fort Collins, 19.5.2011
  26. 26. Aware of REDD sticks dressed as carrots! Fort Collins, 19.5.2011