Addressing Additionality in REDD Contracts When Formal Enforcement Is Absent
The success of reducing carbon emissions from deforestation and forest degradation depends on the design of an effective financial mechanism that provides landholders sufficient incentives to participate and provide additional and permanent carbon...
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
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World Bank, Washington, DC
2013
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| Online Access: | http://documents.worldbank.org/curated/en/2013/06/17919070/addressing-additionality-redd-contracts-formal-enforcement-absent http://hdl.handle.net/10986/15861 |
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okr-10986-158612021-04-23T14:03:23Z Addressing Additionality in REDD Contracts When Formal Enforcement Is Absent Cordero Salas, Paula Roe, Brian Sohngen, Brent AFFORESTATION AFFORESTATION PROJECTS AGRICULTURE ALLOCATION OF LAND ASYMMETRIC INFORMATION ATMOSPHERE BILATERAL CONTRACTS BIODIVERSITY BIODIVERSITY CONSERVATION BREACH CARBON CARBON CREDITS CARBON EMISSION CARBON EMISSIONS CARBON EMISSIONS FROM DEFORESTATION CARBON OFFSET CARBON OFFSETS CARBON SEQUESTRATION CARBON SINKS CARBON STOCKS CARBON-SEQUESTRATION CENTER FOR INTERNATIONAL FORESTRY RESEARCH CLIMATE CLIMATE CHANGE CO COMPENSATION CONTRACT DESIGN CONTRACT ENFORCEMENT CONTRACT OBLIGATIONS CONTRACT OFFERS CONTRACT THEORY COOPERATIVE EQUILIBRIUM DEVELOPING COUNTRIES ECONOMIC DEVELOPMENT ENFORCEABILITY ENFORCEMENT CONSTRAINT ENFORCEMENT MECHANISMS ENVIRONMENTS EQUILIBRIUM EXPENDITURES FEASIBLE CONTRACTS FINANCIAL SUPPORT FOREST FOREST ACTIVITIES FOREST ACTIVITY FOREST CARBON FOREST CARBON SINKS FOREST CONSERVATION FOREST DEGRADATION FOREST LAND FOREST PROTECTION FORESTRY FORESTS FRAMEWORK CONVENTION ON CLIMATE CHANGE GHG GLOBAL CLIMATE CHANGE GOOD FAITH GREENHOUSE GREENHOUSE GAS GREENHOUSE GAS MITIGATION GREENHOUSE-GAS GREENHOUSE-GAS EMISSIONS GROVES HETEROGENEITY HIDDEN INFORMATION HOLDING INCENTIVE COMPATIBILITY CONSTRAINT INCENTIVE COMPATIBILITY CONSTRAINTS INCOMPLETE CONTRACT INCOMPLETE CONTRACTS INDIVIDUAL RATIONALITY CONSTRAINT INFORMATION ASYMMETRIES INFORMATION ASYMMETRY INTERNATIONAL BANK INTERNATIONAL FORESTRY RESEARCH LAND USE LAND USES LAND-USE LANDHOLDER LANDHOLDERS LANDOWNER LANDOWNERS LEGAL SYSTEMS LEGALLY BINDING OBLIGATION LIQUIDITY LIQUIDITY CONSTRAINTS LITERATURE ON CONTRACT MORAL HAZARD OPEN ACCESS OPPORTUNITY COST OPPORTUNITY COSTS OPTIMAL CONTRACT OPTIMAL CONTRACTS PARTICIPATION CONSTRAINT PH PP PRIVATE ENFORCEMENT PROOF OF PROPOSITION REASONABLE COST RELATIONAL CONTRACT RELATIONAL CONTRACTS RENEGOTIATION RETURN RETURNS RISK AVERSION RISK-NEUTRAL SELLER SELLERS TIMBER TIMBER HARVESTING TRADING TRUST FUND WOOD The success of reducing carbon emissions from deforestation and forest degradation depends on the design of an effective financial mechanism that provides landholders sufficient incentives to participate and provide additional and permanent carbon offsets. This paper proposes self-enforcing contracts as a potential solution for the constraints in formal contract enforcement derived from the stylized facts of reducing emissions from deforestation and forest degradation implementation in developing countries. It characterizes the optimal self-enforcing contract and provides the parameters under which private enforcement is sustainable when the seller type that is, the opportunity cost of the land, is private information. The optimal contract suggests that the seller with low opportunity cost receives a positive enforceable payment equivalent to the information rents required for self-selection, in contrast to when the buyer knows the seller type in which case all payments should be made contingent on additional forest conservation. When the buyer does not know the seller type, a first-best self-enforcing contract can be implemented if forest conservation is sufficiently productive. If the gains from forest conservation are small, self-enforcing contracts may induce some carbon sequestration by some or all seller types, depending on the value of the shared gains of the relationship. 2013-09-26T16:10:25Z 2013-09-26T16:10:25Z 2013-06 http://documents.worldbank.org/curated/en/2013/06/17919070/addressing-additionality-redd-contracts-formal-enforcement-absent http://hdl.handle.net/10986/15861 English en_US Policy Research Working Paper;No. 6502 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research |
| repository_type |
Digital Repository |
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Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English en_US |
| topic |
AFFORESTATION AFFORESTATION PROJECTS AGRICULTURE ALLOCATION OF LAND ASYMMETRIC INFORMATION ATMOSPHERE BILATERAL CONTRACTS BIODIVERSITY BIODIVERSITY CONSERVATION BREACH CARBON CARBON CREDITS CARBON EMISSION CARBON EMISSIONS CARBON EMISSIONS FROM DEFORESTATION CARBON OFFSET CARBON OFFSETS CARBON SEQUESTRATION CARBON SINKS CARBON STOCKS CARBON-SEQUESTRATION CENTER FOR INTERNATIONAL FORESTRY RESEARCH CLIMATE CLIMATE CHANGE CO COMPENSATION CONTRACT DESIGN CONTRACT ENFORCEMENT CONTRACT OBLIGATIONS CONTRACT OFFERS CONTRACT THEORY COOPERATIVE EQUILIBRIUM DEVELOPING COUNTRIES ECONOMIC DEVELOPMENT ENFORCEABILITY ENFORCEMENT CONSTRAINT ENFORCEMENT MECHANISMS ENVIRONMENTS EQUILIBRIUM EXPENDITURES FEASIBLE CONTRACTS FINANCIAL SUPPORT FOREST FOREST ACTIVITIES FOREST ACTIVITY FOREST CARBON FOREST CARBON SINKS FOREST CONSERVATION FOREST DEGRADATION FOREST LAND FOREST PROTECTION FORESTRY FORESTS FRAMEWORK CONVENTION ON CLIMATE CHANGE GHG GLOBAL CLIMATE CHANGE GOOD FAITH GREENHOUSE GREENHOUSE GAS GREENHOUSE GAS MITIGATION GREENHOUSE-GAS GREENHOUSE-GAS EMISSIONS GROVES HETEROGENEITY HIDDEN INFORMATION HOLDING INCENTIVE COMPATIBILITY CONSTRAINT INCENTIVE COMPATIBILITY CONSTRAINTS INCOMPLETE CONTRACT INCOMPLETE CONTRACTS INDIVIDUAL RATIONALITY CONSTRAINT INFORMATION ASYMMETRIES INFORMATION ASYMMETRY INTERNATIONAL BANK INTERNATIONAL FORESTRY RESEARCH LAND USE LAND USES LAND-USE LANDHOLDER LANDHOLDERS LANDOWNER LANDOWNERS LEGAL SYSTEMS LEGALLY BINDING OBLIGATION LIQUIDITY LIQUIDITY CONSTRAINTS LITERATURE ON CONTRACT MORAL HAZARD OPEN ACCESS OPPORTUNITY COST OPPORTUNITY COSTS OPTIMAL CONTRACT OPTIMAL CONTRACTS PARTICIPATION CONSTRAINT PH PP PRIVATE ENFORCEMENT PROOF OF PROPOSITION REASONABLE COST RELATIONAL CONTRACT RELATIONAL CONTRACTS RENEGOTIATION RETURN RETURNS RISK AVERSION RISK-NEUTRAL SELLER SELLERS TIMBER TIMBER HARVESTING TRADING TRUST FUND WOOD |
| spellingShingle |
AFFORESTATION AFFORESTATION PROJECTS AGRICULTURE ALLOCATION OF LAND ASYMMETRIC INFORMATION ATMOSPHERE BILATERAL CONTRACTS BIODIVERSITY BIODIVERSITY CONSERVATION BREACH CARBON CARBON CREDITS CARBON EMISSION CARBON EMISSIONS CARBON EMISSIONS FROM DEFORESTATION CARBON OFFSET CARBON OFFSETS CARBON SEQUESTRATION CARBON SINKS CARBON STOCKS CARBON-SEQUESTRATION CENTER FOR INTERNATIONAL FORESTRY RESEARCH CLIMATE CLIMATE CHANGE CO COMPENSATION CONTRACT DESIGN CONTRACT ENFORCEMENT CONTRACT OBLIGATIONS CONTRACT OFFERS CONTRACT THEORY COOPERATIVE EQUILIBRIUM DEVELOPING COUNTRIES ECONOMIC DEVELOPMENT ENFORCEABILITY ENFORCEMENT CONSTRAINT ENFORCEMENT MECHANISMS ENVIRONMENTS EQUILIBRIUM EXPENDITURES FEASIBLE CONTRACTS FINANCIAL SUPPORT FOREST FOREST ACTIVITIES FOREST ACTIVITY FOREST CARBON FOREST CARBON SINKS FOREST CONSERVATION FOREST DEGRADATION FOREST LAND FOREST PROTECTION FORESTRY FORESTS FRAMEWORK CONVENTION ON CLIMATE CHANGE GHG GLOBAL CLIMATE CHANGE GOOD FAITH GREENHOUSE GREENHOUSE GAS GREENHOUSE GAS MITIGATION GREENHOUSE-GAS GREENHOUSE-GAS EMISSIONS GROVES HETEROGENEITY HIDDEN INFORMATION HOLDING INCENTIVE COMPATIBILITY CONSTRAINT INCENTIVE COMPATIBILITY CONSTRAINTS INCOMPLETE CONTRACT INCOMPLETE CONTRACTS INDIVIDUAL RATIONALITY CONSTRAINT INFORMATION ASYMMETRIES INFORMATION ASYMMETRY INTERNATIONAL BANK INTERNATIONAL FORESTRY RESEARCH LAND USE LAND USES LAND-USE LANDHOLDER LANDHOLDERS LANDOWNER LANDOWNERS LEGAL SYSTEMS LEGALLY BINDING OBLIGATION LIQUIDITY LIQUIDITY CONSTRAINTS LITERATURE ON CONTRACT MORAL HAZARD OPEN ACCESS OPPORTUNITY COST OPPORTUNITY COSTS OPTIMAL CONTRACT OPTIMAL CONTRACTS PARTICIPATION CONSTRAINT PH PP PRIVATE ENFORCEMENT PROOF OF PROPOSITION REASONABLE COST RELATIONAL CONTRACT RELATIONAL CONTRACTS RENEGOTIATION RETURN RETURNS RISK AVERSION RISK-NEUTRAL SELLER SELLERS TIMBER TIMBER HARVESTING TRADING TRUST FUND WOOD Cordero Salas, Paula Roe, Brian Sohngen, Brent Addressing Additionality in REDD Contracts When Formal Enforcement Is Absent |
| relation |
Policy Research Working Paper;No. 6502 |
| description |
The success of reducing carbon emissions
from deforestation and forest degradation depends on the
design of an effective financial mechanism that provides
landholders sufficient incentives to participate and provide
additional and permanent carbon offsets. This paper proposes
self-enforcing contracts as a potential solution for the
constraints in formal contract enforcement derived from the
stylized facts of reducing emissions from deforestation and
forest degradation implementation in developing countries.
It characterizes the optimal self-enforcing contract and
provides the parameters under which private enforcement is
sustainable when the seller type that is, the opportunity
cost of the land, is private information. The optimal
contract suggests that the seller with low opportunity cost
receives a positive enforceable payment equivalent to the
information rents required for self-selection, in contrast
to when the buyer knows the seller type in which case all
payments should be made contingent on additional forest
conservation. When the buyer does not know the seller type,
a first-best self-enforcing contract can be implemented if
forest conservation is sufficiently productive. If the gains
from forest conservation are small, self-enforcing contracts
may induce some carbon sequestration by some or all seller
types, depending on the value of the shared gains of the relationship. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Cordero Salas, Paula Roe, Brian Sohngen, Brent |
| author_facet |
Cordero Salas, Paula Roe, Brian Sohngen, Brent |
| author_sort |
Cordero Salas, Paula |
| title |
Addressing Additionality in REDD Contracts When Formal Enforcement Is Absent |
| title_short |
Addressing Additionality in REDD Contracts When Formal Enforcement Is Absent |
| title_full |
Addressing Additionality in REDD Contracts When Formal Enforcement Is Absent |
| title_fullStr |
Addressing Additionality in REDD Contracts When Formal Enforcement Is Absent |
| title_full_unstemmed |
Addressing Additionality in REDD Contracts When Formal Enforcement Is Absent |
| title_sort |
addressing additionality in redd contracts when formal enforcement is absent |
| publisher |
World Bank, Washington, DC |
| publishDate |
2013 |
| url |
http://documents.worldbank.org/curated/en/2013/06/17919070/addressing-additionality-redd-contracts-formal-enforcement-absent http://hdl.handle.net/10986/15861 |
| _version_ |
1764431653741002752 |