Proposals for both international and domestic carbon cap-and-trade programs contain generous provisions allowing firms to offset their emissions by paying for emissions reductions through reduced deforestation and degradation (REDD) in other countries, an abatement option widely thought to be relatively inexpensive. However, it is not clear that REDD can actually provide many low-cost emissions offsets. If not, cap-and-trade programs will impose a much greater economic burden on firms.
Will REDD Really Be Cheap?
February 5, 2010
An international system that enables countries to earn carbon credits by reducing emissions from deforestation and degradation (REDD) will almost certainly be a prominent feature of whatever post-2012 international climate architecture emerges from ongoing negotiations.
One of the main arguments for creating such a system is that REDD will be inexpensive compared to fuel switching, carbon capture and storage, and other greenhouse gas abatement options. As a result, allowing countries to sell REDD credits will cut the total global cost of combating climate change. This argument underpins numerous high-profile reports and white papers—including the 2007 Intergovernmental Panel on Climate Change Fourth Assessment Report and the 2006 Stern Review—and has even inspired widespread concern about, and research on, a coming deluge of low-cost REDD credits.
Yet the scientific foundation for the hypothesis that REDD credits will be cost effective is thin, is contradicted by emerging evidence on the effectiveness of forest conservation policies in developing countries, and deserves serious scrutiny before critical REDD policy decisions are made.
Problems with Existing Studies
Studies that conclude REDD will be inexpensive are often based on simplistic assumptions about how clearing and degradation of forests in developing countries can be prevented. Most assume that the cost of REDD is merely the opportunity cost of the leading activities that result in tree cover loss, sometimes with relatively small transactions costs tacked on. An example is the background paper on REDD used to write the Stern report. The cost of REDD is estimated as the price tag of a hypothetical program applied in eight high-deforestation developing countries. This program would identify managers of forested land apt to clear or degrade their holdings and pay them the average opportunity cost of retaining tree cover.
A critical assumption is that these payments would result in 100 percent “additionality,” that is, not a dime would be wasted paying land managers to retain tree cover that is not in real danger of being cleared. A second assumption is that the program would not cause leakage, that is, it would not simply shift deforestation efforts to areas not receiving payments. Using this hypothetical model of a REDD program, the Stern Review concludes that, “curbing deforestation is a highly cost-effective way of reducing greenhouse gas emission and has the potential to offer significant reductions fairly quickly.”
Opportunity-cost models like this ignore voluminous evidence of the serious constraints on effective forest conservation in developing countries, including weak regulatory institutions, confused property rights, corruption, and an abundance of small-scale and informal drivers of tree cover loss (Chomitz 2007).
Emerging Quantitative Evidence
Recently, several studies have been published that use accurate forest cover data derived from satellite images along with rigorous statistical methods to develop quantitative estimates of the effectiveness of historical forest conservation policies—the same ones that developing countries would likely use to generate REDD credits. These studies take into account both additionality and leakage. Unfortunately, they also suggest that REDD is likely to be significantly more costly than widely believed.
Perhaps most notable is a study of Costa Rica’s payments for environmental services program, which has become a model for similar initiatives worldwide (Robalino et al. 2008). Much like the hypothetical carbon payments model envisioned by REDD researchers, this program would pay land managers to retain tree cover. The study found that each year, the payments program has prevented deforestation on less than 1 percent of enrolled hectares because virtually all of them are ill-suited for productive uses and would have remained forested absent payments. Studies of protected areas in Costa Rica and Mexico reached similar conclusions: these policies only prevented a very small fraction of land they comprised from being cleared for the same reason (Andam et al. 2008; Blackman et al. 2009).
Were these studies alone in concluding that forest conservation policies in developing countries are inefficient, they might be set aside as outliers. But they are not. Rather, they put numbers to qualitative findings common in the case study literature.
Conclusion and Policy Implications
To be fair, historical experiences with large-scale conservation policies are not necessarily good predictors of the effectiveness of REDD policies. Conservation policies typically serve a number of ends, including preserving biodiversity, protecting hydrological services, minimizing economic development and cultural trade offs, and maximizing long-term conservation. Policies specifically designed to preserve tree cover in immediate danger of being cleared would presumably be more effective and efficient at achieving that particular goal. Indeed, some REDD pilot projects appear to have been quite successful.
Still, the gap between the optimistic view of forest conservation in developing countries that underpins the conventional wisdom about the costs of REDD and the more complex pessimistic perspective afforded by the literature on historical experiences with such conservation should give us pause. REDD policymakers and stakeholders would be well advised to pay at least as much attention to the latter as the former.
Andam, K., P. Ferraro, A. Pfaff, J. Robalino, and A. Sanchez. 2008. Measuring the Effectiveness of Protected-Area Networks in Reducing Deforestati. Proceedings of the National Academy of Sciences 105(42): 16089–16094.