Unveiling information on opportunity costs in REDD: Who obtains the surplus when policy objectives differ?

Philippe Delacote, Charles Palmer, Riyong Kim Bakkegaard, Bo Jellesmark Thorsen

Research output: Contribution to journalJournal articleResearchpeer-review

Abstract

Improving information about individual opportunity costs of deforestation agents has the potential to increase the efficiency of REDD when it takes the form of a payment for environmental services scheme. However, objectives pursued in REDD projects may vary across policy makers. Within a theoretical framework, this paper explores the impacts of different policy objectives under two opportunity cost settings: asymmetric and full information. For a policy maker aiming to maximize net income from REDD, having full information may not increase the amount of forest conserved but could lead to a redistribution of rents away from agents. By contrast, for an environmental policy maker focused on maximizing the amount of forest conserved under REDD having full information increases the amount of forest conserved while reducing the rents received by agents. For a policy maker pursuing poverty alleviation objectives in REDD-affected communities, having full information makes no difference to overall welfare as rents remain with agents. The amount of deforestation avoided will at least be as high as under asymmetric information. These results are illustrated with data collected on opportunity costs in Amazonas State, Brazil.
Original languageEnglish
JournalResource and Energy Economics
Volume36
Issue number2
Pages (from-to)508–527
ISSN0928-7655
DOIs
Publication statusPublished - 2014
Externally publishedYes

Keywords

  • Asymmetric information
  • Brazil
  • Deforestation
  • Opportunity costs
  • Payments for environmental services
  • REDD

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