Monday, June 15, 2015


What policies can be implemented to slow deforestation?  Your first answer might be "make it illegal", via command-and-control (standards).  The problem with this approach is that it does not recognize that people lives depend on earning money from the forests.  What if poor nations could profit from NOT cutting trees rather than profiting from cutting trees?   

REDD stands for Reducing Emissions from Deforestation and forest Degradation. Think of it as a global PES system. 

The system works as follows:

The carbon stored in standing trees in a country is estimated.  Carbon losses from continued "business as usual" (BAU) deforestation and forest degradation are also estimated. The country then undergoes conservation activities to reduce deforestation below the projected BAU level.

The carbon "saved" via conservation activities is credited to the country and made available for sale in international carbon markets.  (Developed) countries (or states) that face carbon reduction requirements can reduce their own emissions and/or purchase credits on the international market.

This provides a monetary incentive to preserve standing forests as long as the profit that can be earned by selling carbon credits exceeds the profit that can be earned from various forms of development that require deforestation.

Sounds good. The skewed intertemporal and international distribution of costs and benefits are a big reason for tropical deforestation.  The benefits of deforestation are realized by current generations, but the costs of deforestation are "paid" by future generations (in large part by developing nations).  You're thinking about Hardin's Tragedy here I hope.

If developed countries buy carbon credits from developing nations, forests are preserved for future generations. Obviously there are a lot of complications and concerns. This will be true for any policy.

Read more about the basics of REDD and REDD+ here at the UN

FAQs here

Some cool videos here.

Are there problems and unintended consequences? Yes, of course.

Read more here and here.

Can these problems be overcome? 

P.S. I have a former student who is working on this REDD project.


Erin Tremblay said...

I'm curious about how carbon is valued in the permit system. How are the values/credits derived? Obviously the amount of carbon absorbed/reduced translates into the amount of value/credit, but how? Just curious if you know Dr. Schuhmann...& if so, could you explain in layman's terms? Thanks!

Olivia Setser said...

I am thinking along the same lines as Erin, how is the value placed? Is it by emission level change, units used, or are there sensors placed to measure carbon dioxide in the atmosphere? And what is done to adjust the levels so that it's beneficial to the country, what if they benefit more from deforestation than selling their carbon permits in the market? What steps in then? Also, does the IMF or the World Bank have a hand in this and what countries are providing the most monetary support/funding? I'm not sure if you know these answers Dr. Schuhmann, but I did have a few questions about how this functions and how it is funded.

Dr. Peter Schuhmann said...

Prices are determined by supply and demand. If a country benefits more from deforestation, then they won't sell carbon permits. Countries will only participate if it makes them better off, so there is no need for anyone to step in. Like all voluntary markets, if you don't like the price, then you don't buy or sell. I'll post more on this soon.

Morgan Hoy said...

The additional reading you attached to the post stated that the indigenous people of the developing countries were extremely opposed to the REDD system because it interferes with their cultural beliefs and livelihood. If these people are to win out over the popular opinion of their government won't they cease selling carbon permits because, in their opinion, it does not benefit them? It seems that the government and their people will have to come to a compromise of some sort, maybe set aside a certain number of hectares for indigenous use while also attempting to explain the benefits of the system so maybe they will come to see it is beneficial to long term success?

Tori Deluise said...

Who decides the value of the carbon? I am wondering about the non-use values as well. Carbon reduction helps plants photosynthesize more efficiently, reduces acid rain, helps crop yields increase and there are many other benefits as well. Are valuation methods used to put a price on these additional benefits that would be accrued by the community at large?

James Glenn said...

After reading about REED and taking in to consideration the last paragraph about every policy has their problems my thoughts are policy is not the answer. Change the way people see the environment and educating them might be the only way this problem can be solved. I would imagine changing the way people think and view the environment is challenging and I hope the future generation does not have to learn this the hard way through are mistakes.

Olivia Setser said...

But if the "biggest" fish in the pond doesn't participate because lets say they hypothetically don't like the price, then the market won't have any real impact, it'll do some good but everyone has to be on board for this to do something or else I see that this may result in something like the Kyoto Protocol- a good idea with no enforcement. But maybe I'm mixing metaphors... Dr. Schuhmann?

Dr. Peter Schuhmann said...

James - please consider what you're saying. If policy is not the answer, then there is no answer. The environmental movement started over 60 years ago attempting to change the way people think about the environment. We are the future generation. Even the most educated people (you and me included) create a great deal of pollution. Will education solve the tragedy of the commons? Will education internalize externalities?

Dr. Peter Schuhmann said...

In response to Olivia... I do not think you are mixing metaphors. The major obstacle to global environmental policy is the free rider problem. Enforcement of protocols is necessary and difficult. I assume that the big fish you are referring to are the US and China. The tide seems to be turning (link below), but only time will tell. The first step is agreeing to emissions reductions (setting a cap that will be lowered over time). The second step is deciding how to meet the targets. The two options that can help are a carbon tax (Pigou) or carbon trading. Each of these has pros and cons.

In response to Victoria ... The short answer is that the market decides the price. Once the number of permits are decided (this is the cap on emissions) then buyers (polluters) bid on those permits in an auction. The forces of supply and demand take over to determine the price. In Europe, carbon has traded between 6 and 30 Euro per ton. Currently the price is low (around 7 Euro), probably due to an abundance of credits in the market (i.e. the cap is too loose, creating a lot of supply and demand is low due to the recession curtailing production and the demand for emissions credits). Carbon is currently trading for around $13 per ton in California.

Jawad Dughmush said...

Taxes are always the solution. If Deforestation occurs, then the people near the forest should pay a tax even if they are not responsible. But the people of the nearby communities will promote to save the forests.

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