Designing Contracts for Reducing Emissions from Deforestation and Forest Degradation
Reduction of carbon emissions from deforestation and forest degradation has been identified as a cost effective element of the post-Kyoto strategy to achieve long-term climate objectives. Its success depends primarily on the design and implementati...
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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/2013/06/17919249/designing-contracts-reducing-emissions-deforestation-forest-degradation http://hdl.handle.net/10986/15862 |
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okr-10986-158622021-04-23T14:03:23Z Designing Contracts for Reducing Emissions from Deforestation and Forest Degradation Cordero Salas, Paula ADVERSE SELECTION AGRICULTURE ATMOSPHERE BIODIVERSITY BIODIVERSITY CONSERVATION CARBON CARBON CREDITS CARBON DIOXIDE CARBON EMISSION CARBON EMISSIONS CARBON EMISSIONS FROM DEFORESTATION CARBON MARKET CARBON OFFSETS CARBON REDUCTIONS CARBON SEQUESTRATION CARBON SINK CARBON SINKS CARBON STOCK CARBON STOCKS CARBON STORAGE CENTER FOR INTERNATIONAL FORESTRY RESEARCH CLIMATE CLIMATE CHANGE CLIMATE CHANGE MITIGATION CO CO2 COMPETITIVE MARKET CONSERVATION OF CARBON CONTRACT DESIGN CONTRACT ENFORCEABILITY CONTRACT ENFORCEMENT CREDIT BUYER DEVELOPED COUNTRIES DEVELOPING COUNTRIES DEVELOPING COUNTRY DISCOUNT RATE ECONOMIC ACTIVITY ECONOMIC DEVELOPMENT ECONOMIC RENTS ECONOMICS ECOSYSTEMS EMISSION REDUCTION EMISSION REDUCTION TARGETS EMISSIONS EMISSIONS FROM DEFORESTATION EMISSIONS LIMITS EMISSIONS REDUCTIONS EMPIRICAL ANALYSIS ENFORCEABILITY ENFORCEABLE CONTRACTS ENFORCEMENT MECHANISM ENFORCEMENT MECHANISMS ENFORCEMENT OF CONTRACTS ENFORCEMENT REGIMES ENVIRONMENTAL ENVIRONMENTAL BENEFITS ENVIRONMENTAL QUALITY ENVIRONMENTAL SERVICES ENVIRONMENTS EQUILIBRIUM FINANCIAL SUPPORT FOREST FOREST ACTIVITIES FOREST ACTIVITY FOREST CARBON FOREST CARBON SINKS FOREST CONSERVATION FOREST DEGRADATION FOREST LAND FOREST PROTECTION FOREST STOCKS FORESTRY FORESTRY PRODUCTS FORESTRY PROJECTS FORESTS FRAMEWORK CONVENTION ON CLIMATE CHANGE GHG GLOBAL CLIMATE CHANGE GLOBAL FOREST GREENHOUSE GREENHOUSE GAS GREENHOUSE GAS EMISSIONS GREENHOUSE GAS MITIGATION INCENTIVE COMPATIBILITY CONSTRAINT INCENTIVE COMPATIBILITY CONSTRAINTS INTERNATIONAL BANK INTERNATIONAL FORESTRY RESEARCH INVOLUNTARY UNEMPLOYMENT LAND AREA LAND HOLDERS LAND OWNER LAND OWNERS LAND USE LAND USES LAND-USE LAND-USE CHANGE LANDHOLDER LEGAL SYSTEMS LOCAL GOVERNMENTS MARGINAL BENEFITS MARGINAL COST MORAL HAZARD OPPORTUNITY COST OPTIMAL CONTRACT PERFECT INFORMATION PRESENT VALUE PRINCIPAL-AGENT PROBLEMS PRIVATE ENFORCEMENT REDUCING EMISSIONS REFORESTATION RENEGOTIATION RETURN RETURNS SIDE PAYMENTS SOCIALLY SUSTAINABLE DEVELOPMENT SUSTAINABLE DEVELOPMENT TEMPERATURE TERMS OF TRADE TIMBER TIMBER HARVESTING TRADING TRANSACTION TRUST FUND VALUATION WATERSHED WILLINGNESS TO PAY Reduction of carbon emissions from deforestation and forest degradation has been identified as a cost effective element of the post-Kyoto strategy to achieve long-term climate objectives. Its success depends primarily on the design and implementation of a financial mechanism that provides land-holders sufficient incentives to participate in such scheme. This paper proposes self-enforcing contracts (relational contracts) as a potential solution for the constraints in formal contract enforcement derived from the stylized facts of the implementation because relational contracting relies upon mutual private self-enforcement in a repeated transaction framework. The paper derives an opportunity cost function for land use and characterizes the optimal self-enforcing contract as well as provide the parameters under which private enforcement is sustainable. The optimal payment scheme suggests that all payments should be made contingent on the carbon offsets delivered, that is, at the end of the contracting period. Thus, the optimal contract does not observe any ex ante payment. Self-enforcement is more difficult to sustain the higher the opportunity cost of forest conservation is relative to the value of the carbon offsets from the contract. Necessary extensions to the relational contracting model are also discussed. 2013-09-26T16:13:37Z 2013-09-26T16:13:37Z 2013-06 http://documents.worldbank.org/curated/en/2013/06/17919249/designing-contracts-reducing-emissions-deforestation-forest-degradation http://hdl.handle.net/10986/15862 English en_US Policy Research Working Paper;No. 6503 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 |
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Digital Repository |
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Foreign Institution |
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Digital Repositories |
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World Bank Open Knowledge Repository |
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World Bank |
| language |
English en_US |
| topic |
ADVERSE SELECTION AGRICULTURE ATMOSPHERE BIODIVERSITY BIODIVERSITY CONSERVATION CARBON CARBON CREDITS CARBON DIOXIDE CARBON EMISSION CARBON EMISSIONS CARBON EMISSIONS FROM DEFORESTATION CARBON MARKET CARBON OFFSETS CARBON REDUCTIONS CARBON SEQUESTRATION CARBON SINK CARBON SINKS CARBON STOCK CARBON STOCKS CARBON STORAGE CENTER FOR INTERNATIONAL FORESTRY RESEARCH CLIMATE CLIMATE CHANGE CLIMATE CHANGE MITIGATION CO CO2 COMPETITIVE MARKET CONSERVATION OF CARBON CONTRACT DESIGN CONTRACT ENFORCEABILITY CONTRACT ENFORCEMENT CREDIT BUYER DEVELOPED COUNTRIES DEVELOPING COUNTRIES DEVELOPING COUNTRY DISCOUNT RATE ECONOMIC ACTIVITY ECONOMIC DEVELOPMENT ECONOMIC RENTS ECONOMICS ECOSYSTEMS EMISSION REDUCTION EMISSION REDUCTION TARGETS EMISSIONS EMISSIONS FROM DEFORESTATION EMISSIONS LIMITS EMISSIONS REDUCTIONS EMPIRICAL ANALYSIS ENFORCEABILITY ENFORCEABLE CONTRACTS ENFORCEMENT MECHANISM ENFORCEMENT MECHANISMS ENFORCEMENT OF CONTRACTS ENFORCEMENT REGIMES ENVIRONMENTAL ENVIRONMENTAL BENEFITS ENVIRONMENTAL QUALITY ENVIRONMENTAL SERVICES ENVIRONMENTS EQUILIBRIUM FINANCIAL SUPPORT FOREST FOREST ACTIVITIES FOREST ACTIVITY FOREST CARBON FOREST CARBON SINKS FOREST CONSERVATION FOREST DEGRADATION FOREST LAND FOREST PROTECTION FOREST STOCKS FORESTRY FORESTRY PRODUCTS FORESTRY PROJECTS FORESTS FRAMEWORK CONVENTION ON CLIMATE CHANGE GHG GLOBAL CLIMATE CHANGE GLOBAL FOREST GREENHOUSE GREENHOUSE GAS GREENHOUSE GAS EMISSIONS GREENHOUSE GAS MITIGATION INCENTIVE COMPATIBILITY CONSTRAINT INCENTIVE COMPATIBILITY CONSTRAINTS INTERNATIONAL BANK INTERNATIONAL FORESTRY RESEARCH INVOLUNTARY UNEMPLOYMENT LAND AREA LAND HOLDERS LAND OWNER LAND OWNERS LAND USE LAND USES LAND-USE LAND-USE CHANGE LANDHOLDER LEGAL SYSTEMS LOCAL GOVERNMENTS MARGINAL BENEFITS MARGINAL COST MORAL HAZARD OPPORTUNITY COST OPTIMAL CONTRACT PERFECT INFORMATION PRESENT VALUE PRINCIPAL-AGENT PROBLEMS PRIVATE ENFORCEMENT REDUCING EMISSIONS REFORESTATION RENEGOTIATION RETURN RETURNS SIDE PAYMENTS SOCIALLY SUSTAINABLE DEVELOPMENT SUSTAINABLE DEVELOPMENT TEMPERATURE TERMS OF TRADE TIMBER TIMBER HARVESTING TRADING TRANSACTION TRUST FUND VALUATION WATERSHED WILLINGNESS TO PAY |
| spellingShingle |
ADVERSE SELECTION AGRICULTURE ATMOSPHERE BIODIVERSITY BIODIVERSITY CONSERVATION CARBON CARBON CREDITS CARBON DIOXIDE CARBON EMISSION CARBON EMISSIONS CARBON EMISSIONS FROM DEFORESTATION CARBON MARKET CARBON OFFSETS CARBON REDUCTIONS CARBON SEQUESTRATION CARBON SINK CARBON SINKS CARBON STOCK CARBON STOCKS CARBON STORAGE CENTER FOR INTERNATIONAL FORESTRY RESEARCH CLIMATE CLIMATE CHANGE CLIMATE CHANGE MITIGATION CO CO2 COMPETITIVE MARKET CONSERVATION OF CARBON CONTRACT DESIGN CONTRACT ENFORCEABILITY CONTRACT ENFORCEMENT CREDIT BUYER DEVELOPED COUNTRIES DEVELOPING COUNTRIES DEVELOPING COUNTRY DISCOUNT RATE ECONOMIC ACTIVITY ECONOMIC DEVELOPMENT ECONOMIC RENTS ECONOMICS ECOSYSTEMS EMISSION REDUCTION EMISSION REDUCTION TARGETS EMISSIONS EMISSIONS FROM DEFORESTATION EMISSIONS LIMITS EMISSIONS REDUCTIONS EMPIRICAL ANALYSIS ENFORCEABILITY ENFORCEABLE CONTRACTS ENFORCEMENT MECHANISM ENFORCEMENT MECHANISMS ENFORCEMENT OF CONTRACTS ENFORCEMENT REGIMES ENVIRONMENTAL ENVIRONMENTAL BENEFITS ENVIRONMENTAL QUALITY ENVIRONMENTAL SERVICES ENVIRONMENTS EQUILIBRIUM FINANCIAL SUPPORT FOREST FOREST ACTIVITIES FOREST ACTIVITY FOREST CARBON FOREST CARBON SINKS FOREST CONSERVATION FOREST DEGRADATION FOREST LAND FOREST PROTECTION FOREST STOCKS FORESTRY FORESTRY PRODUCTS FORESTRY PROJECTS FORESTS FRAMEWORK CONVENTION ON CLIMATE CHANGE GHG GLOBAL CLIMATE CHANGE GLOBAL FOREST GREENHOUSE GREENHOUSE GAS GREENHOUSE GAS EMISSIONS GREENHOUSE GAS MITIGATION INCENTIVE COMPATIBILITY CONSTRAINT INCENTIVE COMPATIBILITY CONSTRAINTS INTERNATIONAL BANK INTERNATIONAL FORESTRY RESEARCH INVOLUNTARY UNEMPLOYMENT LAND AREA LAND HOLDERS LAND OWNER LAND OWNERS LAND USE LAND USES LAND-USE LAND-USE CHANGE LANDHOLDER LEGAL SYSTEMS LOCAL GOVERNMENTS MARGINAL BENEFITS MARGINAL COST MORAL HAZARD OPPORTUNITY COST OPTIMAL CONTRACT PERFECT INFORMATION PRESENT VALUE PRINCIPAL-AGENT PROBLEMS PRIVATE ENFORCEMENT REDUCING EMISSIONS REFORESTATION RENEGOTIATION RETURN RETURNS SIDE PAYMENTS SOCIALLY SUSTAINABLE DEVELOPMENT SUSTAINABLE DEVELOPMENT TEMPERATURE TERMS OF TRADE TIMBER TIMBER HARVESTING TRADING TRANSACTION TRUST FUND VALUATION WATERSHED WILLINGNESS TO PAY Cordero Salas, Paula Designing Contracts for Reducing Emissions from Deforestation and Forest Degradation |
| relation |
Policy Research Working Paper;No. 6503 |
| description |
Reduction of carbon emissions from
deforestation and forest degradation has been identified as
a cost effective element of the post-Kyoto strategy to
achieve long-term climate objectives. Its success depends
primarily on the design and implementation of a financial
mechanism that provides land-holders sufficient incentives
to participate in such scheme. This paper proposes
self-enforcing contracts (relational contracts) as a
potential solution for the constraints in formal contract
enforcement derived from the stylized facts of the
implementation because relational contracting relies upon
mutual private self-enforcement in a repeated transaction
framework. The paper derives an opportunity cost function
for land use and characterizes the optimal self-enforcing
contract as well as provide the parameters under which
private enforcement is sustainable. The optimal payment
scheme suggests that all payments should be made contingent
on the carbon offsets delivered, that is, at the end of the
contracting period. Thus, the optimal contract does not
observe any ex ante payment. Self-enforcement is more
difficult to sustain the higher the opportunity cost of
forest conservation is relative to the value of the carbon
offsets from the contract. Necessary extensions to the
relational contracting model are also discussed. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Cordero Salas, Paula |
| author_facet |
Cordero Salas, Paula |
| author_sort |
Cordero Salas, Paula |
| title |
Designing Contracts for Reducing Emissions from Deforestation and Forest Degradation |
| title_short |
Designing Contracts for Reducing Emissions from Deforestation and Forest Degradation |
| title_full |
Designing Contracts for Reducing Emissions from Deforestation and Forest Degradation |
| title_fullStr |
Designing Contracts for Reducing Emissions from Deforestation and Forest Degradation |
| title_full_unstemmed |
Designing Contracts for Reducing Emissions from Deforestation and Forest Degradation |
| title_sort |
designing contracts for reducing emissions from deforestation and forest degradation |
| publisher |
World Bank, Washington, DC |
| publishDate |
2013 |
| url |
http://documents.worldbank.org/curated/en/2013/06/17919249/designing-contracts-reducing-emissions-deforestation-forest-degradation http://hdl.handle.net/10986/15862 |
| _version_ |
1764431656704278528 |