Cooperation and Reciprocity in Carbon Sequestration Contracts

This paper studies the role of cooperation and reciprocity on the structure of self-enforcing carbon sequestration contracts. The optimal contract is derived as a result of the optimizing actions of purely self-interested agents, and agents that ac...

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Main Author:	Cordero Salas, Paula
Format:	Policy Research Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2013
Subjects:	AFFORESTATION AMOUNT OF CREDITS ASYMMETRIC INFORMATION BIODIVERSITY BIODIVERSITY CONSERVATION BIOMASS BIOMASS CARBON BREACH BREACHES BUYER BUYERS CARBON CARBON CREDITS CARBON DIOXIDE CARBON EMISSION CARBON EMISSIONS CARBON EMISSIONS FROM DEFORESTATION CARBON LEVEL CARBON MARKET CARBON OFFSETS CARBON SEQUESTRATION CARBON SINK CARBON SINKS CARBON STOCK CARBON STOCKS CARBON STORAGE CLIMATE CLIMATE CHANGE CLIMATE CHANGE MITIGATION COMPENSATION CONSERVATION OF CARBON CONTRACT DESIGN CONTRACT ENFORCEMENT CONTRACT OBLIGATIONS CONTRACT OFFERS COOPERATIVE EQUILIBRIUM DESIGNING CONTRACTS DEVELOPING COUNTRIES DEVELOPING COUNTRY ECONOMIC ACTIVITY ECONOMIC DEVELOPMENT EMAIL ADDRESS EMISSIONS EMISSIONS ABATEMENT EMISSIONS FROM DEFORESTATION ENFORCEABILITY ENFORCEMENT CONSTRAINTS ENFORCEMENT MECHANISMS EQUILIBRIUM FINANCIAL SUPPORT FIXED COSTS FOREST FOREST CARBON FOREST CLEARING FOREST CONSERVATION FOREST COVER FOREST DEGRADATION FOREST LAND FOREST LANDS FOREST PROTECTION FORESTRY FORESTS GLOBAL CLIMATE CHANGE GOOD FAITH GREENHOUSE GREENHOUSE GAS GREENHOUSE GAS EMISSIONS HIDDEN INFORMATION HOLDING INCENTIVE COMPATIBILITY CONSTRAINT INCENTIVE COMPATIBILITY CONSTRAINTS INCOMPLETE CONTRACTS INDIVIDUAL RATIONALITY CONSTRAINT INDIVIDUAL RATIONALITY CONSTRAINTS INTERNATIONAL BANK LABOR MARKETS LAND HOLDER LAND HOLDERS LAND RIGHTS LAND USE LAND USES LEGALLY BINDING OBLIGATION LOCAL GOVERNMENTS LONG-TERM AGREEMENT MARKET OPPORTUNITY MATERIAL MONETARY PAYOFF MONETARY PAYOFFS OPEN ACCESS OPPORTUNITY COST OPTIMAL CONTRACT OPTIMAL CONTRACTS PARTICIPATION CONSTRAINT PARTNERSHIP PERFORMANCE INCENTIVES PERFORMANCE MEASURES POLITICAL ECONOMY PROOF OF PROPOSITION RELATIONAL CONTRACT RELATIONAL CONTRACTS REMEDIES REMUNERATION RENEGOTIATION RESULT RESULTS RETURN RETURNS RISK-NEUTRAL SAFETY NETS SELLER SELLERS TECHNICAL ISSUES THIRD PARTY TRADING TRUST FUND UNDER CONTRACT USES VALUATION WEB other-regarding preferences
Online Access:	http://documents.worldbank.org/curated/en/2013/06/17940860/cooperation-reciprocity-carbon-sequestration-contracts http://hdl.handle.net/10986/15880

id	okr-10986-15880
recordtype	oai_dc
spelling	okr-10986-158802021-04-23T14:03:26Z Cooperation and Reciprocity in Carbon Sequestration Contracts Cordero Salas, Paula AFFORESTATION AMOUNT OF CREDITS ASYMMETRIC INFORMATION BIODIVERSITY BIODIVERSITY CONSERVATION BIOMASS BIOMASS CARBON BREACH BREACHES BUYER BUYERS CARBON CARBON CREDITS CARBON DIOXIDE CARBON EMISSION CARBON EMISSIONS CARBON EMISSIONS FROM DEFORESTATION CARBON LEVEL CARBON MARKET CARBON OFFSETS CARBON SEQUESTRATION CARBON SINK CARBON SINKS CARBON STOCK CARBON STOCKS CARBON STORAGE CLIMATE CLIMATE CHANGE CLIMATE CHANGE MITIGATION COMPENSATION CONSERVATION OF CARBON CONTRACT DESIGN CONTRACT ENFORCEMENT CONTRACT OBLIGATIONS CONTRACT OFFERS COOPERATIVE EQUILIBRIUM DESIGNING CONTRACTS DEVELOPING COUNTRIES DEVELOPING COUNTRY ECONOMIC ACTIVITY ECONOMIC DEVELOPMENT EMAIL ADDRESS EMISSIONS EMISSIONS ABATEMENT EMISSIONS FROM DEFORESTATION ENFORCEABILITY ENFORCEMENT CONSTRAINTS ENFORCEMENT MECHANISMS EQUILIBRIUM FINANCIAL SUPPORT FIXED COSTS FOREST FOREST CARBON FOREST CLEARING FOREST CONSERVATION FOREST COVER FOREST DEGRADATION FOREST LAND FOREST LANDS FOREST PROTECTION FORESTRY FORESTS GLOBAL CLIMATE CHANGE GOOD FAITH GREENHOUSE GREENHOUSE GAS GREENHOUSE GAS EMISSIONS HIDDEN INFORMATION HOLDING INCENTIVE COMPATIBILITY CONSTRAINT INCENTIVE COMPATIBILITY CONSTRAINTS INCOMPLETE CONTRACTS INDIVIDUAL RATIONALITY CONSTRAINT INDIVIDUAL RATIONALITY CONSTRAINTS INTERNATIONAL BANK LABOR MARKETS LAND HOLDER LAND HOLDERS LAND RIGHTS LAND USE LAND USES LEGALLY BINDING OBLIGATION LOCAL GOVERNMENTS LONG-TERM AGREEMENT MARKET OPPORTUNITY MATERIAL MONETARY PAYOFF MONETARY PAYOFFS OPEN ACCESS OPPORTUNITY COST OPTIMAL CONTRACT OPTIMAL CONTRACTS PARTICIPATION CONSTRAINT PARTNERSHIP PERFORMANCE INCENTIVES PERFORMANCE MEASURES POLITICAL ECONOMY PROOF OF PROPOSITION RELATIONAL CONTRACT RELATIONAL CONTRACTS REMEDIES REMUNERATION RENEGOTIATION RESULT RESULTS RETURN RETURNS RISK-NEUTRAL SAFETY NETS SELLER SELLERS TECHNICAL ISSUES THIRD PARTY TRADING TRUST FUND UNDER CONTRACT USES VALUATION WEB other-regarding preferences This paper studies the role of cooperation and reciprocity on the structure of self-enforcing carbon sequestration contracts. The optimal contract is derived as a result of the optimizing actions of purely self-interested agents, and agents that act according to social or egoistic preferences. The analysis finds that buyers' preferences do not affect contract structure unless the buyer is averse to inequality. In contrast, the optimal payment rule is directly related to the seller's preferences as the payment must motivate the seller to comply with forest conservation. It also finds that the presence of altruistic or warm glow preferences increases the likelihood of cooperation in the long-term relationship relative to the case of selfish parties. These results imply that agencies or organizations that are not only concerned about carbon sequestration but also have objectives related to the economic development of small land holders may be more successful in the implementation contracts to reduce emissions from deforestation and forest degradation. 2013-09-26T19:11:14Z 2013-09-26T19:11:14Z 2013-06 http://documents.worldbank.org/curated/en/2013/06/17940860/cooperation-reciprocity-carbon-sequestration-contracts http://hdl.handle.net/10986/15880 English en_US Policy Research Working Paper;No. 6521 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
institution_category	Foreign Institution
institution	Digital Repositories
building	World Bank Open Knowledge Repository
collection	World Bank
language	English en_US
topic	AFFORESTATION AMOUNT OF CREDITS ASYMMETRIC INFORMATION BIODIVERSITY BIODIVERSITY CONSERVATION BIOMASS BIOMASS CARBON BREACH BREACHES BUYER BUYERS CARBON CARBON CREDITS CARBON DIOXIDE CARBON EMISSION CARBON EMISSIONS CARBON EMISSIONS FROM DEFORESTATION CARBON LEVEL CARBON MARKET CARBON OFFSETS CARBON SEQUESTRATION CARBON SINK CARBON SINKS CARBON STOCK CARBON STOCKS CARBON STORAGE CLIMATE CLIMATE CHANGE CLIMATE CHANGE MITIGATION COMPENSATION CONSERVATION OF CARBON CONTRACT DESIGN CONTRACT ENFORCEMENT CONTRACT OBLIGATIONS CONTRACT OFFERS COOPERATIVE EQUILIBRIUM DESIGNING CONTRACTS DEVELOPING COUNTRIES DEVELOPING COUNTRY ECONOMIC ACTIVITY ECONOMIC DEVELOPMENT EMAIL ADDRESS EMISSIONS EMISSIONS ABATEMENT EMISSIONS FROM DEFORESTATION ENFORCEABILITY ENFORCEMENT CONSTRAINTS ENFORCEMENT MECHANISMS EQUILIBRIUM FINANCIAL SUPPORT FIXED COSTS FOREST FOREST CARBON FOREST CLEARING FOREST CONSERVATION FOREST COVER FOREST DEGRADATION FOREST LAND FOREST LANDS FOREST PROTECTION FORESTRY FORESTS GLOBAL CLIMATE CHANGE GOOD FAITH GREENHOUSE GREENHOUSE GAS GREENHOUSE GAS EMISSIONS HIDDEN INFORMATION HOLDING INCENTIVE COMPATIBILITY CONSTRAINT INCENTIVE COMPATIBILITY CONSTRAINTS INCOMPLETE CONTRACTS INDIVIDUAL RATIONALITY CONSTRAINT INDIVIDUAL RATIONALITY CONSTRAINTS INTERNATIONAL BANK LABOR MARKETS LAND HOLDER LAND HOLDERS LAND RIGHTS LAND USE LAND USES LEGALLY BINDING OBLIGATION LOCAL GOVERNMENTS LONG-TERM AGREEMENT MARKET OPPORTUNITY MATERIAL MONETARY PAYOFF MONETARY PAYOFFS OPEN ACCESS OPPORTUNITY COST OPTIMAL CONTRACT OPTIMAL CONTRACTS PARTICIPATION CONSTRAINT PARTNERSHIP PERFORMANCE INCENTIVES PERFORMANCE MEASURES POLITICAL ECONOMY PROOF OF PROPOSITION RELATIONAL CONTRACT RELATIONAL CONTRACTS REMEDIES REMUNERATION RENEGOTIATION RESULT RESULTS RETURN RETURNS RISK-NEUTRAL SAFETY NETS SELLER SELLERS TECHNICAL ISSUES THIRD PARTY TRADING TRUST FUND UNDER CONTRACT USES VALUATION WEB other-regarding preferences
spellingShingle	AFFORESTATION AMOUNT OF CREDITS ASYMMETRIC INFORMATION BIODIVERSITY BIODIVERSITY CONSERVATION BIOMASS BIOMASS CARBON BREACH BREACHES BUYER BUYERS CARBON CARBON CREDITS CARBON DIOXIDE CARBON EMISSION CARBON EMISSIONS CARBON EMISSIONS FROM DEFORESTATION CARBON LEVEL CARBON MARKET CARBON OFFSETS CARBON SEQUESTRATION CARBON SINK CARBON SINKS CARBON STOCK CARBON STOCKS CARBON STORAGE CLIMATE CLIMATE CHANGE CLIMATE CHANGE MITIGATION COMPENSATION CONSERVATION OF CARBON CONTRACT DESIGN CONTRACT ENFORCEMENT CONTRACT OBLIGATIONS CONTRACT OFFERS COOPERATIVE EQUILIBRIUM DESIGNING CONTRACTS DEVELOPING COUNTRIES DEVELOPING COUNTRY ECONOMIC ACTIVITY ECONOMIC DEVELOPMENT EMAIL ADDRESS EMISSIONS EMISSIONS ABATEMENT EMISSIONS FROM DEFORESTATION ENFORCEABILITY ENFORCEMENT CONSTRAINTS ENFORCEMENT MECHANISMS EQUILIBRIUM FINANCIAL SUPPORT FIXED COSTS FOREST FOREST CARBON FOREST CLEARING FOREST CONSERVATION FOREST COVER FOREST DEGRADATION FOREST LAND FOREST LANDS FOREST PROTECTION FORESTRY FORESTS GLOBAL CLIMATE CHANGE GOOD FAITH GREENHOUSE GREENHOUSE GAS GREENHOUSE GAS EMISSIONS HIDDEN INFORMATION HOLDING INCENTIVE COMPATIBILITY CONSTRAINT INCENTIVE COMPATIBILITY CONSTRAINTS INCOMPLETE CONTRACTS INDIVIDUAL RATIONALITY CONSTRAINT INDIVIDUAL RATIONALITY CONSTRAINTS INTERNATIONAL BANK LABOR MARKETS LAND HOLDER LAND HOLDERS LAND RIGHTS LAND USE LAND USES LEGALLY BINDING OBLIGATION LOCAL GOVERNMENTS LONG-TERM AGREEMENT MARKET OPPORTUNITY MATERIAL MONETARY PAYOFF MONETARY PAYOFFS OPEN ACCESS OPPORTUNITY COST OPTIMAL CONTRACT OPTIMAL CONTRACTS PARTICIPATION CONSTRAINT PARTNERSHIP PERFORMANCE INCENTIVES PERFORMANCE MEASURES POLITICAL ECONOMY PROOF OF PROPOSITION RELATIONAL CONTRACT RELATIONAL CONTRACTS REMEDIES REMUNERATION RENEGOTIATION RESULT RESULTS RETURN RETURNS RISK-NEUTRAL SAFETY NETS SELLER SELLERS TECHNICAL ISSUES THIRD PARTY TRADING TRUST FUND UNDER CONTRACT USES VALUATION WEB other-regarding preferences Cordero Salas, Paula Cooperation and Reciprocity in Carbon Sequestration Contracts
relation	Policy Research Working Paper;No. 6521
description	This paper studies the role of cooperation and reciprocity on the structure of self-enforcing carbon sequestration contracts. The optimal contract is derived as a result of the optimizing actions of purely self-interested agents, and agents that act according to social or egoistic preferences. The analysis finds that buyers' preferences do not affect contract structure unless the buyer is averse to inequality. In contrast, the optimal payment rule is directly related to the seller's preferences as the payment must motivate the seller to comply with forest conservation. It also finds that the presence of altruistic or warm glow preferences increases the likelihood of cooperation in the long-term relationship relative to the case of selfish parties. These results imply that agencies or organizations that are not only concerned about carbon sequestration but also have objectives related to the economic development of small land holders may be more successful in the implementation contracts to reduce emissions from deforestation and forest degradation.
format	Publications & Research :: Policy Research Working Paper
author	Cordero Salas, Paula
author_facet	Cordero Salas, Paula
author_sort	Cordero Salas, Paula
title	Cooperation and Reciprocity in Carbon Sequestration Contracts
title_short	Cooperation and Reciprocity in Carbon Sequestration Contracts
title_full	Cooperation and Reciprocity in Carbon Sequestration Contracts
title_fullStr	Cooperation and Reciprocity in Carbon Sequestration Contracts
title_full_unstemmed	Cooperation and Reciprocity in Carbon Sequestration Contracts
title_sort	cooperation and reciprocity in carbon sequestration contracts
publisher	World Bank, Washington, DC
publishDate	2013
url	http://documents.worldbank.org/curated/en/2013/06/17940860/cooperation-reciprocity-carbon-sequestration-contracts http://hdl.handle.net/10986/15880
_version_	1764431844565057536

Cooperation and Reciprocity in Carbon Sequestration Contracts

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