Neoliberal conservation in REDD+: The roles of market power and incentive designs

Abstract

Market power relations and incentive designs are critical determinants affecting the success or failure of implementing the scheme of Reducing Emissions from Deforestation and Degradation (REDD+). This paper explores how market power differences in REDD + and incentive designs with different motivating objects affect the actors’ own emissions-reducing behavior. Guided by a theoretical framework that considers both market power and incentive designs, this paper examines the impacts of incentive designs and market power on the behavior of actors in REDD + by constructing game models. A numerical simulation is applied to examine the effects of parameter changes on the optimal strategies of each actor under different market-power structures and different incentive solutions. The results demonstrate the following. First, the incentives for landholders in REDD + are more conducive to affect actors’ efforts to reduce emissions than the incentives for the investor. Second, landholders, rather than investors, were found to obtain more market power due to the unequal market-power structure in REDD+, which will ultimately improve the landholders’ efforts to conserve forests and make a profit. At the same time, investors’ efforts and profits were also found not decline, despite the existence of the unequal market power. Third, the effects of market power and incentive designs on actors were found to be related to various REDD + factors, including opportunity costs, payments, the price of carbon credits, and the output elasticities of efforts. This paper further demonstrates that the incentive designs and market power have a more significant impact on landholders than on investors.