RED versus REDD: Biofuel policy versus forest conservation

Abstract

We examine the interplay between Renewable Energy Directives (RED) and the United Nations Programme to Reduce Emissions from Deforestation and Forest Degradation (REDD) using a scenario approach with a recursive–dynamic global computable general equilibrium model. A methodological issue addressed in the paper is the specification of the supply of agricultural land in the face of restrictions over its availability, as arises under REDD. By giving magnitudes to the effects of REDD and RED, our simulations provide a defense against environmental skeptics who, in the absence of such estimates, can dismiss these policies as being exorbitantly expensive. Although REDD and RED are in tension with respect to land use, the paper shows that they could be implemented simultaneously without significant global problems for food supply. The paper does however pinpoint some regional problems. Implementation of RED and REDD would cause large increases in food prices in Indonesia and Southern Africa. The methodology used in this paper, if implemented at a more detailed level, could be the basis of working out compensation packages that would be needed to make pervasive RED and REDD policies politically feasible.