Reducing greenhouse gas emissions by forest protection: The transaction costs of implementing REDD

Abstract

Understanding and minimizing the transaction costs of policy implementation are critical for reducing tropical forest losses. As the international community launches REDD, a global initiative to reduce greenhouse gas emissions from tropical deforestation, policymakers need to pay attention to the transactions costs associated with negotiating, monitoring and enforcing contracts between forest users, governments, and donors. The existing institutional design forREDDrelies heavily on central government interventions in program countries. Analysing new data on forest conservation outcomes, we identify several problems with this centralized approach to forest protection. We describe options for a more diversified policy approach that could reduce the full set of transaction costs and thereby improve the efficiency of the market-based approach to conservation.