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The economic case for prioritizing governance over financial incentives in REDD+

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  • Mattia Fosci

Abstract

It is argued that the subordination of policies to results-based payments for emissions reductions causes severe economic inefficiencies, which affect the opportunity cost, transaction cost, and economic rent of the programme. Such problems can be addressed by establishing sound procedural, land, and financial governance at the national level, before Reducing Emissions from Deforestation and Forest Degradation (REDD+) economic incentives are delivered at scale. Consideration is given to each governance dimension, the entry points for policy intervention, and the impact on costs. International support must consider the financial and political cost of governance reforms, and use a pay-for-results ethos based on output and outcome indicators. This can be done in the readiness phase but only if the latter's legal force, scope, magnitude, and time horizon are adequately reconsidered. This article provides ammunition for the institutionalists' argument that United Nations Framework Convention on Climate Change (UNFCCC) Parties must prioritize governance reforms between now and the entry into force of the new climate agreement in 2020. Finally, specific recommendations about how such governance reforms can be achieved, which will create the basis for the programme's financial sustainability, are offered. Policy relevance UNFCCC Parties could make the most cost-effective use of REDD+ resources if they were to prioritize investments in governance over the interim period 2012-2020. REDD+'s financial, technical and political capital should be used to establish sound procedural, sectoral (land), and financial governance systems in relevant countries. This will generate long-term economic savings, compared to an approach that privileges the implementation of results-based payments for emissions reductions. In particular, it will reduce economic inefficiencies, which affect the opportunity and transaction costs, and the private rents embedded in the current programme design. In order to promote the necessary policy reforms, stakeholders should work together to address technical, financial, and political economy issues at the domestic level. In particular, UNFCCC Parties should re-conceptualize the readiness phase by strengthening its legal force, expanding its scope, increasing its financial firepower, and extending its time horizon.

Suggested Citation

  • Mattia Fosci, 2013. "The economic case for prioritizing governance over financial incentives in REDD+," Climate Policy, Taylor & Francis Journals, vol. 13(2), pages 170-190, March.
  • Handle: RePEc:taf:tcpoxx:v:13:y:2013:i:2:p:170-190
    DOI: 10.1080/14693062.2013.745112
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    1. Klaus Deininger & Clarissa Augustinus & Stig Enemark & Paul Munro-Faure, 2010. "Innovations in Land Rights Recognition, Administration, and Governance," World Bank Publications - Books, The World Bank Group, number 2519.
    2. Stern,Nicholas, 2007. "The Economics of Climate Change," Cambridge Books, Cambridge University Press, number 9780521700801, October.
    3. Luca Tacconi & Sango Mahanty & Helen Suich (ed.), 2010. "Payments for Environmental Services, Forest Conservation and Climate Change," Books, Edward Elgar Publishing, number 14052.
    4. Pagiola, Stefano & Bosquet, Benoit, 2009. "Estimating the costs of REDD at the country level," MPRA Paper 13726, University Library of Munich, Germany.
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    Cited by:

    1. Jichuan Sheng & Weihai Zhou & Alex De Sherbinin, 2018. "Uncertainty in Estimates, Incentives, and Emission Reductions in REDD+ Projects," IJERPH, MDPI, vol. 15(7), pages 1-21, July.
    2. Piffer Salles, Guilherme & Paiva Salinas, Delhi Teresa & Paulino, Sônia Regina, 2017. "How Funding Source Influences the Form of REDD+ Initiatives: The Case of Market Versus Public Funds in Brazil," Ecological Economics, Elsevier, vol. 139(C), pages 91-101.
    3. Nantongo, Mary & Vatn, Arild & Vedeld, Paul, 2019. "All that glitters is not gold; Power and participation in processes and structures of implementing REDD+ in Kondoa, Tanzania," Forest Policy and Economics, Elsevier, vol. 100(C), pages 44-54.
    4. Sheng, Jichuan & Qiu, Hong, 2018. "Governmentality within REDD+: Optimizing incentives and efforts to reduce emissions from deforestation and degradation," Land Use Policy, Elsevier, vol. 76(C), pages 611-622.

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