Is a Low and Fixed Price for Mitigation Credits Effective in Reducing Deforestation Emissions?

Reducing emissions from deforestation and forest degradation (REDD+) involves payments for emissions reduction in terms of tonnes of Carbon known as Results-Based Payments (RBP). RBPs were envisaged as covering the opportunity and transaction/implementation costs of not converting the forest to other land uses such as oil palm or beef production by providing alternative development pathways. Most REDD+ funding has come from official development assistance (ODA) where funders have benchmarked payments for results at US$ 5/tCO2-e or sometimes US$ 10/tCO2-e. These prices are far below most estimates of the net costs of ending deforestation. Despite REDD+ being designed to fit into an international emissions trading context, the international environment makes it uncertain that international emissions trading under Article 6 of the Paris Agreement will generate a price for REDD+ RBPs necessary to meet the costs of reducing emissions in developing countries. The study examines the peer-reviewed literature and materials produced by various stakeholders on low and fixed benchmark prices for REDD+ RBPs and will conduct a Strengths, Weaknesses, Opportunities, Threats (SWOT) analysis to determine likely outcomes. It concludes that low prices for REDD+ RBPs will substantially continue deforestation because of loss of country ownership, loss of stakeholder support for an alternative development pathway, and shifting of the burden of emissions reduction to developing countries. Low fixed prices result in serious equity and justice concerns for people in tropical forest countries. In the absence of a viable compliance market for REDD+, greater expenditure on REDD+ RBPs is justified, in particular, because it enables a higher price for RBPs.