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Structuring Economic Incentives to Reduce Emission from Deforestation within Indonesia (2011)
13 December 2011
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The authors estimate and map the impacts that alternative national and subnational economic incentive structures for reducing emissions from deforestation (REDD+) in Indonesia would have had on greenhouse gas emissions and national and local revenue if they had been in place from 2000 to 2005. The impact of carbon payments on deforestation is calibrated econometrically from the pattern of observed deforestation and spatial variation in the bene   fits and costs of converting land to agriculture over that time period. We estimate that at an international carbon price of $10/tCO2e, a “mandatory incentive structure,” such as a cap-and-trade or symmetric tax-and-subsidy program, would have reduced emissions by 163–247 MtCO2e/y (20–31% below the without-REDD+ reference scenario), while generating a programmatic budget surplus.In contrast, a “basic voluntary incentive structure” modeled after a standard payment-for-environmental-services program would have reduced emissions nationally by only 45–76 MtCO2e/y(6–9%), while generating a programmatic budget shortfall. By making four policy improvements—paying for net emission reductions at the scale of an entire district rather than site-by-site; paying for reductions relative to reference levels that match business-as-usual levels; sharing a portion of district-level revenues with the national government; and sharing a portion of the national governments responsibility for costs with districts—an “improved voluntary incentive structure” would have been nearly as effective as a mandatory incentive structure, reducing emissions by 136–207 MtCO2e/y(17–26%) and generating a programmatic budget surplus. Splitting the Difference; A Proposal for Benefit Sharing in REDD+ (2011)
15 November 2011
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The objective of REDD+ in developing countries is to create incentives for the reduction of emissions from deforestation and forest degradation and for the increase of carbon stocks through the enhancement, conservation and sustainable management of forests in developing countries. As part of the international negotiations under the United Nations Framework Convention on Climate Change it has not been specified how these incentives will be channeled within countries; there are concerns about how the benefits will be shared among different stakeholders. The authors propose that within national REDD+ accounting systems, credits for carbon enhancement and sequestration should be separated from avoided emissions from deforestation and forest degradation; the first group of credits can be attributed directly to landowners, communities and independent projects managing the forests while the second can be attributed to governments who are in charge of controlling illegal deforestation and degradation at the national level. This separation can help to create adequate incentives for the different stakeholders and overcome some of the problems associated with the design and implementation of national REDD+ programmes. Property Rights and Resource Governance Project (PRRGP) - Institutional Mechanisms for REDD+ - Case Studies Working Paper (2011)
15 August 2011
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The Institutional Mechanisms study seeks to identify promising institutional models and assess potential institutional challenges for achieving effective, efficient, and equitable distribution of benefits under REDD+. The study highlights lessons from case studies in five developing countries including Indonesia , which are characterized by a range of different approaches to forest sector benefit sharing and have been global leaders in REDD+ preparation.   Each case study provides an overview of emerging strategies and concepts relating to REDD+ benefit sharing that are currently being discussed by stakeholders and policy-makers at the national level. It also draws insights from field visits to REDD+ pilot projects that have developed a benefit sharing model, and to other institutions managing environmental benefits at the local level, which have been identified by national policymakers as potential models for REDD+.   The case studies are based on field visits and desk research carried outb etween February and June 2011. The list of institutions and experts interviewed is provided as an appendix to each case study.   Stakeholder Perspectives on Fair and Efficient Benefit Distribution Along The Credd Value Chain (2011)
16 June 2011
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The report presents:- The development and use of a research tool known as Fair & Efficient REDD Value Chains Allocation (FERVA) for analysis of fairness and efficiency along REDD+ value chains, and its initial use in Indonesia and Peru.- Steps to engage potential REDD+ stakeholders in Jambi province, Indonesia in the design of subnational implementation mechanisms, including discussions with ‘Orang Rimba’ as the local forest dwellers are known.- Discussion on the opportunities and challenges relating to fairness and efficiency presented by the coupling of REDD+ funding and an existing scheme of payment for watershed functions in Vietnam. REDD+ Benefit Sharing in Indonesia (2010)
15 October 2010
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Indonesia’s initial regulations on REDD+ were some of the earliest national regulations to be proposed by a REDD+ country and they resembled the ‘nested’ proposal (Pedroni et al.,2007). Under this approach, entity level carbon trading from emissions reductions in REDD+ projects can be carried out by the private sector, NGOs or communities, but under national regulations. While there is still intense debate in Indonesia as to how exactly REDD+ revenues might be shared between national and local levels, the different policy proposals give some insight into the options. Legal Guides for PES and REDD (2010)
26 February 2010
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This presentation covers: Institutional issues and legal frameorks; Draft contracts (watershed, carbon,REDD); web-based tools Financial Governance and Indonesia's Reforestation Fund During the Soeharto and Post-Soehato Periods 1989-2009 (2010)
02 February 2010
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To strengthen both the Government of Indonesia’s administration of the Reforestation Fund and the management of future REDD+ payment mechanisms by Indonesia and other tropical forest countries, the study offers the following recommendations: Build capacity to manage finances and administer revenues; Strengthen institutions to deal with corruption and fraud; Develop effective systems for financial monitoring, reporting and verification; Revise policies to remove misaligned and perverse incentives; Impose robust due diligence and accountability on recipients of public finance; Promote equitable distribution of benefits and minimize negative impacts on forest communities. Ministry of Finance Green Paper - Economic and Fiscal Policy Strategies for Climate Change Mitigation in Indonesia (2009)
01 December 2009
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The Green Paper identifies economic and fiscal policy strategies for climate change mitigation - that is, reducing emissions of carbon dioxide and other greenhouse gases - and how to do this in the most cost effective way. It lays out strategies for the Ministry of Finance for efficient and effective policies, both in the short term and the long term. The paper is grounded in economic principles, and applies emerging international experience to Indonesia's circumstances. Making Policies Work for Payment for Environmental Services (PES); An Evaluation of The Experience of Formulating Conservation in Indonesia (2009)
02 April 2009
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Payment for Environmental Services (PES) is one of several schemes designed to conserve the environment by means of a market-based approach which also incorporate The PES framework and depends upon a number of criteria, namely: (a) A voluntary transaction where (b) a well defined environmental service [ES, or a land use likely to secure that service] (c) is being bought by a (minimum one) ES buyer (d) from a (minimum one) ES provider (e) if and only if the ES provider secures ES provision (conditionality). The case studies described are not perfect examples of PES, in them payments have been made in ways that are not as simple as those described by the PES criteria. The article attempts to describe lessons learned from three case studies by comparing the principles of PES with other conservation approaches. As shown by these case studies, to make PES work, the government has an important role to play. An initial stage of payments, taxes, and subsidies could be seen as a rational step toward an increasing willingness to pay on an individual basis that will lead to conservation on a wider scale. REDD in The Red-Palm Oil Could Undermine Carbon Payment Schemes (2008)
17 December 2008
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Abstract. Oil palm agriculture has become a major driver of tropical deforestation over the last few decades. Here, the paper model and compare the profitability of converting forest to oil palm versus conserving it for an REDD project. It shows that converting a hectare of forest for palm oil production will be more profitable (yielding net present values of $3,835–$9,630) to land owners than preserving it for carbon credits ($614–$994), which are currently restricted to voluntary carbon markets. Giving REDD credits price parity with carbon credits traded in compliance markets would boost the profitability of avoided deforestation (up to $6,605). Unless post-2012 global climate policies legitimize the trading of carbon credits from avoided deforestation, REDD will not be able to compete with oil palm agriculture or other similarly profitable human activities as an economically attractive land-use option, in which case REDD will not be able to fulfill its primary function of avoiding deforestation. How to Distribute Funds Across Countries - A Stock-Flow Mechanism (2008)
12 December 2008
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If a REDD mechanism is approved funds will have to be distributed independently of whether the adopted mechanism is market]based or fund]based. This paper, after briefly reviewing existing proposals for REDD mechanisms to provide incentives to curb emissions from deforestation, introduces a new approach based on an analogy between carbon and the returns on a financial stock. REDD in Indonesia - Options and Challenges for Fair and Efficient Payment Distribution Mechanisms (2008)
24 September 2008
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This paper summarizes one of the studies undertaken by the Indonesian Forest Climate Alliance (IFCA) to support Indonesian stakeholders to participate in global negotiations. It is based on an intensive process of consultations with national stakeholders of the forests and forestry sector on Indonesia. Based on this experience, the design options for a national REDD payment systems could be related to the principles derived to secure multiple benefits. In line with this sequence, this paper describes the findings under six headings; 1) Questions on international architecture for REDD, 2) Indonesia’s bargaining position as high emission country, 3) Scope of REDD and risks of partial accounting, 4) Principles for achieving triple bottom-line (people, planet, profits) benefits, 5)  Existing experience with regulatory, fund and market based approaches, 6) Potential for national Indonesian REDD payments system. Could Carbon Payments be A Solution to Deforestation - Empirical Evidence from Indonesia (2008)
24 September 2008
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This study focuses on the impact of carbon sequestration payments for forest management systems on smallholder households. The level of incentives is determined which motivates farmers to desist from further deforestation and land use intensification activities. Household behaviour and resource allocation is analyzed with a comparative static linear programming model. As these models prove to be a reliable tool for policy analysis, the output can indicate the adjustments in resource allocation and land use shifts when introducing compensation payments. Making REDD Work for The Poor (2008)
15 September 2008
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Most proposals for such mechanisms to ‘Reduce Emissions for Deforestation and Degradation’ (REDD) are still on the drawing board but they are all based on the idea that developed countries would pay developing countries to reduce rates of deforestation or degradation by implementing a range of policies and projects. By linking these payments to carbon markets (i.e. putting a value on the carbon emissions that are avoided), large sums of money could flow to developing countries. With some estimates exceeding $30 billion per year, these could dwarf existing aid flows to the forest sector in developing countries. The potential contribution to rural poverty reduction could be immense, but REDD mechanisms may also entail new risks. This paper presents a framework for understanding the linkages between REDD and poverty, and conducts an initial analysis of the poverty implications of REDD. Payments for Environmental Services (2008)
15 September 2008
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This article discusses a number of lessons and insights that emerged from five years of implementing the “Rewarding Upland Poor for the Environmental Services they provide” project (RUPES Phase 1) in Asia and from discussions to start up pro-poor rewards for Environmental Services in Africa (PRESA). These insights may help others who are in the early phase of enthusiasm for PES to understand more about its potentials and pitfalls.

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Documents by Subject


Payment Distribution
Deforestation and Degradation
Forest Management in Indonesia
Land Tenure
Carbon Accounting
Indonesia Actions
Governance Assesstment
Financing Options
Opportunity Cost
Regulation on REDD in Indonesia
Carbon Market
REDD Demonstration Sites
Indigenous People
UNFCCC Policy on Forest Emission
Remote Survey

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Payment Distribution
Deforestation and Degradation
Forest Management in Indonesia
Land Tenure
Carbon Accounting
Indonesia Actions
Governance Assesstment
Financing Options
Opportunity Cost
Regulation on REDD in Indonesia
Carbon Market
REDD Demonstration Sites
Indigenous People
UNFCCC Policy on Forest Emission
Remote Survey