Reducing Emissions from Deforestation and Forest Degradation (REDD+): Transaction Costs of Six Peruvian Projects

Abstract

"Reduced Emissions from Deforestation and Forest Degradation (REDD+) has received strong support as a major component of future global climate change policy. The financial mechanism of REDD+ is payment for the ecosystem service of carbon sequestration in tropical forests that is expected to create incentives for conservation of forest cover and condition. However, the costs of achieving emissions reduction by these means remain largely unknown. We assess the set-up, implementation, and monitoring costs, i.e., collectively the transaction costs, of six of the first seven REDD+ project designs from the Peruvian Amazon and compare them with established projects in Brazil and Bolivia. The estimated costs vary greatly among the assessed projects from US$0.16 to 1.44 ha-1 yr-1, with an average of US$0.73 ha-1 yr-1, though they are comparable to earlier published estimates. The results indicate that the costs of implementing REDD+ are highly uncertain for participating developing countries because of issues such as inadequate project design and how additionality is determined. Furthermore, some insight is obtained into how different activities to reduce deforestation and forest degradation, the type of implementer, and project location affect implementation costs of REDD+ projects. Even with these first estimates, the cost of preserving existing intact forests in the Peruvian Amazon may have been underestimated."