Designing Contracts for Reducing Emissions from Deforestation and Forest Degradation

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dc.creatorCordero Salas, Paula
dc.date2013-09-26T16:13:37Z
dc.date2013-09-26T16:13:37Z
dc.date2013-06
dc.date.accessioned2026-07-01T00:54:13Z
dc.descriptionReduction of carbon emissions from deforestation and forest degradation has been identified as a cost effective element of the post-Kyoto strategy to achieve long-term climate objectives. Its success depends primarily on the design and implementation of a financial mechanism that provides land-holders sufficient incentives to participate in such scheme. This paper proposes self-enforcing contracts (relational contracts) as a potential solution for the constraints in formal contract enforcement derived from the stylized facts of the implementation because relational contracting relies upon mutual private self-enforcement in a repeated transaction framework. The paper derives an opportunity cost function for land use and characterizes the optimal self-enforcing contract as well as provide the parameters under which private enforcement is sustainable. The optimal payment scheme suggests that all payments should be made contingent on the carbon offsets delivered, that is, at the end of the contracting period. Thus, the optimal contract does not observe any ex ante payment. Self-enforcement is more difficult to sustain the higher the opportunity cost of forest conservation is relative to the value of the carbon offsets from the contract. Necessary extensions to the relational contracting model are also discussed.
dc.formatapplication/pdf
dc.formattext/plain
dc.identifierhttp://documents.worldbank.org/curated/en/2013/06/17919249/designing-contracts-reducing-emissions-deforestation-forest-degradation
dc.identifierhttps://hdl.handle.net/10986/15862
dc.identifierhttps://doi.org/10.1596/1813-9450-6503
dc.identifier.urihttp://hdl.handle.net/123456789/412715
dc.languageEnglish
dc.languageen_US
dc.publisherWorld Bank, Washington, DC
dc.relationPolicy Research Working Paper;No. 6503
dc.rightsCC BY 3.0 IGO
dc.rightshttp://creativecommons.org/licenses/by/3.0/igo/
dc.rightsWorld Bank
dc.subjectADVERSE SELECTION
dc.subjectAGRICULTURE
dc.subjectATMOSPHERE
dc.subjectBIODIVERSITY
dc.subjectBIODIVERSITY CONSERVATION
dc.subjectCARBON
dc.subjectCARBON CREDITS
dc.subjectCARBON DIOXIDE
dc.subjectCARBON EMISSION
dc.subjectCARBON EMISSIONS
dc.subjectCARBON EMISSIONS FROM DEFORESTATION
dc.subjectCARBON MARKET
dc.subjectCARBON OFFSETS
dc.subjectCARBON REDUCTIONS
dc.subjectCARBON SEQUESTRATION
dc.subjectCARBON SINK
dc.subjectCARBON SINKS
dc.subjectCARBON STOCK
dc.subjectCARBON STOCKS
dc.subjectCARBON STORAGE
dc.subjectCENTER FOR INTERNATIONAL FORESTRY RESEARCH
dc.subjectCLIMATE
dc.subjectCLIMATE CHANGE
dc.subjectCLIMATE CHANGE MITIGATION
dc.subjectCO
dc.subjectCO2
dc.subjectCOMPETITIVE MARKET
dc.subjectCONSERVATION OF CARBON
dc.subjectCONTRACT DESIGN
dc.subjectCONTRACT ENFORCEABILITY
dc.subjectCONTRACT ENFORCEMENT
dc.subjectCREDIT BUYER
dc.subjectDEVELOPED COUNTRIES
dc.subjectDEVELOPING COUNTRIES
dc.subjectDEVELOPING COUNTRY
dc.subjectDISCOUNT RATE
dc.subjectECONOMIC ACTIVITY
dc.subjectECONOMIC DEVELOPMENT
dc.subjectECONOMIC RENTS
dc.subjectECONOMICS
dc.subjectECOSYSTEMS
dc.subjectEMISSION REDUCTION
dc.subjectEMISSION REDUCTION TARGETS
dc.subjectEMISSIONS
dc.subjectEMISSIONS FROM DEFORESTATION
dc.subjectEMISSIONS LIMITS
dc.subjectEMISSIONS REDUCTIONS
dc.subjectEMPIRICAL ANALYSIS
dc.subjectENFORCEABILITY
dc.subjectENFORCEABLE CONTRACTS
dc.subjectENFORCEMENT MECHANISM
dc.subjectENFORCEMENT MECHANISMS
dc.subjectENFORCEMENT OF CONTRACTS
dc.subjectENFORCEMENT REGIMES
dc.subjectENVIRONMENTAL
dc.subjectENVIRONMENTAL BENEFITS
dc.subjectENVIRONMENTAL QUALITY
dc.subjectENVIRONMENTAL SERVICES
dc.subjectENVIRONMENTS
dc.subjectEQUILIBRIUM
dc.subjectFINANCIAL SUPPORT
dc.subjectFOREST
dc.subjectFOREST ACTIVITIES
dc.subjectFOREST ACTIVITY
dc.subjectFOREST CARBON
dc.subjectFOREST CARBON SINKS
dc.subjectFOREST CONSERVATION
dc.subjectFOREST DEGRADATION
dc.subjectFOREST LAND
dc.subjectFOREST PROTECTION
dc.subjectFOREST STOCKS
dc.subjectFORESTRY
dc.subjectFORESTRY PRODUCTS
dc.subjectFORESTRY PROJECTS
dc.subjectFORESTS
dc.subjectFRAMEWORK CONVENTION ON CLIMATE CHANGE
dc.subjectGHG
dc.subjectGLOBAL CLIMATE CHANGE
dc.subjectGLOBAL FOREST
dc.subjectGREENHOUSE
dc.subjectGREENHOUSE GAS
dc.subjectGREENHOUSE GAS EMISSIONS
dc.subjectGREENHOUSE GAS MITIGATION
dc.subjectINCENTIVE COMPATIBILITY CONSTRAINT
dc.subjectINCENTIVE COMPATIBILITY CONSTRAINTS
dc.subjectINTERNATIONAL BANK
dc.subjectINTERNATIONAL FORESTRY RESEARCH
dc.subjectINVOLUNTARY UNEMPLOYMENT
dc.subjectLAND AREA
dc.subjectLAND HOLDERS
dc.subjectLAND OWNER
dc.subjectLAND OWNERS
dc.subjectLAND USE
dc.subjectLAND USES
dc.subjectLAND-USE
dc.subjectLAND-USE CHANGE
dc.subjectLANDHOLDER
dc.subjectLEGAL SYSTEMS
dc.subjectLOCAL GOVERNMENTS
dc.subjectMARGINAL BENEFITS
dc.subjectMARGINAL COST
dc.subjectMORAL HAZARD
dc.subjectOPPORTUNITY COST
dc.subjectOPTIMAL CONTRACT
dc.subjectPERFECT INFORMATION
dc.subjectPRESENT VALUE
dc.subjectPRINCIPAL-AGENT PROBLEMS
dc.subjectPRIVATE ENFORCEMENT
dc.subjectREDUCING EMISSIONS
dc.subjectREFORESTATION
dc.subjectRENEGOTIATION
dc.subjectRETURN
dc.subjectRETURNS
dc.subjectSIDE PAYMENTS
dc.subjectSOCIALLY SUSTAINABLE DEVELOPMENT
dc.subjectSUSTAINABLE DEVELOPMENT
dc.subjectTEMPERATURE
dc.subjectTERMS OF TRADE
dc.subjectTIMBER
dc.subjectTIMBER HARVESTING
dc.subjectTRADING
dc.subjectTRANSACTION
dc.subjectTRUST FUND
dc.subjectVALUATION
dc.subjectWATERSHED
dc.subjectWILLINGNESS TO PAY
dc.titleDesigning Contracts for Reducing Emissions from Deforestation and Forest Degradation

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