Estimating Transaction Costs of REDD

Reducing emissions from deforestation and forest degradation (REDD+) is generally believed to be a cost-effective mitigation strategy against climate change. Some suggest, however, that costs of REDD+ are underestimated because many studies either exclude or undervalue transaction costs. A major cha...

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Bibliographic Details
Published in:Ecological economics 2019-02, Vol.156, p.1-11
Main Authors: Nantongo, Mary, Vatn, Arild
Format: Article
Language:English
Subjects:
Brazil
Governance structures
REDD+ policy
Tanzania
Transaction costs
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Summary:Reducing emissions from deforestation and forest degradation (REDD+) is generally believed to be a cost-effective mitigation strategy against climate change. Some suggest, however, that costs of REDD+ are underestimated because many studies either exclude or undervalue transaction costs. A major challenge in this field of research is the absence of a common framework and methodology for assessing such costs. This paper uses the notion of governance structures to suggest a generic definition and methodology for measuring transaction costs. The methodology is subsequently used in an analysis of transaction costs for REDD+ pilots in RDS Rio Negro, Brazil and Kilosa, Tanzania. Results indicate higher unit costs – costs per ton of reduced CO2 – of establishing the REDD+ governance structures in Kilosa, while unit costs of using those structures are higher in RDS Rio Negro. The results also show that while REDD+ was originally conceived as a market i.e., a direct trade between buyers and sellers, it could also take on a non-market governance structure or a mixture of market and non-market elements. These different forms of governance structures have implications for transaction costs.
ISSN:0921-8009
1873-6106
DOI:10.1016/j.ecolecon.2018.08.014