According to the Intergovernmental Panel on Climate Change (IPCC), deforestation accounts for almost 20 percent of greenhouse gas emissions. The United Nation's program, Reducing Emissions from Deforestation and Forest Degradation in Developing Countries (REDD) seeks to reduce this figure by giving forests a monetary value based on their capacity to store carbon, thereby reducing greenhouse gases. Resource economists have identified two potential drawbacks in the design of the probable REDD payment selection rule. The first, price spillover, predicts that if payments for protected areas decrease crop production, crop prices could rise leading to increased production elsewhere. The other is process spillover, which predicts that a landowner who maintains standing forest without recieving payment may be persuaded to cut forest if others nearby are receiving payment, in order to attract incentive payments himself. Currently, these potential side effects are not integrated in current payment selection rules.
This project will use Costa Rica as the test case to examine the selection rule for REDD projects (i.e. who is paid and why) to ensure equity and efficiency of payment programs. The goal is to identify an appropriate pricing structure that will encourage lower rates of deforestation by assessing the extent of responses to ecosystem payments by unpaid and paid parties. CATIE will conduct focus group interviews to determine perceptions toward payments, and test their assumptions in lab and field models.