On international equity in reducing emissions from deforestation

Reducing emissions from deforestation and forest degradation (REDD) can be an effective and efficient means of mitigating climate change. However, the perceived equity in the distribution of financial incentives for REDD could also emerge as a critical issue in international negotiations. The design of reference levels, which provide the benchmark for crediting emissions reductions, affects the economic incentives for national participation in a REDD mechanism and thus the overall willingness to reach an agreement on REDD. This paper compares the equity impacts of five proposed reference level designs using a partial-equilibrium model. Tradeoffs among equity, environmental effectiveness and cost-efficiency indicate the proposals trigger similar aggregate emissions reductions but lead to different outcomes in efficiency and alternative measures of equity. If equity across countries is measured as the financial incentive provided relative to a country's forest carbon stock, then a REDD mechanism compensating a uniform share of at-risk carbon stocks is the most equitable. On the other hand, if equity is evaluated as the financial incentive relative to the opportunity costs of participating in REDD, then the most equitable approach would be compensating emissions reductions but withholding a part of the payments to compensate for carbon stocks, which also encourages broader country participation under our model.