Memo 8: REDD, PES and other Economically Driven Environmental Incentives

Cristin Williams
April 5, 2011
Readings Discussed: Bapna (2010), Wunder (2006)

Summary
For this memo, I will be discussing the Bapna and Wunder readings. The Bapna reading was about an incentive mechanism called REDD. REDD stands for Reducing Emissions from Deforestation and Degradation. Most people are aware that logging can be profitable. Trees provide wood for many different types of products, from hardwood floors to paper cups However, many people are unaware that when trees are cut down they release massive amounts of CO2 into the atmosphere. When you cut down a tree, that tree can also no longer absorb C02 from the air. REDD seeks to provide an alternative profit motive concerning forests. REDD would provide incentives for governments and nations that limited forest destruction past a pre-established level. Where would funding for REDD come from? Some suggest that we should link a program like REDD with the carbon market, allowing companies to offset their carbon footprint by paying into REDD. The article also points out that weak governments within these tropical countries are much of the reason that deforestation was continued. We should strive to support forest governance in these countries.

The Wunder article talks about a similar aspect of economically driven environmental preservation. In the article, PES's are discussed. PES stands for Payments for Environmental Services. PES's are a broad spectrum of environmental preservation techniques that can be traded and economically funded. Many people have heard of carbon credit trading by now, which is right along the lines of PES. A PES scheme involves a "seller of environmental services" and a "buyer," just like any market transaction. The drawbacks for PES come from the fact that they a very new idea. Buyers of credits will want explicit proof of how their money is being utilized. How much is 3 hours of river clean up worth? How much does it cost to plant a new forest? PES could be very successful in the future because they are economically driven, though the author doubts that they will take over in place of traditional conservation methods.
Comparing & Contrasting
Both articles are about economically driven environmental conservation. After taking Microeconomics and Macroeconomics, I feel like I have a fairly strong econ background. This type of profit-driven conservation makes the most sense to me. I've met quite a few business majors that seem to think environmentally conscious people are wasting their time. "Why should I recycle? How is that going to help me make more money?" Well if we can find a way to incentivize activities like recycling, business-minded people will have a reason to hop on board. Both of these articles seem to realize this notion. Both articles also stress the importance of correctly allocated funds. PES cannot be effective if the buyers money doesn't serve to actually help the environment. The Wunder article stressed that it isn't good enough if the money simply goes to organizations that claim to not be environmentally destructive. The money needs to fund actual conservation efforts. The Bapna article points out how if corrupt governments get a hold of REDD funding, they will use it to fund corrupt ventures (obviously). It all boils down to stable governance.


Queries/Questions
Concerning the Bapna article, I wonder what progress was made in the year 2010 concerning REDD. Did the EU decide to include REDD in its emissions trading scheme? What other progress has been made on REDD? Has the Governance of Forests Initiative been successful? How does simply diagnosing a government as corrupt serve to improve their nation? I would support some type of plan that also provided a framework for stabilizing and assisting these young governments. Essentially what confused me about the Wunder article was the scope of PES. Is PES an all-encompassing term for all types of economically motivated environmental conservation? Does carbon credit trading fall exactly under PES? Due to the fact that the concept of PES is a new one, we can't totally grasp whether or not it is or will be effective. Over time we will come to realize which PES techniques will be the most helpful and profitable. The idea of carbon trading is intriguing to me. I think the problem lies in the fact that some businesses are almost over-eager to sell away their environmental regrets. We need to be sure that the buyers money is actually going towards worthwhile conservation activities.