The Potential for REDD+: Key Economic Modeling Insights and Issues

This article takes stock of economic modeling tools and findings related to reducing greenhouse gas emissions from deforestation and forest degradation as well as other forestry activities in developing countries (REDD+), and discusses priorities for future research. The economics literature has identified opportunities for significant cost-effective climate change mitigation from both reducing deforestation and enhancing forest carbon stocks. Several studies estimate that including REDD+ could reduce the costs of achieving climate policy goals over both the near and longer terms. Studies also suggest that the near-term potential for REDD+, especially reduced deforestation, could be valuable in support of near-term emissions reduction strategies, hedging against uncertainties, and dampening future carbon market price volatility. However, the literature is evolving. Most early and many recent studies of REDD+ provide optimistic benchmark estimates, based on ideal, but unrealistic, assumptions about policies and institutions. The more recent literature, which analyzes dynamics; interactions among forestry activities, regions, and economic sectors; implementation requirements and costs; policy designs; and uncertainties suggests a more limited and nuanced mitigation role for REDD+, especially in the near future. There are also important modeling challenges. Together, these real-world complexities and modeling challenges indicate that the actual costs and net environmental benefits of potential REDD+ activities are uncertain and highly dependent on policy and implementation features. (JEL: O13; Q11; Q23; Q24; Q28; Q54; Q58; R14) Copyright 2013, Oxford University Press.