Streamlining REDD+ to Confront the Growth and Spread of Tropical Forest Clearing

The latest news from FORMA (Forest Monitoring for Action) is very bad.  Figure 1 shows that the FORMA index of global forest clearing rose 60% from January, 2007 to October, 2012.  It declined during the economic crisis, from late 2008 to early 2010, but has climbed steadily since then.  To make matters worse, this increase has been accompanied by rapid dispersion of clearing. As Table 1 shows, only Brazil has displayed a significant decline during the past five years.  The FORMA indicator has increased slightly in Indonesia and sharply in other regions of Asia, Latin America and Sub-Saharan Africa.  In January, 2007, Brazil and Indonesia accounted for 77.3% of the global indicator total.  By October, 2012, their share had fallen to 39.4%.Table 1:  Regional FORMA Indicator Values, January, 2007 and October, 2012These developments have significant implications for conservation strategy, through their impact on the economics of negotiating, monitoring and enforcing programs that compensate countries for successful forest protection.  The compensation programs, coordinated by the United Nations, are collectively known as REDD+: Reducing Emissions from Deforestation and Forest Degradation in Developing Countries.Unfortunately, the evidence presented in Figure 1 and Table 1 suggests that time-consuming bilateral bargains under the aegis of REDD+ are becoming less attractive as forest clearing disperses more widely.  The essential problem resides in transactions cost.  If clearing is concentrated in a few countries, compensation negotiations are not excessively costly because few parties are involved.  As clearing disperses across countries, however, negotiation costs escalate even if total clearing remains constant.  This is particularly true if weak governance in new entrants raises the cost of monitoring and enforcing compensation agreements.Can REDD+ adapt to this new challenge, or will it fade to irrelevance as forest clearing disperses, complex bilateral negotiations proliferate, and transactions costs become punitive?  My colleagues and I believe that REDD+ can indeed be salvaged, but only if it adopts a streamlined incentive model.  We develop this model in a CGD Working Paper, From REDD to Green: A Global Incentive System to Stop Tropical Forest Clearing.  Our proposed Tropical Forest Protection Fund (TFPF) is a cash-on-delivery system that rewards independently-monitored performance without formal contracts.The TFPF incorporates both monetary and reputational incentives, which are calculated quarterly.  The monetary incentives are unconditional cash transfers based on measured performance, while the reputational incentives are provided by CGD's Forest Conservation Performance Ratings (fCPR):  publicly-disclosed, color-coded performance ratings for each country.  The incentives include rewards for: (1) exceeding long-run expectations, given a country’s forest clearing history; (2) meeting or exceeding global REDD+ goals; and (3) achieving an immediate reduction in forest clearing.This streamlined REDD+ model is possible because FORMA (Forest Monitoring for Action) now monitors forest clearing in the pantropics in near-real-time.  Developed by our team at CGD, FORMA will soon offer high-resolution, biweekly updates through Global Forest Watch 2.0, an exciting new program at the World Resources Institute that is supported by Google Earth Engine and many other sponsors.  As part of our close collaboration with WRI in developing GFW 2.0, we have recently mobilized the latest FORMA information to produce fCPR ratings for 56 tropical forest countries.  A detailed note on the ratings and their implications has just been posted on CGD's website.To summarize, the latest evidence indicates that CO2 emissions from forest clearing have entered a period of rapid growth and geographic dispersion after a hiatus during the global economic crisis.  REDD+ may fail to overcome this new challenge unless it adopts a radically-streamlined incentive model that eliminates the need for complex, costly bilateral arrangements.  With the advent of FORMA and fCPR, we believe that such streamlining is now possible through the simplified incentive model illustrated by our Tropical Forest Protection Fund.  We urge bilateral and multilateral donors that support REDD+ to improve its survival prospects by adopting this new approach to forest conservation incentives.