Presentation by Jan Börner (CIFOR), Sven Wunder (CIFOR), Sheila Wertz-Kanounnikoff (CIFOR), Glenn Hyman (CIAT) and Nathalia Nascimento (UFPA).

1. REDD sticks and carrots in the Brazilian Amazon: assessing costs and livelihood implications Washington DC, 26.8.2011 Jan B örner (CIFOR) Sven Wunder (CIFOR) Sheila Wertz-Kanounnikoff (CIFOR) Glenn Hyman (CIAT) Nathalia Nascimento (UFPA) The CGIAR Research Program on Climate Change, Agriculture and Food Security (CCAFS), is a strategic partnership of the Consortium of International Agricultural Research Centers (CGIAR) and the Earth System Science Partnership (ESSP). The program is supported by the European Union (EU), the United States Agency for International Development (USAID), the Canadian International Development Agency (CIDA), New Zealand’s Ministry of Foreign Affairs and Trade, the Danish International Development Agency (Danida) and the UK Department for International Development (DFID), with technical support from the International Fund for Agricultural Development (IFAD). The views expressed in this document cannot be taken to reflect the official opinions of these agencies, nor the official position of the CGIAR or ESSP.

4. Context: Brazilian Amazon Washington DC, 26.8.2011 Reduce annual average deforestation (19,500 km 2 , 1996-2005) by 80% until 2016

6. What scope for PES? Washington DC, 26.8.2011 Over 1.4 million km 2 threatened until 2050 B ö rner et al, 2010, Ecological Economics, 69

7. What scope for PES? Washington DC, 26.8.2011 Over 50% of threatened forests exhibit offset market competitive opportunity costs. Total annual cost > R$ 17 billion ~ US$ 9 billion B ö rner et al, 2010, Ecological Economics, 69

8. What scope for PES? Washington DC, 26.8.2011 B ö rner et al, 2010, Ecological Economics, 69 Only 25% of threatened forest land boast institutional preconditions for conditional incentives (i.e., well defined property rights)

10. The workings of stick policies Washington DC, 26.8.2011 To deforest or not to deforest…. unprofitable profitable Opportunity costs Based on Becker, 1968 “Crime and punishment: an economic approach”, JPE Enforcement probability Fine

11. Cost-effectiveness of stick policies Washington DC, 26.8.2011 Additionality Implementation costs

12. Measuring the costs of stick policies at the farm forest frontier Washington DC, 26.8.2011 Liability establishment Cost categories Coercion and administrative processes Fine revenues Spatial unit

13. Welfare effect of stick policies Washington DC, 26.8.2011 Opportunity cost Fine payments

14. Travel time (costs) in the Amazon Washington DC, 26.8.2011

15. Determining p enf – a resource allocation problem Washington DC, 26.8.2011 Subject to: Maximizing deterrence by targeting largest offenders Operational budget limitations when acting at remote forest frontiers

16. Data sources Washington DC, 26.8.2011 Data type Source Annual deforestation polygons (2002-9) INPE-PRODES (2002-9) 1 Municipal-level average profits from agricultural activities and timber extraction (i.e. REDD opportunity costs) Börner et al. 2010 Location and size of land-reform settlements, protected areas, and indigenous territories. IBAMA (provided in 2007) Location and size of protected areas and indigenous territories IBAMA, at: http://siscom.ibama.gov.br (accessed in 2009) Costs and locations (districts) of C&C enforcement operations (2003-2008) IBAMA records, provided in June 2009 Population estimates (Amazon region) IBGE 2 Agricultural Census 2006

17. Actual and optimal enforcement strategies Washington DC, 26.8.2011 Observed enforcement Simulated enforcement 70% overlap

18. p enf as a function of deforestation polygon size and distance Washington DC, 26.8.2011

19. Implementation costs and C&C effectiveness - aggregate Washington DC, 26.8.2011

20. C&C cost-effectiveness in space Washington DC, 26.8.2011

21. Welfare effects in space Washington DC, 26.8.2011

25. Beware of REDD sticks dressed as carrots! Washington DC, 26.8.2011