Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/27620
Authors: 
Anger, Niels
Dixon, Alistair
Livengood, Erich
Year of Publication: 
2009
Series/Report no.: 
ZEW Discussion Papers 09-001
Abstract: 
Reducing emissions from deforestation and degradation (REDD) has been proposed as a potentially inexpensive and plentiful source of emission abatement to supplement other longterm climate policies. However, critics doubt that REDD credits are environmentally equivalent to domestic emission reductions, and suggest an excess supply may disrupt carbon markets. In this context, we investigate the economic implications of emissions market regulations and future emissions reduction commitments, as well as uncertainties in REDD credit supply. Numerical simulations with a multi-country equilibrium model of the global emissions market show unrestricted exchange of REDD units reduces the international carbon price by half and cuts Annex I compliance costs by roughly one third. Restricting supply or demand of REDD credits reduces price impacts, but comes at the cost of economic efficiency. Alternatively, Annex I reduction commitments could be increased by almost two thirds at constant carbon prices. While REDD provides large economic benefits for tropical rainforest regions, any REDD policy scenario also reduces wealth transfers to traditional CDM host countries through increased competition on the supply-side of the carbon market.
Subjects: 
Climate Change
Kyoto Protocol
Emissions Trading
Deforestation
REDD
JEL: 
Q58
D61
C60
Q23
Document Type: 
Working Paper

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