Reducing emissions from deforestation and forest degradation (REDD+): transaction costs of six Peruvian projects

Reduced Emissions from Deforestation and Forest Degradation (REDD+) has received strong support as a major component of future global climate change policy. The financial mechanism of REDD+ is payment for the ecosystem service of carbon sequestration in tropical forests which is expected to create incentives for conservation of forest cover and condition. However, the costs of achieving emissions reduction by these means are very poorly known. This paper assesses the set-up, implementation and monitoring costs (i.e. collectively the transaction costs) of six of the first seven REDD+ project designs from the Peruvian Amazon and compares them with established projects in Brazil and Bolivia. The estimated cost categories vary greatly amongst the assessed projects (US$ 0.16 to 1.44 ha-1 yr-1, average US$ 0.73 ha-1 yr-1), though they are comparable to earlier published estimates. The results indicate that the actual economic costs of implementing REDD+ are highly uncertain for participating developing countries, and they may be significantly underestimated in Peru due to inadequate project design and to how additionality is determined. Furthermore, some insight is obtained into the effects of types of activities to reduce deforestation and forest degradation, the nature of project implementer’s, and project location on the implementation costs of REDD+ projects. Even with these first estimates, the cost of preserving existing intact forests in the Peruvian Amazon may have been underestimated.