International initiatives for reducing carbon emissions from deforestation and forest degradation (REDD+) could make critical, cost-effective contributions to tropical countries' nationally ...determined contributions (NDCs). Norway, a key donor of such initiatives, had a REDD+ partnership with Indonesia, offering results-based payments in exchange for emissions reductions calculated against a historical baseline. Central to this partnership was an area-based moratorium on new oil palm, timber, and logging concessions in primary and peatland forests. We evaluate the effectiveness of the moratorium between 2011 and 2018 by applying a matched triple difference strategy to a unique panel dataset. Treated dryland forest inside moratorium areas retained, at most, an average of 0.65% higher forest cover compared to untreated dryland forest outside the moratorium. By contrast, carbon-rich peatland forest was unaffected by the moratorium. Cumulative avoided dryland deforestation from 2011 until 2018 translates into 67.8 million to 86.9 million tons of emissions reductions, implying an effective carbon price below Norway's US$5 per ton price. Based on Norway's price, our estimated cumulative emissions reductions are equivalent to a payment of US$339 million to US$434.5 million. Annually, our estimates suggest a 3 to 4% contribution to Indonesia's NDC commitment of a 29% emissions reduction by 2030. Despite the Indonesia-Norway partnership ending in 2021, reducing emissions from deforestation remains critical for meeting this commitment. Future area-based REDD+ initiatives could build on the moratorium's outcomes by reforming its incentives and institutional arrangements, particularly in peatland forest areas.
Discounting Disentangled Drupp, Moritz A.; Freeman, Mark C.; Groom, Ben ...
American economic journal. Economic policy,
11/2018, Letnik:
10, Številka:
4
Journal Article
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The economic values of investing in long-term public projects are highly sensitive to the social discount rate (SDR). We surveyed over 200 experts to disentangle disagreement on the risk-free SDR ...into its component parts, including pure time preference, the wealth effect, and return to capital. We show that the majority of experts do not follow the simple Ramsey Rule, a widely used theoretical discounting framework, when recommending SDRs. Despite disagreement on discounting procedures and point values, we obtain a surprising degree of consensus among experts, with more than three-quarters finding the median risk-free SDR of 2 percent acceptable.
This paper provides novel empirical evidence on the value of the elasticity of marginal utility,
η
, for the United Kingdom.
η
is a crucial component of the social discount rate (SDR), which ...determines the inter-temporal trade-offs that are acceptable to society. Using contemporaneous and historical data, new estimates are obtained using four revealed-preference techniques: the equal-sacrifice income tax approach, the Euler-equation approach, the Frisch additive-preferences approach and risk aversion in insurance markets. A meta-analysis indicates parameter homogeneity across approaches, and a central estimate of 1.5 for
η
. The confidence interval excludes unity, the value used in official guidance by the UK government. The term structure of the SDR is then estimated. The result is a short-run SDR of 4.5% declining to 4.2% in the very long-run. This is higher and flatter than the UK official guidance. The difference stems from incorrect calibration of social welfare and estimation of the diffusion of growth. Other things equal, the results suggest that current UK guidance might need to be updated.
We derive a simple formula for the social discount rate (SDR) that uses the median, rather than average agent of the economy to reflect the consequences of consumption growth on income inequality. ...Under reasonable assumptions, the difference between the growth of median and mean incomes is used to adjust the wealth-effect in the standard Ramsey rule. In a plausible special case the representative agent has the median income. With inequality aversion elasticity of 2 (1.5, 1), the U.K. and U.S. SDR would be 1% (0.5%, 0.25%) lower than the standard Ramsey rule. This reflects two decades of inequality-increasing growth and implies greater weight placed on future generations in public appraisal.
•The social discount rate (SDR) determines the value of future costs & benefits today.•Inequality dynamics can affect intergenerational welfare and hence the SDR.•Median, not mean, income growth can be used to derive an inequality adjusted SDR.•In the UK/U.S., this adjustment leads to a lower SDR by of up to 1 percentage point.•The median, not mean, income as the representative agent has a welfare justification.
Should governments use a discount rate that declines over time when evaluating the future
benefits and costs of public projects? The argument for using a declining discount rate
(DDR) is simple: if ...the discount rates that will be applied in the future are uncertain
but positively correlated, and if the analyst can assign probabilities to these discount
rates, then the result will be a declining schedule of certainty-equivalent discount
rates. There is a growing empirical literature that estimates models of long-term interest
rates and uses them to forecast the DDR schedule. However, this literature has been
criticized because it lacks a connection to the theory of project evaluation. In
benefit-cost analysis, the net benefits of a project in year t (in
consumption units) are discounted to the present at the rate at which society would trade
consumption in year t for consumption in the present. With simplifying
assumptions, this leads to the Ramsey discounting formula, which results in a declining
certainty-equivalent discount rate if the rate of growth in consumption is uncertain and
if shocks to consumption are correlated over time. We conclude that the arguments in favor
of a DDR are compelling and thus merit serious consideration by regulatory agencies in the
United States. (JEL: D61)
Measures of inequality aversion are elicited using hypothetical decision tasks. The tasks require an assessment of projects in the presence of environmental inequalities across space and time. We ...also test the effect of different environmental domains (air pollution, recreational forest and soil fertility) and contextual framings (gain/loss, within/between regions and present–future/past–present inter-temporal trade-offs). Estimated mean inequality aversion is higher in the intra-temporal framing (an elasticity of 2.9), than in the inter-temporal framing with either negative (2.0) or positive (1.4) growth in environmental quality. Differences across environmental domains exist but are less pronounced. Similar results hold for pure time preference. Losses are associated with a lower pure rate of time preference but higher inequality aversion compared to gains. The results indicate how domain-specific ‘dual’ discount rates or rather changing relative shadow prices for the environment might be calibrated. Yet, seen as an exercise in empirical social choice, the context dependent results reject the classical Utilitarian formulation of a single Ramsey Rule.
The Dasgupta Review provides a rich overview of the economics of biodiversity, paints a bleak picture of the current state of biodiversity, and is a call to arms for action in anticipation of the CBD ...COP 15. The Review takes a global perspective aimed at the high level of international and national policy on biodiversity, while elucidating the very local nature of biodiversity threats and values. The approach is orthodox in its diagnosis via the language of externalities, natural capital, shadow pricing, asset returns, and the suite of remedial policies that follow. Yet, at its centre is an ‘unorthodox’ perspective: the economy is embedded in the environment and growth is limited. We offer reflections on this framing in light of its objectives for biodiversity. The limits to growth message will be criticised and applauded in equal measure by different economists. The central place of valuation and the aggregated concept of biodiversity will draw criticism from outside the discipline. Yet the Review provides a foundation for biodiversity economics, and its largely orthodox framing may invoke the intended step change in the mainstream approach to economic growth.
The deterrent effects of counter-violence initiatives could backfire if they cause preferences to change so that the perceived gains from violent actions increase. We test the preference-change ...hypothesis in a quasi-experimental design exploiting the random location of segments of the wall between the West Bank and Israel, an initiative intended to deter armed resistance. We undertake incentivised decision tasks with Palestinians to measure key individual traits that determine the valuation of political actions: preferences for risk, uncertainty and time delay. We show that people living close to the wall become more risk-tolerant, ambiguity averse and impatient than those unexposed to the wall, and this effect is amplified for people both exposed to and isolated (from the West Bank) by the wall. Preference-change could explain how repressive initiatives appear to perpetuate cycles of violence and resistance.
Societal Impact Statement
Humankind is facing both climate and biodiversity crises. This article proposes the foundations of a scheme that offers tradable credits for combined aboveground and soil ...carbon and biodiversity. Multidiversity—as estimated based on high‐throughput molecular identification of soil meiofauna, fungi, bacteria, protists, plants and other organisms shedding DNA into soil, complemented by acoustic and video analyses of aboveground macrobiota—offers a cost‐effective method that captures much of the terrestrial biodiversity. Such a voluntary crediting system would increase the quality of carbon projects and contribute funding for delivering the Kunming‐Montreal Global Biodiversity Framework.
Summary
Carbon crediting and land offsets for biodiversity protection have been developed to tackle the challenges of increasing greenhouse gas emissions and the loss of global biodiversity. Unfortunately, these two mechanisms are not optimal when considered separately. Focusing solely on carbon capture—the primary goal of most carbon‐focused crediting and offsetting commitments—often results in the establishment of non‐native, fast‐growing monocultures that negatively affect biodiversity and soil‐related ecosystem services. Soil contributes a vast proportion of global biodiversity and contains traces of aboveground organisms. Here, we outline a carbon and biodiversity co‐crediting scheme based on the multi‐kingdom molecular and carbon analyses of soil samples, along with remote sensing estimation of aboveground carbon as well as video and acoustic analyses‐based monitoring of aboveground macroorganisms. Combined, such a co‐crediting scheme could help halt biodiversity loss by incentivising industry and governments to account for biodiversity in carbon sequestration projects more rigorously, explicitly and equitably than they currently do. In most cases, this would help prioritise protection before restoration and help promote more socially and environmentally sustainable land stewardship towards a ‘nature positive’ future.
Inimkond ägab nii kliima‐ kui ka elurikkuse kriiside all. Selles artiklis pakume välja kaubeldava süsiniku ja elurikkuse kooskrediteerimise skeemi, kus eri organismirühmade (selgrootud loomad, seened, bakterid, protistid, taimed) kaalutud liigirikkus mullaproovides on peamine elurikkuse näitaja. Molekulaarsete meetodite abil läbiviidud mulla DNA uuringud koos video ja akustilise materjaliga võimaldavad kulutõhusalt hinnata kogu ökosüsteemi elurikkust. Siin väljapakutud kooskrediteerimise põhimõte võimaldab tõhustada süsinikuprojekte ja rahastada looduskaitset.
Humankind is facing both climate and biodiversity crises. This article proposes the foundations of a scheme that offers tradable credits for combined aboveground and soil carbon and biodiversity. Multidiversity—as estimated based on high‐throughput molecular identification of soil meiofauna, fungi, bacteria, protists, plants and other organisms shedding DNA into soil, complemented by acoustic and video analyses of aboveground macrobiota—offers a cost‐effective method that captures much of the terrestrial biodiversity. Such a voluntary crediting system would increase the quality of carbon projects and contribute funding for delivering the Kunming‐Montreal Global Biodiversity Framework.
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