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Optimal policies to preserve tropical forests

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  • Agricultural Science
  • Ecology


Optimal policies to preserve tropical forests Preliminary draft Gilles Lafforgue ∗ and Helene Ollivier † February 1, 2011 Abstract We develop a North/South growth model to investigate the normative question of international transfers to preserve tropical forests. The South converts forest lands into agricultural lands to produce a final consumption good which is consumed by the North. We consider two ways of incorporating the externality coming from de- forestation in the utility of the North: i) through an amenity value, which reflects a continuous willingness to preserve forests, or ii) through a minimum stock of tropical forests to be preserved. First, we solve the optimal program and we characterize the dynamic properties of the optimal deforestation regime. Second, we derive the decen- tralized equilibrium outcome in which the externality can be corrected by a transfer scheme from the North to the South. This transfer function depends both on the stock of forest (positively) and on the deforestation rate (negatively). Third, we characterize the dynamic implementation rule which must be satisfied by this transfer to restore the optimum. Finally, we analyze the specific cases of a pure forest subsidy policy and a pure deforestation taxation policy and we illustrate these findings with an analytical specified model. Keywords: REDD mechanism, deforestation, dynamics, optimal regulation, tax, subsidy. JEL classifications: Q23, Q27, Q28. 1 Introduction Reducing emissions from deforestation and forest degradation (REDD) in developing coun- tries has been recently at the center of negotiations on a renewed climate regime. Deforesta- tion in tropical countries is responsible for about a quarter of total world carbon emissions ∗ Toulouse School of Economics (INRA-LERNA). 21 allee de Brienne, 31000 Toulouse, France. E-mail address: † Department of Agricultural and Resource Economics, University of California, B

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