Policies to Reduce Emissions from Deforestation and Degradation ...

cies risk having a small impact. As is the case with the CDM, project-based REDD policies might not
substantially engage developing countries in the climate change discourse and would not encourage
developing countries to consider emissions commitments. Project-level REDD policies
would have to address other shortcomings of the CDM, such as issues of additionality, the quality
and robustness of credits, and whether sustainable development goals could be realized.
Hybrids
Numerous conceivable hybrid arrangements could enmesh the national- and project-based approaches
described above. Below, two potential hybrid approaches are discussed. The first was
proposed by Pedroni and Streck (2007) as the Nested Approach. The second is a variation of national-based
approaches and pairs national-level commitments with project-level activities and
payments.
Nested Approach. Immediate, project-based REDD activities would be paired with the eventual
transition to a national-based REDD program. Such an approach would accommodate heterogeneity
in the capacity to implement REDD programs by allowing subnational entities to generate
credits through REDD projects. During the project phase, credits would be issued to project representatives.
Hypothetically, the project phase would facilitate learning and capacity building and
build momentum among country agents and among investors. After a given threshold—which
could be based on forest area, as proposed by Pedroni and Streck (2007), or temporal—the country
would transition to a national REDD policy in which accounting and credit generation would
occur at the national level, and the national government would distribute credits appropriately.
The transition from project to national scope outlined in the Nested Approach takes advantage
of existing capacity by subnational entities while maintaining focus on the magnitude of the
issue, which can only be addressed by national-level commitments. Although this approach accommodates
the real-world challenges to implementing effective national-based REDD policies, it
is not clear that appropriate incentives exist to make the transition from project-level to nationallevel
commitments. Additionally, once the transition is made to national accounting, investors
may face disincentives to engage with national entities—similar to the disincentives they would
have faced in outright national programs. Thus, there may be perverse incentives for the subnational
entities and project investors to stall the transition to the national phase of the program. As
a result, it may be more appropriate to have a temporal threshold: after XX years, a country must
transition to national-based REDD program, barring extenuating circumstances.
National commitments with project-level investments. The success of REDD policies relies on
the coordination between private interest in carbon credits and public interest in reduction of
forestry emissions. Ideally, payments would be made to the landowner or user because it is this
entity that must consider alternative uses for the land (Karousakis and Corfee-Morlot 2007). If potential
payments for REDD activities are more than the potential returns from clearing the forest,
landowners and users will find that conserving forests is in their best interest as well as the public
interest. Because of investor reluctance to entwine investment returns with government performance,
it is conceivable that project investors would prefer to work directly with the landowners
and users. Given these interests, a REDD policy could pair project-level private investments with
national guarantees of quality, additionality, permanence, and leakage management. The resulting
credit revenues would be split between project agents and the government. In a hypothetical
34 Policies to Reduce Emissions from Deforestation and Degradation in Developing Countries