Environment and Development Economics

Research Article

Linking reduced deforestation and a global carbon market: implications for clean energy technology and policy flexibility

VALENTINA BOSETTIa1, RUBEN LUBOWSKIa2, ALEXANDER GOLUBa3 and ANIL MARKANDYAa4

a1 Sustainable Development Unit, Fondazione Eni Enrico Mattei (FEEM) and Climate Impacts and Policy Division of the EuroMediterranean Center on Climate Change (CMCC), Fondazione Eni Enrico Mattei, Corso Magenta 63, Milan, Italy. Tel: +39 02 52036916. Fax: +39 02 52036946. Email: valentina.bosetti@feem.it

a2 Environmental Defense Fund (EDF), 1875 Connecticut Avenue NW, Washington, DC 20009, USA. Email: rlubowski@edf.org

a3 Environmental Defense Fund (EDF), 1875 Connecticut Avenue NW, Washington, DC 20009, USA. Email: agolub@edf.org

a4 Basque Center for Climate Change (BC3) and University of Bath, Basque Center for Climate Change – Klima Aldaketa Ikergai, Gran Vía 35, 2, Bilbao, Spain. Email: anil.markandya@bc3research.org

ABSTRACT

This study uses a global climate-energy-economy model to investigate potential implications of linking credits from reducing emissions from deforestation and forest degradation in developing countries to a global carbon market, focusing on reducing emissions from deforestation (RED) and effects on energy technology innovation. Integrating RED into a global carbon market lowers the estimated total costs of a policy to achieve 535 ppmv of CO2-equivalent concentrations in 2100 by up to 25 per cent. Alternatively, a global RED program could enable additional reductions of about 20 ppmv by 2100 with no added costs compared with an energy-sector-only policy. The results indicate that market linkage of RED induces modest reductions in clean energy innovation overall but slightly enhances development of particular technologies, including carbon capture and storage. We also find that RED in combination with credit banking encourages greater mitigation in the near term, enhancing flexibility to potentially tighten emission targets at lower cost in response to future information.

(Received June 25 2009)

(Revised May 07 2010)

(Accepted December 18 2010)

(Online publication February 08 2011)

Footnotes

We thank Brent Sohngen; Daniel Nepstad, Frank Merry, Paulo Moutinho, and Britaldo Soares-Filho; and Michael Obersteiner and Mykola Gusti for their respective cost estimates for reducing deforestation emissions. The authors acknowledge useful comments from participants at the International Workshop on ‘Reducing Emissions from Deforestation and forest Degradation (REDD)’, November 2008, Milan, Italy. The authors are also grateful for very helpful comments from Steve Rose and two anonymous referees. Any remaining errors are the authors’ own responsibility.