Public Policy and Economics

BANTER: The Brazilian Amazon Negotiation Toolbox for the Economics of REDD

Brazil is leading the way in adopting policies to reduce deforestation and taking on ambitious reduction targets. A central element of a strategy to reduce deforestation is understanding the distribution, at the sub-national level, of benefits and costs of REDD policies. Quantitative economic analysis can provide useful insights on the effectiveness, efficiency, and fairness of REDD strategies. The Brazilian Amazon Negotiation Toolbox for the Economics of REDD (BANTER) is a spreadsheet-based economic tool that helps examine the economic and environmental effects in the Brazilian Amazon of different REDD mechanism designs.

BANTER is designed to support REDD negotiations among states in the Brazilian Amazon by allowing users to compare emissions reductions, avoided deforestation and revenue generation at the state level across proposed REDD design options. It takes into consideration the share of land that is illegally deforested in the formulation of Brazilian REDD policy. The model is adapted to consider the existing policy framework in Brazil: it is expected that some reductions in emissions will represent Brazil's contribution to combating climate change and will not generate offset credits, but that reductions beyond a national target may be sold on the carbon market. Six reference level design options can be examined, with particular focus on possible designs of a cap-and-trade mechanism. Results can be obtained for a range of design parameter values. Click here for technical details.

BANTER is based on the OSIRIS platform which is a static partial equilibrium model with instantaneous feedback for a single commodity -- agricultural output of a single hectare of land cleared from tropical forest ("frontier land agricultural output"). Demand for frontier land agricultural output is national; local demand for frontier land agricultural output is latent. Every Amazon state has a supply curve without REDD for frontier land agricultural output. These statewide supply curves are shifted with REDD based on design- and state- specific REDD incentives. Statewide supply curves for frontier land agricultural output without and with REDD intersect with the national demand curve for frontier land agricultural output to determine the equilibrium price and quantity of agricultural land cleared from tropical forest. It is assumed that all reductions in emissions from deforestation will have a buyer at a given price.

Reducing emissions in the Brazilian Amazon requires coordination across 9 Amazon states with an aggregate population of 20 million and covering an area of 5 million km2.

Image courtesy of Dr. Michael Coe

Collaborating institutions:

The BANTER model is a joint effort of The Woods Hole Research Center, The Amazon Institute for Environmental Research (IPAM), and the Federal University of Minas Gerais. It relied on the platform provided by the OSIRIS model, which was developed as part of the Collaborative Modeling Initiative on REDD Economics. Participating institutions include Conservation International, the Terrestrial Carbon Group, Environmental Defense Fund, Woods Hole Research Center and the Center for Social and Economic Research on the Global Environment at the University of East Anglia.

 

Download the BANTER Spreadsheet Tool:

BANTER Version 1.0 (Zipped Excel File - 2.8MB)

BANTER Version 1.0 (Excel File - 4.5MB)

 

Technical details:

BANTER focuses on sub-national REDD design in a Brazilian policy context. The sub-national focus entails addressing some issues that are not relevant in the international debate on REDD:

  1. Making the distinction between legal and illegal deforestation
    1. The share of illegal deforestation is reported by state and the resources required to reduce illegal deforestation are distinct and separate from the positive incentives to avoid legal deforestation.
    2. The cost of enforcing the law is represented as a share of the payment level that is provided as an incentive to avoid legal deforestation (CELL B34 in worksheet SUMMARY)

  2. Allowing for the fact that the national government may legislate what the sub-national states can and cannot do
    1. the government can decide whether states can participate in a carbon market or not
    2. If the country does not participate in a carbon market then the option included in BANTER is for the government to put in place a payment for environmental services scheme: a flat rate payment per hectare (like the Amazon Fund), a per ton of CO2-equivalent of avoided emissions, or a combination of the two

  3. If the country does participate in a carbon market then:
    1. the states can receive the market price of carbon for their reductions relative to a reference level
    2. However, the national government can set a target reduction in emissions that is meant to be the country's contribution to combating climate change: these reductions cannot generate offset credits
    3. states receive the PES payment level (assumed to be lower than market value) for those reductions that cannot generate offset credits

  4. The cap-and-trade design option is developed in depth
    1. emission allowances can be allocated in more than one way: the allowances can be allocated according to the 5 design options for reference levels and also according to forest area by different legal categories
    2. The price of credits in the cap-and-trade can be the international market price or a domestic rate (by not allowing access to the carbon market)
    3. In the cap-and-trade we assume that it is the sole program and that there is no PES scheme for compensating reductions that are not associated with an allowance

More details on how to use the model are presented in the Excel file.

For more information on BANTER, email

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