Cooperation and Reciprocity in Carbon Sequestration Contracts

This paper studies the role of cooperation and reciprocity on the structure of self-enforcing carbon sequestration contracts. The optimal contract is derived as a result of the optimizing actions of purely self-interested agents, and agents that act according to social or egoistic preferences. The analysis finds that buyers' preferences do not affect contract structure unless the buyer is averse to inequality. In contrast, the optimal payment rule is directly related to the seller's preferences as the payment must motivate the seller to comply with forest conservation. It also finds that the presence of altruistic or warm glow preferences increases the likelihood of cooperation in the long-term relationship relative to the case of selfish parties. These results imply that agencies or organizations that are not only concerned about carbon sequestration but also have objectives related to the economic development of small land holders may be more successful in the implementation contracts to reduce emissions from deforestation and forest degradation.

Bibliographic Details

Main Author:	Cordero Salas, Paula
Format:	Policy Research Working Paper biblioteca
Language:	English en_US
Published:	World Bank, Washington, DC 2013-06
Subjects:	AFFORESTATION, AMOUNT OF CREDITS, ASYMMETRIC INFORMATION, BIODIVERSITY, BIODIVERSITY CONSERVATION, BIOMASS, BIOMASS CARBON, BREACH, BREACHES, BUYER, BUYERS, CARBON, CARBON CREDITS, CARBON DIOXIDE, CARBON EMISSION, CARBON EMISSIONS, CARBON EMISSIONS FROM DEFORESTATION, CARBON LEVEL, CARBON MARKET, CARBON OFFSETS, CARBON SEQUESTRATION, CARBON SINK, CARBON SINKS, CARBON STOCK, CARBON STOCKS, CARBON STORAGE, CLIMATE, CLIMATE CHANGE, CLIMATE CHANGE MITIGATION, COMPENSATION, CONSERVATION OF CARBON, CONTRACT DESIGN, CONTRACT ENFORCEMENT, CONTRACT OBLIGATIONS, CONTRACT OFFERS, COOPERATIVE EQUILIBRIUM, DESIGNING CONTRACTS, DEVELOPING COUNTRIES, DEVELOPING COUNTRY, ECONOMIC ACTIVITY, ECONOMIC DEVELOPMENT, EMAIL ADDRESS, EMISSIONS, EMISSIONS ABATEMENT, EMISSIONS FROM DEFORESTATION, ENFORCEABILITY, ENFORCEMENT CONSTRAINTS, ENFORCEMENT MECHANISMS, EQUILIBRIUM, FINANCIAL SUPPORT, FIXED COSTS, FOREST, FOREST CARBON, FOREST CLEARING, FOREST CONSERVATION, FOREST COVER, FOREST DEGRADATION, FOREST LAND, FOREST LANDS, FOREST PROTECTION, FORESTRY, FORESTS, GLOBAL CLIMATE CHANGE, GOOD FAITH, GREENHOUSE, GREENHOUSE GAS, GREENHOUSE GAS EMISSIONS, HIDDEN INFORMATION, HOLDING, INCENTIVE COMPATIBILITY CONSTRAINT, INCENTIVE COMPATIBILITY CONSTRAINTS, INCOMPLETE CONTRACTS, INDIVIDUAL RATIONALITY CONSTRAINT, INDIVIDUAL RATIONALITY CONSTRAINTS, INTERNATIONAL BANK, LABOR MARKETS, LAND HOLDER, LAND HOLDERS, LAND RIGHTS, LAND USE, LAND USES, LEGALLY BINDING OBLIGATION, LOCAL GOVERNMENTS, LONG-TERM AGREEMENT, MARKET OPPORTUNITY, MATERIAL, MONETARY PAYOFF, MONETARY PAYOFFS, OPEN ACCESS, OPPORTUNITY COST, OPTIMAL CONTRACT, OPTIMAL CONTRACTS, PARTICIPATION CONSTRAINT, PARTNERSHIP, PERFORMANCE INCENTIVES, PERFORMANCE MEASURES, POLITICAL ECONOMY, PROOF OF PROPOSITION, RELATIONAL CONTRACT, RELATIONAL CONTRACTS, REMEDIES, REMUNERATION, RENEGOTIATION, RESULT, RESULTS, RETURN, RETURNS, RISK-NEUTRAL, SAFETY NETS, SELLER, SELLERS, TECHNICAL ISSUES, THIRD PARTY, TRADING, TRUST FUND, UNDER CONTRACT, USES, VALUATION, WEB, other-regarding preferences,
Online Access:	http://documents.worldbank.org/curated/en/2013/06/17940860/cooperation-reciprocity-carbon-sequestration-contracts http://hdl.handle.net/10986/15880
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