Climate Conversations - How to design a REDD+ project

REDD+ (Reducing Emissions from Deforestation and Forest Degradation) aims to reward or compensate tropical developing countries for keeping their forests intact or for reducing the scale of  deforestation.

It’s predicted that financial flows to these countries from REDD+ could reach up to $30 billion a year. So getting the issue of REDD+  benefit distribution right is crucial, not only to ensure that it is benefiting the poorest of the poor (or at least not harming them), but for building REDD+’s legitimacy both at the national and international level, which in turn will help preserve forest ecosystems.

Before REDD+ programmes begin to be implemented in earnest, lessons should be learned from previous payment schemes, so past mistakes aren’t repeated.

How do you like your REDD+?

Cash transfers or in-kind transfers? It is often argued that cash transfers are more effective than in-kind transfers - such as food transfers, goods or vouchers to buy goods. For example, in the Programa de Apoyo in Mexico - which provided cash or in-kind payments to households in return for sending their children to school - cash was judged more cost-effective than in-kind transfers. But what works in one place doesn’t in another. Cash transfers haven’t worked in the Democratic Republic of Congo, for example, because inflationary pressures lowered the purchasing power of the cash provided. As they weren’t benefiting from the scheme, participants simply abandoned it.

Payments to households or communities as a whole?  In addition to the complexity associated with deciding whether to transfer benefits in cash or in kind, another question needs answering: whether payments should be made directly to households or to communities as a whole.

Both questions are often overlooked in both academic and non-academic literature, and during project design and implementation.

Even though there aren’t many (if any) functioning REDD+ projects to be able to assess the pros and cons of each approach, there is substantial accumulated experience from similar interventions, such as payments for ecosystem services, integrated conservation and development programmes, community-based natural resource management, and food or cash transfer programmes. My paper reviewed these schemes and identified ten key points that programme designers need to consider to develop REDD+ benefit distribution schemes that are equitable and benefit the poor.

1. Communities should be consulted on whether they prefer to have benefits transferred to the entire community or directly to households.  Communities should be consulted to assess their preferences on the amount and type of benefits.

2. Consider economic feasibility, local institutional capacity and governance structures before deciding whether to transfer benefits to communities as a whole or directly to households. Direct payments to households require less institutional capacity and no sustained funding for maintenance. But if the payments are channelled through local elites, there is a risk that they will take a percentage of the profits. On the other hand, directly investing in community infrastructure, such as roads, schools or medical clinics, through payments to communities is arguably less vulnerable to elites skimming off funds for themselves. Moreover, if there are too many participants, then direct payment to households might dilute the incentives provided and undermine the effectiveness of the scheme. In that case, investing in community infrastructures that can be enjoyed by all may be the most preferred alternative.

3. Three factors need to be considered to make REDD+ benefit the poor: proportionality, equality and need. In areas where the differences between the richest and poorest within a community are minimal, a proportional benefit distribution, for example, based on the proportional size of their land or agricultural output, would work. But in an unequal society – characterised by land and income disparity – benefits should be distributed based on need and not, for example, on land size or holdings. If it were done following a proportional principle then those with more land assets would benefit more than the poorest, and this could even exacerbate the disparity between the rich and poor further.

4. In such unequal societies, equitable benefit distribution could be achieved by systematically favouring the poor, such as landless and small landholders. This could be achieved by, for example, diminishing payments for each additional unit of land in order to distribute the costs of and benefits from participation more fairly, as suggested by Schwarte and Mohammed and applied in practice in the Programa Socio Bosque in Ecuador. In this way, participation by small landholders (who are often from ethnic minorities) is encouraged while ensuring that large landholders do not benefit disproportionately more from REDD+.

5. Projects should be designed to use the primary asset of the poor - their labour. Landless farmers can benefit from REDD+ schemes by being hired as labour by the REDD+ project payment recipients. In this way, the intervention may also have a positive effect on local job creation - and, unsurprisingly, this would fulfil a local need, as many studies suggest that many villagers are eager to see more jobs created locally. Designing projects that create local jobs will also ensure they meet one of the external criteria of pro-poor REDD+ interventions.

6. Whether to transfer cash or in-kind benefits should be based on a careful assessment of community preferences and the logistical and social consequences of each payment type.

7. An analysis of the availability of and access to local markets should decide whether to provide cash or in-kind payments. It’s often argued that cash payments would ease the budget constraints that the rural poor usually face and allow them to meet their basic needs. However, as is the case in many other similar payment schemes, in-kind payments are more likely to be preferred in areas where poor farmers reside in a remote and inaccessible area and cash is rarely used to buy consumable goods or basic necessities.

8. Consider whether the type of payment will have a negative impact on the local economy. We can learn lessons from previous food/cash transfer programmes, which have sometimes demonstrated that, if provided in excess, in-kind payments may distort the local economy. If the in-kind payments are of locally produced goods, producers may be negatively affected by the reduced commodity prices of consumable goods. On the other hand, if the REDD+ benefit receiver is a consumer, they may benefit from the reduced prices. Such market distortions are very likely to happen in remote and semi-closed economies. To avoid doing harm and to strengthen the legitimacy of REDD+ schemes at the local, national and international level, the impact an intervention may have on the community as a whole - including non-participants - has to be considered.

9. Where cash payments are made, some measures need to be taken to overcome inflationary pressures. As we saw in the DRC project, if the cash transfer made today doesn’t have the same value later in the project’s lifespan, then it is very likely that participants will abandon the project. Details of how to overcome such inflationary problems can be found in my paper.

10. Project design needs to be flexible and include the periodic assessment by participants of their payment preferences. Communities consulted on their preference for different payment types often (if not always) lack experience of receiving payments in exchange for ecosystem services provision. Their preferences should be periodically assessed and there should be flexibility to change the payment type over time as needed. This would allow participants to learn from experience and reconsider their preferred payment types.