Efficiency (cost-effectiveness)

Efficiency refers to the relative costs of options to achieve the outcome.

Given project resource and budget constraints, achieving efficiency requires that the selected activities to support progress towards achieving REDD+ goals are implemented in a timely and cost-effective manner. Actions should reduce transaction costs and operational costs at both policy and project levels, such as by targeting benefits to the objective of the benefit sharing mechanism or by using spatial geographic systems to site REDD+ projects in geographic areas with the highest potential for positive impacts.

In Tanzania, REDD+ projects are not necessarily located in high suitability areas, which affects the efficiency or cost-effectiveness of meeting REDD+ project objectives. A study using GIS identified potential areas for REDD+ project development incorporating “efficient targeting” criteria by focusing on areas with high forest carbon content, high deforestation risk and low opportunity cost, to areas with high biodiversity and high poverty rates. With REDD+ projects, the main environmental service to consider is the forest carbon stock, or the carbon emissions avoided by not deforesting. The higher the forest carbon density, the higher priority the area is for REDD+, so the objective is to minimize the opportunity costs per unit of avoided forest carbon emissions, where avoided carbon emissions are a function of carbon density and deforestation threat. Identifying areas at high risk of deforestation where the most forest carbon can be protected at the lowest cost, the researchers found that the locations of projects do not match well with the most suitable landscapes for efficient targeting.

One reason many of the existing projects are located outside of the most suitable areas may be that they focus on forest degradation or enhancement of forest carbon stocks rather than deforestation. This could also be because the project proponents have better information on deforestation threats and the possibility of mitigating those threats in specific sites.

Identifying and mapping optimal landscapes for siting REDD+ projects using GIS tools could help policymakers, funders and project proponents to target these projects considering multiple criteria that reflect the multifaceted expectations of REDD+. Encouraging REDD+ projects in areas of high suitability identified using this method could increase the chances that those projects can cost-effectively reduce forest carbon emissions (Lin et al. 2014[1]).

Across Indonesia, avoiding additional deforestation on peat soils and minimizing forest degradation caused during log harvesting are highly cost-effective opportunities for reducing emissions. A study found that to achieve a low emissions reduction target of 25%, funding should target deforestation in protected areas and oil palm and timber concessions to maximize emissions reductions at the lowest cumulative cost. But to achieve a high emissions reduction target of 75%, the researchers allocated funding across all strategies, finding no single strategy could reduce emissions cost-effectively across all of Indonesia.

The researchers used spatial analyses to assess the variation in costs and carbon benefits of various REDD+ strategies in Indonesia, and identified the factors that drive cost-effectiveness of REDD+ strategies for reducing one metric ton of carbon and for achieving emissions targets using maps of carbon stocks, forest cover, peatlands and crop suitability on oil palm, timber and logging permits, protected areas and on degraded land.

By using a spatially-targeted approach to identify high priority locations for reducing emissions from deforestation and forest degradation, REDD+ resources can be allocated cost-effectively across Indonesia by identifying the cheapest locations for reducing carbon emissions for each REDD+ strategy and targeting these as priority areas for investment. This type of spatial analysis could inform multidisciplinary land-use planning in Indonesia and guide the implementation of national and regional plans towards priority areas for combatting forest carbon loss efficiently through REDD+ (Graham et al. 2017[2]).

Production and opportunity costs

REDD+ projects are usually established in areas of high economic or productive value. To win over stakeholders and achieve project buy-in, project proponents should enhance the acceptability of REDD+ by considering the benefits and costs to participants.

Two REDD+ projects that were located in the Lindi region in Tanzania, called the TFCG/Mjumita “Making REDD work for communities and forest conservation in Tanzania” and the Angai Village Land Forest Reserve (AVLFR) REDD+ project, highlight the difficulty of overcoming opportunity costs and creating successful and sustainable alternative income-generating activities.

The project provided participants with carbon payments, which, despite their high level of popularity among the villagers, were provided at a level too low to significantly impact poverty or vulnerability. Additionally, the opportunity costs for protecting the forests are high for the community members (ranging from USD 10 to USD 20 per metric ton of carbon), and the researchers warn that it could just be a matter of time until villagers go back to converting the forests to agriculture. The pressure on forest protection is exacerbated by the growing demand for agricultural land and increased prices of cash crops, such as sesame and cashew nuts.

Besides carbon payments, project proponents had promised alternative livelihoods as compensation for forest protection, yet the projects struggled to generate alternative livelihood strategies. Efforts to introduce beekeeping, conservation agriculture, butterfly farming, vegetable farming and development of woodlots generally struggled to deliver the expected results. In the TFCG/Mjumita REDD+ project, a number of concerns were expressed by the visited communities on the relevance and quality of support provided for income generation activities, such as technical support and advisory services on beekeeping and poultry farming, which had very limited success. Poultry keeping was discontinued by the project due to its poor performance and limited links to the broader deforestation objectives. Finally, In both villages, REDD+ projects have failed to sell carbon credits via market exchanges.

Given the high opportunity costs of forest protection, the failure to generate long-term security over performance-based payments, and the projects failing to create alternative income, there is a high likelihood that villagers will revert to previous land use practices.

Transaction costs

There can be different kinds of costs associated with implementing REDD+ in a country, whether it be due to bureaucracy (overlapping ministry mandates, contradicting regulations) or differences in priorities of REDD+ objectives.

There are high transaction costs involved in implementing REDD+ in Indonesia due to overlapping ministerial mandates and contradictory and overlapping regulations. Despite there being many regulations shaping how REDD+ should be implemented, regulations issued by one ministry tend to only bind that ministry and are usually ignored by others. As many ministries are involved, coordination tends to be cumbersome and results in high transaction costs. At the national level, the Ministry of Environment and Forestry and the National Development Planning Agency (Bappenas) compete for control over climate change issues. The Ministry of Environment and Forestry has established a Directorate General for Climate Change Control, but Bappenas is promoting green development and is in charge of the Nationally Determined Contribution for climate change emissions. This competition is not conducive to effective and efficient implementation of any climate change mitigation or adaptation programme. It also deflects attention away from effectively addressing the drivers of deforestation and forest degradation. Implementation of market processes also remains a struggle, with authority contested between government agencies and private interests (Boer 2018[3]).

A study comparing transaction costs for REDD+ pilots in RDS Rio Negro in the state of Amazonas in Brazil, and Kilosa in Tanzania, found that different governance structures can result in different transaction costs. Higher unit costs – costs per ton of reduced CO₂ – of establishing the REDD+ governance structures were higher in Kilosa (USD 1.7 to USD 1.9 per ton versus USD 0.5 to USD 0.6 in RDS Rio Negro), while unit costs of using those structures were higher in RDS Rio Negro (between USD 0.9 and USD 6.4 versus USD 0.3 and USD 2.0 per ton of expected CO₂ sequestered in Kilosa).

The cost variations in the two pilots stem from the differences in the types of transactions pursued. For example, distributive equity was a key policy goal for the REDD+ project in Brazil. The state government of Amazonas aimed to reverse social underdevelopment among communities in the Amazon, so the programme in RDS Rio Negro was founded mainly as a social development and conservation programme without the goal of trading carbon.

The development focus of the programme, which required a broad human resource base in education, health, forest management and child development, impacted transaction costs. The communities also had to be trained in a broad array of social investments. The result was an increase in the unit costs of using the governance structures in RDS Rio Negro.

In contrast, Kilosa had a narrower focus on carbon, and as such, REDD+ implementation needed a narrower staff base with specific knowledge on carbon measurement, cooperative management and building alternative incomes. These differences lowered the unit using costs in Kilosa. As REDD+ in Kilosa was primarily directed at organizing an economic transaction and positioning the pilot as a participant in the global carbon market, effecting the carbon trade demanded political and civil society processes defining who owns the carbon, how performance is to be monitored and verified and how payments should be made. This required the defining of property rights, the preparation of baselines, and the building of the carbon cooperative, leading to higher unit costs.


[1] Lin, L., Sills, E., Cheshire, H., 2014. Targeting areas for Reducing Emissions from Deforestation and forest Degradation (REDD+) projects in Tanzania. Global Environmental Change 24, 277–286.

[2] Graham, V., Laurance, S.G., Grech, A. and Venter, O. 2017. Spatially explicit estimates of forest carbon emissions, mitigation costs and REDD+ opportunities in Indonesia. Environmental Research Letters 12.

[3] Boer, H.J., 2018. The role of government in operationalising markets for REDD+ in Indonesia. For. Policy Econ., 86, 4-12.