aerial view of a road with a forest on one side and clear cutting on the other

Understanding variable responses to economic incentives for land-based climate solutions

About

As the world seeks to confront climate change, conserve biodiversity and end hunger, policymakers will need to influence the way individuals use and manage the earth’s land. A common policy proposal is to create financial incentives that encourage private landowners to address climate impacts in their land-use decision making, for example, by paying landowners to plant trees on their property. Such incentives could encourage a variety of land-based climate solutions (LBCS), including reduced deforestation, increased afforestation, or enhanced soil carbon sequestration through changes in agricultural practices. However, economic, institutional, political and cultural systems vary among different countries, which would likely affect the land use outcomes that result from LBCS incentive programs. Different types of outcomes will lead to a range of implications for local biodiversity, agricultural production, and food prices. 

Unfortunately, little evidence exists on the scale of this variation, and on LBCS programs’ ability to mitigate climate change. As a result, the aggregate scale and distribution of economically feasible LBCS programs remain uncertain. To fill this gap, we are conducting an econometric analysis that explores how responsive land use decisions are to market prices, with the aim to inform a framework of global deployment of LBCS incentive programs.

Approach

This project consists of four workstreams:

  1. Estimating global and regional price elasticities for land use change: We will use advanced econometric methods and the latest data to estimate how deforestation responds to price fluctuations on both global and regional scales.
  2. Explore variability in elasticities: Using the results from our global price elasticity analysis, we will describe varying land use responses to prices in different areas across the world. Further, we will explore associations between variable responses and possible economic, cultural, and political determinants that might facilitate or impede landowners’ climate mitigation.
  3. Developing high-resolution, national-level models of land use change: We will develop high-resolution land use models at the national scale for one or two countries with active deforestation, forest regrowth, ongoing programs that encourage adoption of carbon-smart agricultural practices, and for which high-quality data exists.
  4. Quantify the impact of inelastic responses to incentives on the adoption of climate-friendly land use practices: Building off of our estimates of land use elasticities, we will model two scenarios of future land use in the presence of economic incentives for carbon sequestration in soil and vegetation. By contrasting the future scenario estimates, we will quantify the role that inelasticity to financial incentives plays in inhibiting the potential benefits from LBCS programs.

Partners

This project is a collaboration with Princeton University’s Carbon Mitigation Institute and partners at the Environmental Defense Fund.