A “Stock Flow with Targets” Mechanism for Distributing Incentive Payments to Reduce Emissions from Deforestation

This policy brief refines the stock‐flow approach submitted jointly by the Woods Hole Research Center (WHRC) and by the Amazon Institute for Environmental Research (IPAM) to the UNFCCC in August 2008 on how to distribute across countries the potential incentive payments to reduce emissions from deforestation and forest degradation (REDD). We provide an overview of the stock‐flow approach, extend it using targets, and then present simulation results on how it performs in terms of environmental
effectiveness, economic efficiency, and equity of REDD payments relative to opportunity costs of participation. The evolution of the stock‐flow approach presented here was inspired and made possible by the development of the Open Source Impacts of REDD Incentives Spreadsheet (OSIRIS; Busch et al., 2009) as a powerful tool to improve our understanding of REDD mechanism design.1 REDD