In Bolivia, agricultural land generates on average three times as much GDP per hectare as standing forest (1), which is one of the reasons why the Bolivian government largely ignores the quarter million hectares of illegal deforestation that occurs every year.

However, forests provide many valuable functions that are not currently included in GDP (e.g. habitat for thousands of plant and animal species; carbon storage to protect against climate change; water capture, storage and cleansing for a cleaner and more stable water flow; recreational and aesthetic values; etc.). As long as all these benefits are not taken into account, natural forests stand little chance against other land uses.

The REDD mechanism intends to tip the balance slightly in favor of forests by recognizing at least one of the values of forest, namely carbon storage. The idea behind REDD is that rich countries would reward poor countries if they manage to reduce carbon emissions from deforestation and forest degradation (below what it would have been in the absence of this mechanism). Any mechanism that promises to simultaneously reduce rural poverty and environmental degradation (with strict safeguards to secure that nobody is harmed by the mechanism) deserves a serious analysis.

The minimum requirements for REDD to work for a poor country are the following: 1) substantial amounts of forests, 2) substantial deforestation, and 3) relatively low opportunity costs of forested land. Bolivia qualifies on all three accounts, with more than 50 million hectares of forest, more than 300,000 hectares of annual deforestation, and typical land prices of $300-600 per hectare (compared to $3,000 in Brazil and $30,000 in the US). With this evident potential, Bolivia has been invited to receive funds to prepare for REDD by both the UN (UN-REDD) and the World Bank (FCPF), with support from several bilateral donors (especially Germany, Denmark and the Netherlands).

However, even if the mechanism makes sense economically (it could bring in billions of dollars for rural development), it also has to be politically acceptable. Whether it is politically acceptable depends a lot on who would benefit from the mechanism, and who would lose.

The most influential parts of the government has intuitively rejected REDD, probably because they suspect that the mechanism would benefit mostly large landowners in the forested Bolivian lowlands, which belong mostly to the opposition.

While this is a very sensible intuition, it is worth doing a more careful empirical analysis of the potential winners and losers from REDD. In order to do this analysis we have developed a neat tool at Conservation International called OSIRIS-Bolivia (Open Source Impacts of REDD Incentives Spreadsheet for Bolivia). The tool divides Bolivia into roughly 120,000 pixels of 3 by 3 km, and provides information on forest cover, deforestation rates, opportunity costs, and all the relevant geographical and socio-economic conditions for each pixel necessary to estimate the effect of REDD under different circumstances (2). Being a little bit outdated due to data limitations, OSIRIS simulates the effects REDD would have caused if the mechanism had been fully working during the period 2001-2005.

Our very first simulation was run to satisfy my curiosity about where REDD might work in Bolivia, and the results look as presented in Map 1:  

Map 1: Estimated Gross per capita REDD revenues (USD), by municipality  
  
Source: Map elaborated by Juan Carlos Ledezma based on results from OSIRIS-Bolivia.
Notes: Net present value in USD over a 4 year period, assuming a price of $5/tCO₂,
with compensation made at the municipal level, and the reference level set to Business as Usual.