REDD and Clean Technologies Innovations, is there a Trade-off

Valentina Bosetti - Fondazione Eni Enrico Mattei (FEEM) and Centro Euro-Mediterraneo per I Cambiamenti Climatici (CMCC)

This article is based on Bosetti, V., R. Lubowski, A. Golub, A. Markandya, (2011) Linking reduced deforestation and a global carbon market: implications for clean energy technology and policy flexibility, Environment and Development Economics. DOI: 10.1017/S1355770X10000549

A key policy question when discussing REDD is how to balance low-cost forestry emission reductions, available in the near term, with investments to drive technological innovation in energy, industry, and other sectors over the longer period. In this article we report a research effort showing that the link of REDD to an international carbon market is, as expected, economically efficient. In addition, provided that the climate policy is stringent (we explore here a 535 ppmv CO2e concentration target), the cost savings due to REDD should entail only a modest tradeoff in terms of reduced clean energy innovation. Reduced clean energy innovation could in principle handicap future efforts to reduce global emissions. However, this analysis suggests that the availability of REDD, in particular when combined with the possibility of banking emission allowances, could provide a head start on climate mitigation that is an aggregate hedge against uncertain future costs. Integrating REDD into global carbon markets could thus lower policy costs and facilitate more ambitious climate policies now and in the future