Torben Mideksa receives Erik Kempe Award 2019

2019-08-13

The European Association of Environmental and Resource Economists (EAERE) awards the Erik Kempe Prize every two years to the best article in environmental and resource economics. The jury believes that Torben Mideksa and Bård Harstads (University of Oslo) article is fundamental to how the world can reduce deforestation and to understanding that there is no «one size fits all» solution in the work against deforestation; the strategies have to be adapted to different conditions.

Torben Mideksa

The winning article "Conservation Contracts and Political Regimes" published in the Review of Economic Studies shows that it is better for a donor to cooperate with a central government when states are strong and deforestation is economically justified, but with local jurisdictions if the main problem is illegal deforestation. According to the Erik Kempe jury, the existing REDD+ (Reducing emissions from deforestation and forest degradation) agreements can be improved significantly thanks to this research.

-The article shows how we get completely different conclusions and recommendations depending on whether deforestation is driven by illegal logging rather than the district's quest for profit. For example, if the districts want the most revenue, they will chop more than the state would, as they do not take into account that more harvests result in lower prices also for neighboring districts. With illegal logging it is the opposite: Then the districts will protect more than central authorities would, since a district does not take into account that increased protection of them leads to more pressure and illegal logging of the neighbors. This may explain that decentralization led to more deforestation in Indonesia and less in the Himalayas and is important knowledge in the work to protect forests, says Torben Mideksa.

Jury Motivation: 
Tropical deforestation is a major contributor to greenhouse gas emissions – in addition to being a tragic environmental problem in itself. Bilateral conservation (REDD+) agreements are yet to prove that they work; negotiators of the Paris Agreement have not yet concluded on how to credit conservation; and policy makers still have a limited understanding of deforestation as well as how the problem can be solved. For example, the fact that decentralization has reduced conservation in deforestation in Indonesia, while it had an opposite, positive effect in in the Himalayas, has been a puzzle. 

How do the diverse causes of deforestation interact with the local political institutions? How should the REDD+ agreements account for these interactions to succeed in enhancing conservation? We must answer both questions to succeed with the REDD+ conservation effort.

The awardees address the questions head-on. Bård Harstad (University of Oslo) and Torben Mideksa (Uppsala University) have provided a unified framework that recognizes districts’ financial motive to permit deforestation as well as the costs of monitoring and protecting conserved areas. If the financial motive is strong and the protection cost small, as is reasonable for strong political regimes, then centralization reduce deforestation: The reason is that the central government will limit logging in order to obtain higher prices on the timber or the agricultural products. If instead the protection cost is large, as is reasonable for weaker states, then the main problem is illegal logging. Since stricter enforcement in one region raises illegal logging next door, monitoring is higher and deforestation is lower if the districts rather than central governments protect the forest. 

These mechanisms can explain the puzzle that while decentralization increased deforestation in Indonesia, where the state is strong, it reduced deforestation in the Himalayas, where both the rugged landscape and weak institutions contribute to higher enforcement costs. 
This insight is essential for how the world can reduce deforestation. For example, a donor is better off cooperating with a central government when states are strong and deforestation is financially motivated, but with local jurisdictions if the main problem is, instead, illegal deforestation. In short, the existing one-size-fits-all REDD+ agreements can be significantly improved upon, according to this research.

Building on this insight, recent research by the authors has also shown that REDD+ agreements can motivate institutional change in the recipient countries. The reason is that decentralized management necessitates larger transfers when the states are strong (and deforestation is managed) but lower transfers under illegal logging. The larger transfers it elicits motivate this institutional change, but a side effect is that also deforestation increases. In fact, such institutional change can reduce (and possibly reverse) the positive, direct effect of REDD+.