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The Using Incentives to Control Deforestation in the Andes- Amazon: insights from Field Study of Opportunity Costs

This paper uses a property-level dataset of socio-economic and physical information from more than 500 properties in three Andean countries to estimate supply curves of land for conservation via incentive programs. We also evaluate the expected impact of a basic incentive payments program and several proposed improvements in design. We find that the distribution and magnitude of opportunity costs present two challenges. First, a large percentage of the landscape will remain forested in the medium term independent of any incentive. Second, landowners likely place a value on land they plan to clear that significantly exceeds the payment offered by existing incentive programs. We find significant potential to reduce the cost of avoiding deforestation through 1) focusing operations on regions with higher deforestation rates, 2) targeting regions and actors who clear for less profitable activities, and 3) excluding from contracts those areas that are less likely to be cleared. 