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This report is published under the ‘Poverty and sustainable development impacts of REDD architecture: options for equity, growth and the environment’ project funded by the Norwegian Agency for Development Cooperation (Norad).

In many developing countries, factors such as low agricultural yields and reliance on wood for fuel drive poor rural communities to clear forest areas, and to use the remaining forests unsustainably. REDD+, an emerging international mechanism to provide incentives for reducing forest-related emissions, could potentially offer a way of improving the livelihoods of such communities while lowering emissions associated with deforestation and degradation.

A key tool in the development of REDD+ will be the estimation of opportunity costs. Part I of this paper evaluates the economic viability of REDD+ in two forested districts of Vietnam in Lam Dong Province (Bao Lam and Cat Tien), with an emphasis on investigating how opportunity costs can help to identify the land-use options most relevant to poor actors there.

Although opportunity costs may help to identify opportunities for implementing a pro-poor approach to REDD+, many other costs are associated with implementing and operating the intervention. This includes the costs associated with the benefit distribution system (BDS) responsible for the delivery of benefits to those directly or indirectly involved in REDD+ activities. In addition, local actors, including poor constituents, will need to be involved in decisions around the most efficient and effective BDS – which implies further costs of arranging extensive consultations.

Part II of the report therefore examines some of the key costs of implementing pro-poor BDS. The results are explored in terms of their effect on the viability of REDD+ in Cat Tien and Bao Lam and balanced with a set of options for reducing these costs.