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Abstract
Reducing Emissions through Deforestation and Degradation (REDD)
is one of the few interventions to mitigate global warming being pur-
sued at a global scale. Its implementation requires knowledge of the
willingness to accept land use change contracts and its effectiveness re-
quires its application over large areas. In this paper we use data from
Sumatra, Indonesia, to contrast two approaches to the elicitation of
the supply curve for carbon sequestration: a reverse uniform auction
and a budgetary analysis of opportunity costs. The analysis of the
supply curves highlights that individual preferences, namely time and
risk preferences, but not the opportunity costs, play a significant role
in determining the price villagers are willing to accept land use con-
tracts that promote high carbon sequestration systems. The results
also indicate that there are significant gains from trade to be made
through the implementation of this program, as the price requested by
land users in the setting we study is much lower than current carbon
prices. Finally, we analyse possible targeting techniques, concluding
that a combination of geographic and self selection targeting would be
the most efficient way to implement this policy.