International debate on the design of an international policy for Reducing Emissions from Deforestation and forest Degradation (REDD+) has been going on since 2003. A three-phased approach was adopted at the 15th Conferences of the Parties (COP) to the United Nations Framework Convention on Climate Change (UNFCCC) in Copenhagen in 2009. Under such an approach, countries would first receive assistance to build up their capacities, then to experiment with strategies to reduce deforestation and degradation before moving on to a fully fledged system under which they could expect financial rewards tied to performance compared to agreed baselines or reference levels [1,2,3]. With financial support from the UN-REDD programme (UN-REDD+), the Forest Carbon Partnership Facility (FCPF) and various bilateral donors, a number of countries are well into phase 1 or starting phase 2, and the formal adoption of a REDD+ framework by the Parties at COP19 in Warsaw is a major step forwards in turning the idea into reality. A major role for communities has been foreseen, not only in managing forests, but also in monitoring tasks related to this [4], and there have been many projects promoting methods that could be used for community based monitoring (CBM) for REDD+ [5,6]. However, with all these positive advances, some of the challenges of implementing this complex policy at national and local level are also becoming more evident [7]. As countries move from the basic capacity development phase into Phase 2 of REDD+ and start to envisage how performance-based activities could be built into national programmes, several important questions arise relating to CBM, benefit sharing and how the related data will tie into national REDD+ data systems.

We start from the position that CBM is likely to be promoted in national REDD+ programmes, even though it is not yet clear what form it will take and what data it will provide. While CBM protocols could focus on carbon stock changes in community forests, they could also be designed to gather data on activities undertaken rather than on results. Either way, the use of CBM may be very important in increasing both the accuracy and the transparency of monitoring processes, but the choice of data to be included would have direct bearing on the suitability of such monitoring with respect to benefit sharing.

In this paper, we present and discuss a range of feasible options for benefit distribution systems that governments could select from. We use the term “benefit” here to refer to the direct rewards that participants within a national REDD+ system would receive in Phase 3 as an inducement, and we assume that the main source of these benefits is the finance raised as a result of international trading of the carbon credits, whether this is through a fund or a market; these inducements might be transferred to the stakeholders in the form of cash or in kind. We do not consider funds relating to preparatory phases, e.g., for capacity building, to be “benefits” in this sense, and in this paper we are not considering co-benefits (such improved micro-climates, water supply etc.) that may also accrue to participating communities.

An important question is how the financial benefits of future carbon credits and/or other REDD+ payments will be distributed within national programmes or initiatives started at the level of sub-national jurisdictions, since although UNFCCCC REDD+ was conceived as a scheme to operate at the national level, it has been agreed that in some cases, particularly where national governments do not have full authority over some jurisdictions, sub-national programmes will be accepted (e.g., province or state level REDD+ programmes). For simplicity, we talk in terms of national programmes for the purposes of this article [8]. These benefits may be the main incentives for the participation of individual stakeholders in REDD+ activities within national programmes; before opting in, potential participants will want clarity on what rewards they could expect, and under what conditions they will be eligible to receive them. Not only will they need information relating to their own opportunities under REDD+, it is clear that at societal level there will be need for transparency and a legitimate rationale to justify how the financial benefits from REDD+ are to be distributed between the different participants. These might for example be individuals or communities whose territory includes forest areas and who might contribute to REDD+ by improving their forest management approach or by making changes in other ways (e.g., management of cattle) to reduce pressure on the forest. However, given that community monitoring of such REDD+ activities will in many cases accompany these activities, the question arises of whether, and how, this will be used in assessing the relative contribution of different participants, and therefore whether it could and should be used as a basis for the distribution of benefits. A further question concerns how such community monitored data might be integrated with the data systems at national level which will be used by countries in reporting to UNFCCC on their national achievements relative to reference levels.

The assumption is often implicitly made that within national programmes the financial benefits that accrue from international sources should simply be shared between participating stakeholders according to the performance of each participant, calculated in terms of the tons of carbon each participant saves, a model which we refer to as an “output-based benefit distribution system”. However, although a carbon-performance metric based on output (amount of carbon saved through REDD+ activities) may be appropriate for distribution of benefits at the international level [9], there are a number of reasons why it is less suitable for the distribution of benefits within countries or jurisdictions. There are alternative metrics for distribution of REDD+ benefits that could be considered, using subsidies which are tied to performance in terms of inputs and effort, rather than in terms of (carbon) outputs. We refer to models of this type as “input-based benefit distribution systems”. The distinction between input-based and output-based models is well known in literature on Payment for Environmental Services (PES) [10,11,12], where the terms “action based” and “results-based” are sometimes used [13]. Input-based systems are much more common in PES systems, that is, payments are made on a per hectare basis for changes in management which are assumed to bring about improvements in the flow of environmental services, rather than for the delivery of the services themselves, partly because capacity to observe and measure the environmental services themselves is limited [11].

The choice between these different types of benefit distribution model needs to be based on careful comparison of their implications with regard to three critical characteristics: (a) technical feasibility, particularly as regards baselines; (b) political acceptability, particularly as regards equity and who could be included as a participant; and (c) data requirements, particularly with regard to data that could be gathered by CBM. We start by describing the two models for benefit distribution, including some variations on the input-based approach, in Section 2, before going on to compare them in terms of these three critical issues in Section 3. In Section 4, we consider whether and how systems of data collection to support benefit distribution at the local level might be linked to national systems for REDD+ monitoring and Measuring, Reporting and Verification (MRV). Conclusions are summarized in Section 5.

International REDD+ as proposed under the UNFCCC is in the long run predicated on an output-based benefit distribution system in the sense that by Phase 3, countries are to be rewarded on the basis of reduced emissions or increased removals of carbon dioxide from the atmosphere, as assessed using a baseline or reference level. Countries will only be rewarded for carbon savings which are additional in terms of this baseline, and they will be rewarded proportionally to the quantities involved. As noted above, many observers have assumed that within countries, the same principle should hold: benefits should flow to those who participate in reducing the emissions, on the basis of their individual achievements in reducing emissions through reduced rates of deforestation and/or degradation or though increasing removals of carbon from the atmosphere through forest enhancement [14,15,16]. This follows the idea of market based incentives [3,9] or a “payment by output” approach that has come into vogue in various domains of public policy and public management, including the environment [17], and this principle will be followed regardless of whether international finance for REDD+ comes from a true carbon market based on off-sets, or from a fund. It reflects a model of economic incentives in which the underlying assumption is that people will try harder if they are rewarded proportionally to their achievements; in terms of UNFCCC policy the underlying rationale is that it will lead to the most cost-efficient mitigation of emissions. Interestingly, many (though not all) REDD+ type projects which pre-date UNFCCC and national approaches to REDD+ and which sell their carbon credits on the Voluntary Carbon Market (VCM) are also rewarded in this way; their funds are, as might be expected, directly related to their carbon performance. However, in those where credits are issued for reductions in deforestation (rather than for tree planting and other forest enhancement activities, which have different characteristics in terms of accounting [18]) the internal distribution of benefits among the project participants (say, between the members of participating communities at the local level) is not generally carried out according to individual performance [19,20]. There are important reasons for this. Firstly, a system in which payment is tied to individual achievement would require a baseline for each and every participant, against which performance could be assessed. Secondly, it may in practice be difficult to identify and define who should receive the benefits (i.e., which participants have not deforested, but would have done in the absence of the REDD+ project). Thirdly, a system based on individual achievement may offend basic principles of equity [18]. As we will demonstrate and explain in this paper, exactly the same kinds of challenges arise in the distribution of benefits among participants within national level REDD+ programmes (say, between different participating rural communities).

The alternative to the output-based benefit distribution model is one that distributes rewards on the basis of effort or input in the implementation of REDD+ activities. As noted above, in most Payment for Environmental Services (PES) systems, landowners are offered a flat rate payment per hectare if they agree not to deforest, or to carry out a set of prescribed activities for sustainable use which are assumed to conserve forest and retain or increase carbon stocks or biodiversity (see for example [21] for the case of Mexico; [22] for the case of Costa Rica; and [23] for the case of Ecuador). Though called a “payment for environmental services”, in these programmes the payment is in fact a subsidy, and it is paid on the assumption that the actions undertaken will have positive effects on the quantity and quality of the services. The improvement in the supply of environmental services is not directly measured, although payments are usually made after checking that the activities have indeed been carried out, to ensure conditionality. However, additionality is not usually assessed; it is clear that in many cases payments do not result in additional effects, since many of the participants would not have deforested anyway [21,23] (for an extended discussion of the efficiency of payments in this respect under PES, see [24,25]). In input-based systems, potential participants are free to decide if it is worth their while to participate, based on the size of the incentive offered. Payments may be higher in areas with particularly important ecological characteristics (“graded flat rates”), and may be restricted to areas which are genuinely under threat of deforestation. This input-based system of distribution of benefits relies on calculation of overall carbon achievements of a large area (state or national level), the financial value of which form the basis of the fund to be distributed. It is therefore fundamentally different from the output-based one which pays each participant on the basis of the direct measurement ex-post of carbon achievements.

A sophisticated variation on the input-based model is payment by opportunity cost, in which the level of the reward or benefit is set based on an estimate of what the landowner/community would have to sacrifice financially by conserving the forest or managing it in a sustainable way rather than deforesting or degrading it for personal economic gain (note that here we are considering opportunity costs only in the sense of how these might vary within any one country. It is of course true that the opportunity costs of REDD+ vary between countries, an issue that leads to inequalities in the extent to which different countries could potentially participate, but this is beyond the scope of this paper.). This is based on the idea that implementation costs are not uniform, and that scaling of payments to reflect this will enable more people to participate. There are two ways to estimate opportunity costs: (1) payment levels could be set centrally for each type of likely land use change in given regions; the per hectare rates of payment in areas threatened by avocado or palm oil plantations, for example, would be much higher than rates of payment in areas threatened by less profitable commodities such as maize; (2) payment levels are fixed through an auction system, in which potential participants bid, proposing the level of payment they consider would match their costs; a central organization would then select which bids to accept, i.e., choosing the most cost effective bids on offer. The knowledge that selection will be made in this way should encourage potential participants to put in their lowest possible bids. Opportunity costs models, particularly the second type, are considered by some economists to offer the most efficient form of incentives as in theory at least they should result in carbon savings at lowest costs. Many observers of PES however dispute this, noting that opportunity costs do not reflect the full costs of the environmental service delivered since they do not include transaction costs [26,27]. Transaction costs (for example, the cost of acquiring the necessary data), may vary considerably between the different models, as we show below. It has also been noted that opportunity costs vary greatly over space and are usually highest for large landowners in areas of greatest deforestation threat [24,28,29], which raises the question of social equity in targeting. Borrego and Skutsch [30] have shown that the opportunity costs of shifting cultivation vary by a factor of 5 within one community, as richer individuals with larger parcels invest more and get much higher returns. A policy of paying the poorer members of the community at a lower rate than the richer members is not likely to be popular. Moreover, experience indicates that the suppliers of the environmental service prefer fixed payments [31].

In order to make sound choices in the design of a benefit distribution system, the characteristics of the different possible systems needs to be considered. Here, we consider three important sets of characteristics. We first look at the different technical challenges associated with baselines for output- and input-based systems, secondly at their respective political and equity implications, and finally at their data requirements, including the cost of gathering the data that would be needed to implement them.

Many national governments are already setting up national forest monitoring systems, which will be used among other things to support national measuring, reporting and verification (MRV) of their REDD+ activities as required by UNFCCC and international carbon funds. These MRV requirements are fixed by UNFCCC and need to be fulfilled by the national monitoring system, which has to capture the carbon impacts of the sum of all the REDD+, and other activities over the whole national forest area. These national forest monitoring systems will need to include information on drivers of deforestation and on the effectiveness of different programmes and policies in dealing with these drivers and in reducing emissions. They will be essential in providing feedback to the country on what works and what does not work under REDD+, to justify and prioritize REDD+ activities addressing key drivers [69,70]. In addition to these international requirements, the national monitoring system should cater for the needs of the national REDD+ programme implementation, including benefit distribution. A link could be established between data needed to support the benefit distribution system, focusing on activities and change in management practice, and data that is already being systematized in the national monitoring system. The fact that many REDD+ activities may address actions and actors that are outside forests implies that monitoring should include other areas in addition to forests [70]. The national system would need to be able to track and monitor REDD+ activities by the multiple actors involved both inside and outside the forest and could provide the basis and verification for the input-based benefit distribution mechanism. In this way, national forest monitoring systems would evolve to underpin and stimulate strategies and priorities for REDD+ implementation, to track REDD+ activities and their impacts (both carbon and non-carbon), and to support the generation and sharing of benefits for the multiple REDD+ actors involved, as well as providing data for reporting on REDD+ performance in terms of greenhouse gas emissions to the international community. They could be used to link the success and failure of different types of incentives and rewards to the activities undertaken in different parts of the country and, at a broad scale (though not at the level of the individual parcel) to achievements in reducing emissions at the national level.

Moreover, if a dual benefit distribution (i.e., payments based on both outputs and inputs) were to be introduced, with output-based payments for increases in stock, there would be locally generated data on changing stock levels in the forests, as a result of community biomass stock monitoring. This would of course only exist for those parts of the forest where these activities take place, i.e., it would be patchy, but it would represent an important source of data, additional to national forest inventories, providing information on stock levels which could validate and densify data in the national system.

In this paper, we have argued that a transparent, legitimate and easy to understand benefit distribution system will be essential to the success of REDD+ as countries move into Phase 2 and start to implement activities at the local level, initially on a pilot scale but with a view to fully-fledged performance-based REDD+ in the near future. We argue that there are advantages and disadvantages to both output- and input-based benefit distribution systems. Benefit distribution systems based on output metrics (calculations relating to reductions of emissions of carbon associated with reductions in deforestation and degradation) are difficult, if not impossible, to implement at the level of individual forest parcels, such as forests owned and managed by communities or small landowners, since it is not possible to identify who, out of the many land owners who have not deforested in any given time period, would have deforested in the absence of REDD+, and thus deserve the rewards (a technical problem). In reality, and to ensure public and political acceptability of the programme, all forest owners who carry out sustainable forest management practices may need to be rewarded, at least in areas where there is a clear risk of deforestation, whether or not they would have engaged in unsustainable practices in the absence of REDD+. It is very doubtful that output-based benefit distribution systems would be considered equitable by the general public, because this would not reward those who have always conserved their forests. Moreover, output-based payments are based on measurements which involve considerable uncertainty at the local level, and which involve heavy transaction costs and risk of the REDD+ mechanism becoming too complex to be effectively implemented [7].

Input-based benefit distribution systems, in which stakeholders receive benefits according to their participation in the REDD+ activities such as conservation or sustainable management of forests or sustainable agricultural practices, are in many ways preferable to output-based systems. We argue that they are technically more feasible, more politically acceptable and easier to administer, with associated lower costs, partly because of lower requirements for detailed carbon monitoring. One option is to distribute benefits according to opportunity costs, either through a centrally fixed payment level for each type of likely land use change (which corresponds with different opportunity costs) or through a system of bidding by interested actors. However, though in theory more economically efficient, opportunity cost models will involve considerable transaction costs because appropriate payments levels would have to be calculated for each participant, and this would raise procedural equity issues and increase the potential for corrupt practice. Another option, which is more transparent and simple in administrative terms, is that a central agency pays flat rates per hectare in return for good forest management or agricultural practice, either using a universal rate or different rates to account for varying land use activities, which is in fact the payment method used in most PES schemes including some agri-environmental subsidies within the European Union. This, however, would mean that many participants would be paid for activities which are not additional in carbon accounting terms, meaning that this system will not be very cost-effective.

As we have shown in this article, both input-based and output-based models have advantages and disadvantages in terms of efficiency, legitimacy and political feasibility. We suggest that the best solution might be a hybrid system in which stock increases (forest enhancements) are rewarded on an output basis at the level of the individual forest parcel, while the financial returns from reductions in emissions from deforestation and degradation (assessed at regional level) would be used to fund input-based incentives. This would imply that only increases in stock should be rewarded on the basis of local measurements of stock change over the REDD+ period (as ascertained by CBM), while avoided deforestation and degradation would be monitored at a regional scale. The fund derived from sale of the resulting carbon credits could be used to encourage activities both within and outside the forest, reaching a broader range of actors; it would therefore not be restricted to forest owners. This mixed system would result in a higher level of economic efficiency than a purely input-based system because at least the rewards for stock increments would only be paid to those who actually produce such increments.

Whatever benefit distribution system is chosen, it is important to recognize that if countries wish to promote CBM as part of the monitoring for REDD+ as recommended by UNFCCC, they should think carefully about what the function of these data will be with regard to the way that benefits are to be distributed, and to provide protocols for the CBM that meet these requirements.

Finally, we suggest that data associated with input-based benefit distribution systems at the local level could usefully supplement national monitoring systems, as in addition to carbon data, these will require information on the success of different public policies or programmes in reducing emissions. In this sense, the requirements for national forest monitoring systems are evolving to more than simply accounting for carbon. Data systems are needed to underpin and stimulate strategies and priorities for REDD+ implementation, by tracking REDD+ activities and their impacts (both carbon and non-carbon), and supporting the generation and sharing of benefits for the multiple REDD+ actors involved, in addition to their obligatory role in the reporting of REDD+ performance in terms of green house gas emissions to the international community. A dual system of benefit sharing as proposed in this paper would certainly require CBM at the local level, which could feed important information both on carbon and on the range of interventions undertaken at that level into an improved national data system.