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Abstract

Over the last decade, efforts to slow deforestation and climate change merged with new ideas on paying for performance in the context of development aid to culminate in a series of agreements between Norway and tropical forest countries. These experiences hold lessons for international cooperation in reducing greenhouse gas emissions from deforestation and for financial relationships between countries addressing this and other global challenges.

In this paper we set out the origins and trajectory of an agreement signed by Indonesia and Norway in 2010 to reduce greenhouse gas emissions from deforestation and forest degradation, assess the extent to which it can be called a success, and draw some lessons from the experience for other pay-forperformance agreements.

In 2009, Indonesia was the first developing country to announce voluntary targets for reducing greenhouse gas emissions, which would require a significant reduction in emissions from deforestation. Deforestation in Indonesia is driven by a range of economic interests entwined with politically powerful groups. The country’s shift toward decentralized democracy and the absence of a strong constituency for addressing climate change have complicated commitments to enact policies aimed at slowing deforestation. Indonesia made a commitment to establish a moratorium on licensing forest exploitation as part of the negotiations with Norway, and also agreed to institutionalize broader policies to deal with emissions from deforestation and degradation by creating a new agency reporting directly to the president.

Though Indonesia’s emissions from deforestation continued to rise through at least 2012 (the most recent year for which data is available), we argue that the pay-for-performance agreement has been a success in at least two respects. First, it led to a series of steps that provided visibility to and strengthened at least moderately the hand of those within and outside government who favor controlling deforestation and protecting indigenous rights. Second, by not releasing payments when Indonesia did not perform at reducing deforestation, the agreement represents a successful case of “non-payment for non-performance”. It leaves on the table the option for the newly elected government (which took office in late 2014) to take full ownership of the agreement and the challenge, and thus capture the available transfers in the next several years. The glass, in short, is half-full. The modest progress achieved under the agreement so far is fragile, but the agreement’s existence sets the stage for the country’s new leaders to institutionalize and build on progress up to now.