Conference Agenda

This study introduces Tropical Forest Carbon Credit Capitalization (TFCCC), a contractual framework that keeps tropical forests publicly owned while granting private firms carbon credits and conservation responsibilities. By indexing lessees’ payoffs to verified deforestation outcomes, TFCCC reallocates monitoring and enforcement incentives to the private sector, addressing weak enforcement, funding volatility, and ambiguous land tenure. The analysis develops a dynamic equilibrium model calibrated to Brazilian Amazon data and finds that, in the baseline, TFCCC reduces deforestation in vulnerable areas from 15.11\% (no-policy benchmark) to 0.189\% per year, equivalent to 0.0161\% of total area, outperforming a TFFF-type benchmark. Further robustness checks show that, although TFCCC may not be attractive under some parameter settings compared to development, it delivers robust reductions in deforestation if adopted. In Monte Carlo analysis, the mean (median) proportional reduction relative to the no-policy benchmark is 95.44\% (98.91\%), with total deforestation below 0.1\% of the total area in most draws. Overall, TFCCC illustrates how performance-linked carbon leases can transform conservation from a fiscal burden into a scalable, self-financing institution that aligns public objectives with private incentives.