Deforestation is transformation of forestland for various land uses. Policies aimed at Reducing Emissions from Deforestation and Forest Degradation (REDD+) can provide a way for tackling global warming and climate change. A spatial model of deforestation is considered for designing effective REDD+ policies in view of internalizing the external costs of deforestation. The causes of deforestation can be classified at different levels. In this study, the causes are considered at two levels: the direct (endogenous) and the indirect (exogenous) causes. An econometric model, recursive in nature, is estimated in two stages for analyzing the interactions between the direct and the indirect causes. At the first stage, the direct causes are regressed on the indirect causes by Seemingly Unrelated Regression (SUR) method to account for the correlations between the direct causes. At the second stage, the SUR estimates of the direct causes are used for the regression of a deforestation equation. The results are discussed in relation to Asian, African and Latin American regions to provide an understanding of the mechanism for deforestation process at two levels. The spatial model presented, along with the regression results, can effectively provide guidance for designing REDD+ policies.

Tropical deforestation is one of the most serious environmental problems in recent times. It has become a global concern due to tropical forests’ importance in biodiversity conservation and limiting greenhouse effects. Estimated figures for deforestation show that there was considerable deforestation in the world during 1990-2010, but this was more or less confined to the tropical regions.

However, deforestation still remains the second leading cause of greenhouse gas emissions, just behind industrial emissions. At global level, tropical deforestation accounts for about 25% of the heat trapping emissions (Houghton, 2005). Tropical rain forests, in particular,constitute about 41% of total tropical forest cover on the earth’s land surface, and it is the richest and the most valuable ecosystem that provides habitation for 50-90% of all species on earth (WCED, 1987). Deforestation also affects economic activity and threatens livelihood and cultural integrity of forest-dependent people at the local level.

Applied Economics Journal, Reducing Emissions from Deforestation and Forest Degradation (REDD+), Causes, Deforestation, Policies, Reduced Emissions (REDD+), Seemingly Unrelated Regression (SUR), Cross-Country Analysis.