Transaction costs, power, and multi-level forest governance in Indonesia

- High transaction costs limit the participation of poorly resourced groups in multi-level forest governance.
- Transaction cost barriers reinforce the influence of powerful organizations.
- Organizational similarities mitigate transaction costs.
- Effective REDD + governance systems require investment in building capacity for cross-level relationships.

Since 2005, there has been considerable international interest in Reducing Emissions from Deforestation and Forest Degradation (REDD +), a program intended to finance protection of tropical forests through the sale of carbon offsets or from donor funding. Requiring the collaboration of local and international civil society stakeholders, firms, and donor and host governments, REDD + is inherently a multi-level governance project, but to date participation in REDD + and coordination across governmental levels have been weak. Combining literature on multi-level and polycentric governance of socioecological systems with transaction-cost economics, we argue that transaction costs structure cross-level information-sharing and collaboration relationships among organizations engaged in REDD + policy development at the national and provincial levels in Indonesia. Using an exponential random graph modelling approach with data collected from interviews with over 80 organizations between 2010 and 2012, we find that powerful organizations tend to dominate cross-level connections, though this effect is somewhat mediated by organizational similarity, which reduces transaction costs. We suggest that explicit efforts to help local organizations overcome the transaction costs of building cross-level relationships will be a central component of building an effective and equitable multi-level governance system for REDD + in Indonesia.