In the Mediterranean region, policy makers and forest managers are seeking for policy instruments to fill the gap between financial and economic profitability in forest management. This paper reviews these policy instruments focusing on the market-based instruments and specifically on payments for environmental service (PES). We focus on the implementation problems of PES schemes looking at barriers and opportunities offered to their development in the Mediterranean region

BROTTO, L.

PETTENELLA, D.

VIDALE, E.

Pettenella, D.

Vidale, E.

Brotto, L.

Hal-Diderot

Policy instruments to preserve or restore woodlands and to improve the supply of forest goods and services

PETTENELLA, DAVIDE MATTEO

VIDALE, ENRICO

BROTTO, LUCIO

Archivio istituzionale della ricerca - Università di Padova

I-Revues

309
Policy instruments to preserve
or restore woodlands
and to improve the supply
of forest goods and services
by Davide PETTENELLA, Enrico VIDALE and Lucio BROTTO
Introduction
The economy of Mediterranean forestland is influenced by an increas-
ing gap between financial and economic profitability in forest manage-
ment, i.e. between the provision of market products and of public non-
market services like carbon sequestration, biodiversity conservation,
water quality enhancement and the promotion of forest tourism and
recreation. In order to support the supply of public or common goods by
the forestry sector a set of instruments have been developed (see Table
1). A broad distinction can be done between regulatory instruments
(command and control or passive tools) not associated to any form of
compensation for the forest owners/managers and active instruments
that can create new sources of income for the sector operators (OECD,
2010). Traditionally Mediterranean decision makers have given priority
to regulatory instruments: they are based on relatively low implementa-
tion costs and they can enhance the role of public institutions in law
enforcement. These instruments however are associated with a top-down
approach and they do not create any incentive to forest owners and man-
agers to actively support the provision of non market services. Over-reg-
ulated forest resources can easily become non profitable; the final out-
come is that they may be abandoned or mis-managed with negative
effects (policy failures) associated to the spreading of forest fires and lack
of regeneration.
Market based instruments
To avoid the negative impacts of regulative instruments, active tools
tend to be promoted. Among them the market-based instruments (MBI)
aim to stimulate the consumer’ and supplier’ behaviours through the cre-
IIIrd Mediterranean Forest Week - Tlemcen
In this paper, the authors review
the various tools to take into
account the value of goods and
services provided by forests. From
regulatory «passive» instruments
to «active» instruments allowing
direct income to forest operators,
advantages, disadvantages and
implications of each are discus-
sed, especially the payments for
environmental services (PES).
forêt méditerranéenne t. XXXIV, n° 4, décembre 2013
ation of financial motivations to properly
manage forest resources. As in the case of reg-
ulative instruments, public authorities may
have either a passive or active role to promote
MBI, according to the type of service, its com-
plexity and dimensional scale. Well defined
services at a small scale are easier to achieve,
while opposite situations may request a more
active involvement of public authorities in
order to reduce some constrains such as
transaction costs for grouping the demand or
supply, measurement protocols and general
information access. In any case governments
have a fundamental responsibility in order to
set up and secure property rights (e.g. in the
case of game, mushrooms, truffles, etc.).
Relatively new in the south Mediterranean
countries, MBI look promising approaches.
Some authors (STAVINS, 2001; PANAYOTOU,
1994) suggest to subgroup MBI in further
three different categories: 1) price-based, 2)
quantity-based, that might be the evolution of
a command and control instruments, and 3)
market friction instruments.
1. Price-based instruments generally stimu-
late the provision of services mainly through
grants, subsidies, soft-loans, concessions, auc-
tions, etc.; they have a direct effect on service
supply.
2. Quantity-based instruments limit the
negative externalities by setting up a maxi-
mum production threshold on a given eco-
nomic activity. Each economic agent may pro-
duce a certain quantity according to the
purchased permits and in any case the total
amount of permits is limited according a gen-
eral agreement among the economic agents.
Among the most common quantity-based
instruments cap-and-trade (i.e. where a maxi-
mum limit is calculated according a reference
time), off-set (or no-net-impact) and mitiga-
tion banking have been implemented as eco-
nomic tools for climate change mitigation (the
first two) and wetland conservation (last one),
in which a third party usually certify the com-
pliance with a set of standards.
3. Finally, market friction instruments are
tools to promote or even create a new service
market. These tools vary from simple market-
ing strategies such as product differentiation
and eco-labelling for less impacting products
to more complex financial tools based on the
environmental risk assessment of a given
activity. Conservation insurance and leverag-
ing eco-investments are two examples. Some
of these tools are similar to the financial
derivatives (i.e. Debt-for-conservation), where
the reduction of natural resources in one area
is compensated with the expected investment
of another one. However, in the recent years,
thanks to the demand analysis, more pres-
sure has been put in contract-payment and
service market creation based on schemes for
the payments for environmental services
(PES).
Payments for environmental
services
PES are defined as: 1) voluntary economic
transaction based on a contract between at
least two parties, 2) one supplier and 3) one
buyer, that trade a 4) certain service and its
provision is 5) ensured by the provider
(WUNDER, 2005). While simple bilateral con-
tract between private actors (see Figure 1) are
rarely implemented, more frequent are PES
developed by intermediaries due to the high
number of payers and suppliers (see Figure
2).
If one of these five parameters is not fulfil,
PES may be call PES-like scheme (WUNDER,
2008). This is the case (quite frequent in the
Mediterranean region) when the buyer and
seller are public institutions or if there is no
voluntariness and the scheme is compulsorily
enforced on one of the two parties. However,
the two pre-requisite of having a well-defined
service and the additionality condition must
be respected in both PES and PES-like
schemes. PES may last for one of more years,
or even forever; its length is strictly related to
the service demand.
310
IIIrd Mediterranean Forest Week - Tlemcen
Table 1:
Policy tools to stimulate
the provision of public
goods
311
The financial mechanism of a PES scheme
might be explained through a simple graph
(see Figure 3). In the business as usual (BAU)
scenario a forest owner gains a certain level of
revenue selling wood, while other forest
stakeholders do not receive any benefit; e.g. a
coppice forest managed with short-rotation
large clear cuts in a mountain area. The
missed benefits for the society associated to
this management type can be a social cost
related to land protection against floods and
soil erosion as well as general loss of recre-
ational activity and non-wood forest product
(NWFP) harvest. A change of forest manage-
ment based on the implementation of legal
constraints, such as the reduction of the area
of clear-cut, may reduce the social costs (sce-
nario “A”): the forest owner has to reduce
his/her revenue on wood production, while all
the other stakeholders enjoy the benefits
related to increased forest externalities.
Policy makers may consider an option
based on some constraint to the forest owner
rights without any compensation (win-loose
system) and a consistent amount of money to
ensure law enforcement and to restore
degraded land. These costs will be covered
through the general fiscal system. An alterna-
tive to this policy is moving toward a PES
scheme: providers and consumers trade their
utility to have a certain level of good and serv-
ices from forest management in exchange of a
monetary transaction to cover the forest
owner’s opportunity cost. In the scenarios “B”
and “C”, both parties have positive net gain
compared to the BAU scenario, both in terms
of environmental service provision and equity
between service beneficiaries and supplier.
PESmight be built for target externalities
(scenario “B”), where the beneficiaries pay for
a specific forest management that provides
NWFP and recreation. In this case, NWFP
collectors and recreational users will be the
only beneficiaries. In fact the best theoretical
scenario is “C”, where all the externalities are
compensated to the producer by a wider set of
Value of good and services provided by Mediterranean forests
Figure 1:
Direct PES
Figure 2:
Mediate PES
Figure 3:
PES schemes for target
and multi environmental
service provision
Source: Pagiola and
Platais (2007) modified
Buyer
Payment
Environmental
Service
Supplier
Direct
Contrat
Environmental Service
Users
Environmental Service
Suppliers
Supplier A
Supplier B
Supplier N
Buyer A
IntermediaryBuyer B
Buyer N
co
nt
ra
ct
s
Environmental Service
co
nt
ra
ct
s
Payment
stakeholders; nevertheless PES schemes are
commonly related to the scenario “B”, where
transaction costs are lower.
Conclusion
Important factors influencing PES design
and implementation are the service physic
characteristics, the demand-supply relation-
ship, the cultural context and institutional
framework (e.g. property rights regulation). A
huge constraint to any PES implementation is
the buyers’ or the suppliers’ fragmentation;
the high fragmented landownership and the
absence of forest owner associations increase
transaction costs. In such conditions, the role
of national or local governments is fundamen-
tal (YANDLE, 1999; HILL, 1997).
In the Mediterranean region water PES are
more frequent than other forest-based serv-
ices, because it is relatively easier to define
service buyers and suppliers in the catchment
areas and link one another in relation to
water quality or quantity issues. Positive
examples are often reported on mono- or oligo-
psony markets typical of water-related serv-
ices where the presence of one (e.g. a water
authority) or few buyers reduces the negotia-
tion costs and allows reaching the best agree-
ment.
Cultural context is also important for the
PES acceptability. People may accept the con-
cept of service monetization but in other cases
they might see PES as too strong limitations
in their land use. The commercialization of
access rights for recreational purposes is an
example. In fact, small forest owners are gen-
erally not willing to sell part of their property
rights, frightened by the fact the new users
will damage their forest or create new privi-
leges.
Property rights are of fundamental impor-
tance for PES design and clear excludability
is a condicio sine qua non for PES scheme
implementation (ENGEL et al., 2008).
However, policy makers in many cases are
reluctant to legislate on high sensitive issues
such as environment and water, where civil
society is frequently against any privatization
process. Unlike a command and control
approach, PES schemes usually increase the
price to the service final users. Local users
may associate at first glance a PES-like
schemes to a form of environmental taxation.
Other aspects like efficiency, information
symmetry, scalar invariance, ES provision
monotonicity, and other elements related to
the contract theory may play a relevant role
in PES scheme design.
Probably in the future PES or PES-like
schemes will substitute some of subsidy-based
mechanisms in developing a more efficient
and effective system of forest-related service
provision. On the supply side landowners’
associations may concretely support the
development of PES through a decrease in the
transaction costs, but in the future the most
important role will be played by consumers’
awareness and willingness to pay, de facto the
real engine of the green economy.
D.P., E.V., L.B.
References
Engel, S., S. Pagiola, and S. Wunder, 2008.
Designing payments for environmental services in
theory and practice: an overview of the issues.
Ecological Economics, 65(4): 663-674.
Hill, P.J., 1997. Market-based environmentalism
and the free market: substitutes or complements?
The Independent Review, 1(3): 387–396.
OECD, 2010. Paying for biodiversity enhancing the
cost-effectiveness of payments for ecosystem serv-
ices. OECD, Paris.
Pagiola, S. and G.Platais, 2007. Payments for envi-
ronmental services: from theory to practice. World
Bank, Washington.
Panayotou, T., 1994. Economic instruments for
environmental management and sustainable
development. Environmental Economics Series,
UNEP - United Nations Environmental
Programme, Nairobi.
Stavins, R.N., 2001. Experience with market-based
environmental policy instruments. Resources for
the Future, Washington D.C.
Yandle, B., 1999. Grasping for the heavens: 3-D
property rights and global commons. Duke
Environmental Law and Policy Forum. 13-44.
Wunder, S., 2005. Payments for environmental
services: some nuts and bolts. CIFOR, 42: 1-32.
Wunder, S., 2008. Necessary conditions for ecosys-
tem service payments. In: J. Reid and J. Boyd
(eds). Economics and conservation in the tropics: a
strategic dialogue, Conservation Strategy Fund,
San Francisco.
312
IIIrd Mediterranean Forest Week - Tlemcen
Summary
In the Mediterranean region, policy makers and forest managers are seeking for policy instruments to
fill the gap between financial and economic profitability in forest management. This paper reviews
these policy instruments focusing on the market-based instruments and specifically on payments for
environmental service (PES). We focus on the implementation problems of PES schemes looking at bar-
riers and opportunities offered to their development in the Mediterranean region.
Davide PETTENELLA
Enrico VIDALE
Lucio BROTTO
Dipartimento
Territorio e Sistemi
Agro-Forestali
Agripolis - Università
di Padova
Via dell'Università
16 - 35020 Legnaro PD
ITALY
Email:
davide.pettenella@
produzione.agraria.
unipd.it
forêt méditerranéenne t. XXXIV, n° 4, décembre 2013


http://documents.irevues.inist.fr/bitstream/2042/53610/3/FORET_MED_2013_4_309-312.pdf

Policy instruments to preserve or restore woodlands and to improve the supply of forest goods and services

Abstract

Similar works

Full text

Available Versions

Hal-Diderot

Archivio istituzionale della ricerca - Università di Padova

I-Revues