Financing mechanisms for forest ecosystem services in Europe and their implications for forest governance

A range of forest ecosystem services have public good characteristics and are therefore difficult to market. In recent years, a number of new financing mechanisms are gaining importance. This paper studies forest ecosystem services from the perspective of innovation research. In order to analyse financing approaches, it uses a classification scheme, which includes pure public mechanisms (taxes and subsidies), mixed public-private mechanisms (public-private contracts and market creation), and pure private mechanisms (trade of goods and services, land purchase and land lease, eco-sponsoring, donations and certification). It gives an overview of their use throughout Europe, based on a questionnaire survey conducted in 26 European Union countries. In this questionnaire, representatives of governments and other stakeholders from forestry and nature conservation, are asked which financing mechanisms are most frequently used and which they propose. While governments rather propose taxes and subsidies, the non-governmental actors call for contracts or market creation. It is remarkable that they do not promote more strongly pure private mechanisms. Also forest owners' representatives rather rely on state activity than their own marketing efforts which indicates that non-wood forest ecosystem services are not seen as a business field. Applying an innovation system approach, the paper discusses the implications of the use of financing mechanisms for forest governance. We observe a paradoxical development regarding the roles of public institutions in forest governance: Although authorities increasingly use market-based instruments and partly retreat from advisory function, they gain more roles in the provision of forest ecosystem services. On the one hand, a stronger use of market-based instruments is part of the trend to a more explicit involvement of private actors into the governance of natural resources. On the other hand, public institutions receive new tasks in order to promote the development of private financing mechanisms as examples of innovations for providing ecosystem services. New tasks lie in the promotion and support of innovative activities in the sector but also in institutional innovations. The public policy instruments such as subsidies need improvement; the state is called for creating new market schemes; and public institutions have a role in supporting the forming of cooperative structures of land owners or across sectors. By this, the roles of public institutions definitely change: the traditional division of state and market spheres increasingly breaks up and new modes of governance appear in which the state involves private actors but at the same time takes over more responsibilities also in the development of markets.