Protecting Europe's forests with market-based instruments

Forests provide many different benefits to nature and society. They provide shelter for countless plant and animal species, and help cool the climate. They are wonderful places for recreation and studies have also shown their positive impacts on human physical and mental health. At the same time, they provide wood as an essential renewable natural resource, as well as wild foods such as mushrooms and berries. The concept of forest ecosystem services (FES) has been used to describe all these benefits. While societal demand for FES is high and diverse, provision of these services also depends on how forests are managed. For instance, a monoculture plantation may provide a lot of wood, but may not at all be beneficial for forest-dependent animal species.

Hence, a critical question is how forests are managed. A central challenge is that financial incentives for forestry are often predominantly connected to a few ecosystem services, mainly wood production. This may make it difficult to also manage forests for other purposes, especially in cases of trade-offs. Since the majority of the EU’s forest land is privately owned, and public forests are often managed based on financial targets, the question of how to ensure the provision of FES that do not provide financial gain – such as natural beauty, biodiversity or drinking water – is critical. Market-based instruments (MBIs) have been advocated as a policy tool to reward private or community forest owners for managing their forests in ways that ensure essential benefits to society. Although MBIs have been recognised by the EU Forest Strategy as a valuable tool to protect forests and their ecosystem services, it is not yet known how they can be implemented effectively in Europe.

Georg Winkel, professor and chair holder of the Forest and Nature Conservation Policy Group (FNP), and Marko Lovrić, assistant professor at FNP, have been jointly working on the opportunities and challenges related to MBIs in the European context. Winkel and Lovrić coordinated the large European project SINCERE (Spurring INnovations for forest eCosystem sERvices in Europe, 2018 - 2022), which explored the importance of FES across Europe and the potential of MBIs. Currently, together with FNP-colleagues Marjanke Hoogstra (assistant professor) and Anne Schuurmans (PhD researcher), both are involved in the new project INTERCEDE (Incentivising future forest ecosystem services and incomes in Europe, 2024 - 2028), studying in more detail how MBIs can be implemented on an EU-wide scale. Both projects have raised considerable interest amongst European forest policy stakeholders.

The potential of payments for ecosystem services in Europe: SINCERE

Winkel's and Lovrić’s work on MBIs started with leading the SINCERE project when both were still working at the European Forest Institute. The aim of SINCERE was to directly engage in 11 concrete case studies with a broad variety of stakeholders experimenting with a specific type of MBI called payments for ecosystem services (PES) for forestry. The case studies showed that these policies can be beneficial on a local scale.

What such policies look like in practice can differ depending on the context. In Catalonia, for example, a system was designed in which forest owners received funding from water companie­­­s and other local stakeholders. As a result, forest owners could change the management in such a way that clean water provision was protected by the forests, enhancing biodiversity and fire protection at the same time. Another interesting case study dealt with ‘funeral forests’ in Switzerland, in which forests became burial places for citizens. This totally changed the meaning and the forest management approach of a municipality-owned forest patch for spiritual purposes, which not only provided many co-benefits relating to forest beauty and biodiversity, but also additional income generation for the municipality.

SINCERE drew considerable attention from EU policymakers. The project engaged in dialogue with European Commission staff members to answer their questions about FES and PES. As a result, Winkel – who had since moved to be chairholder of FNP – was invited to present findings of the project in a variety of workshops and meetings organised by the European Commission and the European Parliament. The idea to develop a novel European PES policy scheme based on findings from SINCERE raised considerable interest. Together with Sven Wunder of the European Forest Institute, Winkel was invited to present the findings in the context of the development of a new guideline document on payments for FES which was later published by the European Commission. An overview of some key findings of SINCERE, including pathways for EU policy-making related to the provision of multiple forest ecosystem services, can be found here and a short version of policy makers has been published here.

Advancing implementation across Europe: INTERCEDE

The SINCERE project explored the promises of a PES mechanism for European forests, but several questions related to these tools remained open. Some of them are now the focus of the new project INTERCEDE. INTERCEDE has a couple of project objectives which are directly relevant to the policy's objectives, and is compiling a large and unique European database on MBIs which are currently applied across Europe. Furthermore, it will compile existing and novel data on FES provision and demand (the benefits citizens desire from forests) on a European scale, studying how both are linked in a spatially explicit way, which is Lovrić’s key focus . PhD researcher Anne Schuurmans, supported by Winkel and Marjanke Hoogstra, will analyse existing MBIs in European forests based on insights from economics, political science and political ecology. This means that Schuurmans will also adopt a critical lens: while MBIs are celebrated for their flexibility, political appeal and ability to attract private funding, they have also been criticised for focusing too much on market solutions. This could lead to the commodification of FES and prioritise economic efficiency over inclusive decision-making. The expectation is that such challenges will be addressed through empirical research, also to minimise the chance of unintended impacts of MBIs developed by INTERCEDE.

Running from 2024 to 2029, INTERCEDE’s collaboration with a wide array of societal actors in so-called transdisciplinary working groups is central to the project. Next to a range of experts – which include economists, political scientists, and ecologists – these working groups include forest owners and managers, professionals, NGOs, and policymakers. INTERCEDE expects to be able to inform policymakers and forestry and conservation practitioners across Europe to advance but also nuance the implementation of MBIs across the continent.

Conclusion

Building networks and achieving societal impact with research is often a process that takes many years, and, as this story shows, is therefore most likely to be reached in a career spanning multiple positions. Winkel and Lovrić – having joined FNP in 2022 and 2024 respectively – are building on the work that they started at the European Forest Institute and are now combining this with the expertise and networks of FNP.

The SINCERE project showed that MBIs, such as payments for ecosystem services, hold considerable potential to align societal demand for ecosystem services with the interests of private landowners and forestry enterprises in securing income from forest management. Some of SINCERE’s findings have been included in a guideline published by the European Commission. Yet, MBIs in themselves are not neutral and may also serve a diversity of political objectives – possibly with unsustainable interests – which are not always visible at first glance. Hence, it is critical to connect policies and practices of MBIs to research that analyses their functioning from various perspectives. It is also important for researchers and scientists to engage in dialogue and communication with policymakers, especially if their work is expected to help advance policies and practices. This was the ambition of SINCERE, and is the ambition of INTERCEDE, and is a lesson learnt from both researchers’ experience with working on market-based instruments for forests for several years now.