Abstract
Having outlined a framework for the various benefits that environmental and forest-related goods and services provide, a subsequent requirement for the operation of a compensation scheme is the determination of economic values. (As the development of compensation schemes relies heavily on the application of economic principles, this chapter will focus on economic valuation methods. For an overview of noneconomic methods (e.g., multi-criteria, participatory, and deliberative methods), refer to Stagl (2007). It should be noted that an anthropogenic-based economic preference model is, per definition, incompatible with an approach arguing for intrinsic values that environmental and forest-related goods and services exhibit. Acknowledging the limitation, the operationalization of the economic approach still bears considerable advantages.) The assignation of values is crucial to assure that provided benefits are adequately taken into account in decision-making processes. The following section will present a framework for economic valuation of environmental and forest-related goods and services. Macro-oriented enabling conditions for compensation payment schemes will be discussed in succession, introducing the political context and arrangements that can be made at the policy level to favor their implementation. The section ends with an overview of current financial vehicles encountered for compensation.
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Notes
- 1.
As the development of compensation schemes relies heavily on the application of economic principles, this chapter will focus on economic valuation methods. For an overview of noneconomic methods (e.g., multi-criteria, participatory, and deliberative methods), refer to Stagl (2007). It should be noted that an anthropogenic-based economic preference model is, per definition, incompatible with an approach arguing for intrinsic values that environmental and forest-related goods and services exhibit. Acknowledging the limitation, the operationalization of the economic approach still bears considerable advantages.
- 2.
(TEEB) initiative (TEEB aims at drawing attention to the global economic benefits of biodiversity. Consult http://www.cbd.int/incentives/teeb for a detailed description and reports of the initiative).
- 3.
For an extensive overview of different valuation methods, refer to CBD (2007) and TEEB (2010). The latter includes a useful table (Table A2.b, “conceptual matrix based on forest ecosystem services and valuation approaches”) where the classifications of benefits that ecosystems provide to people according to the MEA approach (supporting, provisioning, regulating, cultural) are linked to various valuation types (stated preference, revealed preference, production based, cost based, benefits transfer).
- 4.
WTP can be defined as the maximum price that a consumer is prepared to pay for a certain good.
- 5.
- 6.
For examples, refer to the forest biodiversity program METSO pilot established in southern Finland.
- 7.
Assuming a nonvoluntary tax-financed governmental compensation program, it is difficult to speak about incentives since individual exclusion is impossible. However, it can be argued that in case no positive outcome is generated, taxpayers would strongly disapprove.
- 8.
For an overview, consult Forvalue (2008), especially Annex 20. It should be noted that also other, nonfinancial mechanisms exist, such as in-kind transactions (e.g., volunteer labor for fund-raising activities). However, exploring these lies beyond the scope of this chapter.
- 9.
More in-depth discussions of the issue including design elements of environmental taxes can be found in OECD (2011).
- 10.
A detailed description of the REDD mechanism will be given in Sect. 39.5, “Reducing Emissions from Deforestation and Forest Degradation (REDD)”.
- 11.
For a substantial insight, consult Conservation and Biodiversity Banking: A Guide to Setting Up and Running Biodiversity Credit Trading Systems by Carroll et al. (2008).
References
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Recommended References
Convention on Biological Diversity, Economic, Trade and Incentive Measures: http://www.cbd.int/incentives/valuation.shtml
For understanding financial vehicles and their applicability in an environmental setting better, consult any introductory textbook on environmental economics
The Economics of Ecosystem Services and Biodiversity (TEEB) initiative: http://www.cbd.int/incentives/teeb
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Michel, J., Kallweit, K., von Pfeil, E. (2016). Compensation Payment Scheme Requisites and Financial Arrangements. In: Pancel, L., Köhl, M. (eds) Tropical Forestry Handbook. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-54601-3_232
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