Palm oil plantation (photo by Tim Cadman)

Governing the forests: how fiscal instruments can act as a (dis)incentive to reducing emissions

In recent years, the concept of ‘governance’ rather than ‘government’ has become a popular term for describing the interactions between stakeholders in the sustainable development policy arena. In this context, especially in the arena of forest management, it is used to describe the structures and processes that steer, or co-ordinate the relations between multi-stakeholders (government, business, civil society). Usually, governance refers to human actors, but there are other forces that exercise influence over how forests are managed. One of the most important of all these, is that most essential resource: money. This brief report outlines the role that public finance, and most importantly the fiscal instruments developed by governments, can have a considerable influence over the fate of the world’s forests.

Research undertaken by the author in 2016-2017 investigated the extent to which fiscal incentives encouraged, or discouraged, private sector involvement in the United Nations Framework Convention on Climate Change (UNFCCC) initiative known as REDD+ (“Reducing emissions from deforestation and forest degradation and the role of conservation, sustainable management of forests and enhancement of forest carbon stocks in developing countries”).

In Indonesia, REDD+ has been recognized as a potentially significant source of revenue, while at the same time providing an important incentive to contribute to reductions in global deforestation. However, in a series of interviews and surveys, forest-based business stakeholders identified a number of issues impacting on their ability to undertake activities that would lead to reducing deforestation and forest degradation, and emissions.

Environment vs. economy: Mapping the forest environmental frontier

To some, the forests mean combatting illegal logging and associated trade, avoiding deforestation and degradation, conserving biodiversity and protecting wilderness.

To others, the forests mean timber as a renewable raw material for uses such as construction and bioenergy, forest-based climate change adaptation and mitigation and transitioning toward a forest-based bioeconomy.