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'Internalising the Externalities' of Tropical Forestry: A Review of Innovative Financing and Incentive Mechanisms

Research reports

It is now widely accepted that one of the main problems for attempts at sustainable forest management and conservation is that it is only rarely a viable financial proposition. Forest exploitation or deforestation, by contrast, continues to be highly profitable. The problem of weak incentives for forest management and conservation has given rise to an increasing concern by the global community of how to ‘give value’ to forests, especially forests with high ‘externality’ values associated with environmental functions and biodiversity conservation. This paper assesses the potential limitations of a range of ‘innovative’ financial incentive mechanisms. It finds that efforts to increase the incentives for sustainable forestry must be accompanied by effective regulation or control, whether at the national or international level, and should also be complemented by policy measures to make forest-degrading activities less profitable.  

Michael Richards