Balancing investments in ecosystem services for sustainable forest governance

Abstract

Economic instruments like subsidies and tax reliefs are widely used to promote forest ecosystem services. However, such instruments typically target services traded in markets, whereas non-market services are declining worldwide. With Norway as a case, we map economic instruments used in Norwegian forest governance and examine how they promote or constrain forests' capacity to provide different ecosystem services. Data was collected from a review of policy documents and fiscal budgets, compared with data on trends and condition of ecosystem services from Norwegian forests. Three main results are highlighted. First, the main economic instruments are markets for forest products and amenities, forestry certification schemes, and government expenditures. Second, ecosystem services traded in markets like timber (578 mill €/y) and hunting licenses (74.1 mill €/y) attract the lion's share of forest investments, amounting to around 652.1 mill. Euros per year, whereas aggregated investments in non-market ecosystem services like habitat provision (43.44 mill €/y) and carbon sequestration (2.53 mill €/y) remain an order of magnitude smaller. Third, most instruments target services for which forests show increasing capacity, while some services in poor condition or declining supply, are underprioritized or undermined through investments in competing services. Moreover, our results suggest that the current use of economic instruments primarily aligns with the sustainability pathways of green economy/green growth or nature protection. We argue that sustainable forest governance in Norway will require major reallocations of investments to support a broader array of forest values, combined with policy attention to alternative sustainability pathways.