Story | 21 Jul, 2013

Rethinking economics, markets and incentives

Based on a review of the experiences gained during the course of LLS, this paper documents insights and lessons about using markets and incentives to strengthen forest landscapes and livelihoods. It aims to interrogate just what a ‘landscape approach’ means in economic terms, to identify how markets can be used to generate incentives to share forest benefits more equitably and sustainably, and to highlight which kinds of approaches and ‘packages’ of interventions can assist in this.

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Photo: IUCN

The key findings and lessons learnt are:
Forest livelihoods and landscapes are under-valued in decision making Conventional economic approaches tend to exclude the livelihood benefits and broader environmental values that forest landscapes yield – and as aresult have often resulted in market, policy and management decisions that marginalize the groups that depend and impact most on forests. Economic analysis needs to account for local-level benefits and ecosystem services as well as commercial values, address the linkages and trade-offs between different uses, user groups and levels of scale, and consider both the distribution of values and the broader development impacts of different forest landscape management options.

Markets and prices often fail to capture sustainable forest values The continuing low profitability of sustainable forest production and management, combined with difficulties in capturing value at the local level, act as major barriers to forest landscape conservation and poverty reduction. In contrast, developing and improving forestmarkets so as to help rural populations to better benefit from sustainable trade can act as a powerful incentive for long-term improvements in landscape and livelihood status.

Economic policies tend to discriminate against forest landscapes and livelihoods Economic policies and instruments often make it more profitable for producers, consumers and investors to engage in environmentallydestructive activities, and favour sectors and markets to which the poor have no access. The removal of subsidies,unfair taxes and other perverse incentives can overcome many of the barriers to local market participation, and increase substantially the gains from sustainable forest management.

Market solutions, alone, are not sufficient to overcome economic barriers Although what are essentially economic problems do require economic solutions, alone they are rarely sufficient. Arrangements must be in place to equip and empower producers, consumers and investors with the rights, responsibilities and information that will enable them to participate in these markets and gain from these incentives. Organizational and management capacity, information and awareness, and forest and land tenure and rights emerge as being particularly key to the success of market-based interventions.