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Forest Restoration in Landscapes

Forest Restoration in Landscapes

11 Perverse Policy

11 Perverse Policy Incentives Kirsten Schuyt Key Points to Retain Many government incentive programmes in reforestation and afforestation suffer from poor design, lack of enforcement, and lack of monitoring, and are aimed at short-term tree-planting activities. As a result, government support for such schemes acts as a perverse incentive that can sometimes undermine efforts at introducing more balanced or equitable forms of restoration. Instead, incentives need to be redirected toward a wider more integrated approach. This allows broader benefits to society, the involvement of local partners and stakeholders, and effective monitoring and evaluation. 1. Background and Explanation of the Issue In some countries, government incentives for particular kinds of restoration have distorted approaches to the conservation, restoration, and management of forests. Government incentives to the forest industry for restoring forest cover have traditionally been aimed mainly at supporting plantation development. In light of the financial costs of these incentive schemes, and criticism from some environment and 78 social welfare groups, questions have been raised about the economic, environmental, and social benefits of these schemes. Although many public incentives in forestry have provided some employment and income opportunities, questions remain about the overall costs of such schemes and about who will bear these costs in the longer term. For example, some studies have pointed out social and equity concerns when subsidies are captured by a few actors, such as large companies and landowners. In Chile, 80 percent of public incentive payments for the establishment of plantations have gone to three companies. 105 Other poorly designed incentive schemes have resulted in increased conversion of natural forests and land degradation. The key question is: Are public funds for afforestation and reforestation directed toward projects that provide net benefits to society? A case study review by Perrin 106 showed that government incentive programmes in reforestation and afforestation activities tend to suffer from poor design, a lack of enforcement mechanisms, and little or no monitoring. Public incentives are often applied for short-term tree planting activities that inadequately address sustainability, biodiversity, and livelihood concerns. Little emphasis is paid to ensuring that public incentives contribute to restoring forest functions and resources, and they seldom benefit from adequate stakeholder participa- 105 Bazett and Associates, 2000. 106 Perrin, 2003.

tion. There is also a general lack of adequate monitoring and enforcement mechanisms, meaning that incentives are easily misused. The Convention on Biological Diversity107 identifies three common types of perverse policy incentives: • Environmentally perverse government subsidies: Many different definitions exist in the literature as to what a subsidy is. In general, they include direct subsidies (such as grants and payments to consumers or producers); tax policies (tax credits, exemptions, allowances, and so on); capital cost subsidies (preferential loans or debt forgiveness); public provision of public goods and services below cost; and policies that create transfers through the market mechanism (such as price regulations and quantity controls). Such subsidies may have a negative impact on biological resources by directly encouraging behaviour that leads to biodiversity loss. Another example of perverse effects of subsidies is that they may drain scarce public finances that could have been used to conserve biodiversity. • Persistence of environmental externalities: Some governmental policies may contribute to the persistence of negative externalities. For example, government policies may weaken traditional property rights systems, where such rights reside within customary law or cultural traditions. This absence of well-defined property rights at private or communal level may lead to pollution and overexploitation of natural resources, resulting in negative externalities or costs to third parties. • Laws and customary practices governing resource use: An example of formal law generating perverse incentives is beneficial use laws requiring land users to make productive use of water and forest resources to secure land entitlement. On the other hand, the clearing of land may be rooted in customary law to indicate a claim to an area, leading to perverse incentives. Perverse incentive schemes, however, can be redirected to promote restoration practices that 11. Perverse Policy Incentives 79 will offer benefits to conservation and to a wide range of stakeholders. In this respect, forest landscape restoration offers important tools for good practices in restoration, and the key lies in promoting these tools to redirect existing perverse incentive schemes toward restoration that benefits conservation and society. Some examples are provided below. 2. Examples 108 107 CBD, 2002. 108 Perrin, 2003. 2.1. Public Incentives for Plantation Development, Indonesia Deforestation is a major problem in Indonesia. The Indonesian government began promoting the development of industrial tree plantations in the 1980s to boost industrial development in wood-based industries and the oil palm sector. Several government incentives were put in place to stimulate timber plantation development, including interest-free loans, allocation of state-owned land, absence of land taxes, and so on. Large sums of money could also be obtained through the Reforestation Fund. Another incentive came from the International Monetary Fund–backed restructuring of the corporate and banking sector in the late 1990s, which was poorly implemented and led to subsidies and financing being provided to badly managed and corrupt forest companies. In an attempt to redirect some of these public incentives,WWF, the global conservation organisation, has collaborated with the Centre for International Forestry Research (CIFOR) to restructure debt agreements related to the forest and oil palm assets of the Indonesian Bank Restructuring Agency. This reform is to include a series of checks and balances among the state, private sector, and civil society to mitigate structural pressures on the economy and forests, which should help prevent the use of funding for unsustainable and sometimes illegal plantation development as has happened in the past.

Forest Landscape Restoration - IUCN
Landscape restoration