Markets for forest goods and services
Dec 21, 2015
Objective of this session
Discuss the basic elements for creating markets for forest goods and services
Discuss selected market based financing mechanisms for forestry
Elements of markets
“Demand” as the basic concept
Product or serviceBuyersSellers
The “Willingness To Pay” (WTP)
Without existing or latent demand there can be no market
Elements of markets
Values:
Financial versus economic valuesPositive and negative values associated
with the same goodStock values and flow valuesCurrent and future valuesValue in exchange and value in use
Elements of markets
ProductsServices
Site specific and user specific orMore general and global demand
Creating markets
Costs to establish markets for goods and services from natural resources can be high
Initial costs
Operational costs
Creating markets
Initial costs Technical costs (on how to transform the product into
payments) Organisational costs (elaborate network, of supporting
organisations, new roles) Legal costs(definition of property rights for instance)
Creating markets
Operational costs
monitoring performance, enforcing rules and renegotiations of contracts
Innovative (market-based) Financing Mechanisms
What are they?
Key features
Flexibility to those who know best Choice
Innovative (market-based) Financing Mechanisms
Why?
New source of financing They can potentially benefit the poor They are a cost-effective way to
achieve environmental goals
Market-based Financing Mechanisms: Examples (1)
Conventional markets for timber and NTFPsPayment for Environmental Services (PES)Environmental performance bonds Conservation concessions Conservation easements / contracts Service concessions Concession biddingCarbon offset trading (a PES)Certification
Market-based Financing MechanismsExamples (2)
Bio-prospecting contractsBiodiversity business sharesBiodiversity credits/offsetsCommunity – private sector partnershipsJoint private sector and public/private
partnerships“Green” equity capital and associated
investment instrumentsTradable development rightsUser fees
Markets for services: Payment for Environmental Services (PES)
PES is often innovative but not a panacea
PES however can be important for diversifying financing sources
PES can catalyze efforts to improved practices
PES can contribute to sector development and pro poor policies
Stakeholders involvement
Markets for ecological services are multistakeholders affairs Commercial enterprises Governments (local, regional, national) NGO’s (local and international) Donors Community groups Individual landholders
Stakeholders involvement
Stakeholders play different roles: Buyers and sellers Primary and intermediary Roles of governments
Governments and Institutions
Good Governance is critical for emerging markets: Effective and appropriate national
laws/policies Transparent decision-making Functioning institutions Adequate market infrastructure Well conceived fiscal regime Stable macro-economic horizon (investors)