EU State Aid Regulation & Incentives for Forest Biodiversity Conservation: Study of the Constraints

Ecosystems provide society with necessary and irreplaceable services. Ecosystem services are the beneficial outcomes, for the natural environment or people, which result from ecosystem functions. These benefits arise from the regulating, supporting, provisioning and cultural services that biodiversity and ecosystems supply.2 Together, these services provide critical life support functions, contributing to human health, well-being and economic growth.3 Biodiversity4 is essential for these services to stay in balance. Due to the increasing exploitation of natural resources and the resulting loss of species and ecosystem richness, nature conservation has become one of the most important sectors of environmental policy. Legislation, financing, economic control, and different combinations of these are essential measures in environmental protection. In the past years the use of new instruments, especially the incentive-based mechanisms, has increased remarkably. Binding regulatory measures are the longest-established environmental policy option in the world. They set the baseline for minimum norms of protection typically including development restrictions, control of damaging activities, creation of protected areas and protection of certain habitat types and species. However, these “command and control” tools have limitations. They can generate strong opposition among the affected groups, take time to draft and adopt and be expensive and difficult to monitor, particularly if they go against general social norms about the use and conservation of nature. Because of their constraining and de-motivating character, purely restrictive regulatory measures neither provide a basis for active conservation of land nor encourage public participation or encourage innovation. They can even inadvertently discourage people from practising good stewardship. For example, many private landowners shudder at the thought of having an endangered species occupy their land, because they fear the government will limit their ability to use the land. In extreme cases, landowners might consider removing the endangered species to avoid the associated complications.5 Incentive measures, on the other hand, are designed to modify behaviour by encouraging private individuals, organisations and business to participate actively in conservation. Even the Convention on Biological Diversity (CBD) recognises their importance6.7 Positive incentives to motivate stakeholders can be economic (direct payments, tax reliefs) or non-economic (recognition, awards for outstanding performance, reputation). Disincentives internalize the costs of damage to biological resources to discourage activities that harm biodiversity.8 The economic incentive measures are required to internalise the full costs of biodiversity loss in the activities that lead to this loss, and to provide the necessary information, support and incentives to sustainably use or conserve biological diversity.9 Forests are among Europe’s most precious renewable resources. They are also of particular importance to European and global nature conservation by providing habitats for many rare plants, fungi, mosses and lichens.10 The role of forests varies from one Member State to another and the forest policy falls within the sphere of competence of the Member States. As Finland is one of the most forested countries in the EU with 20 million hectares of forest11, this study analyses the incentives for forest biodiversity conservation particularly from the Finnish perspective