Subsidies Examples: Increasing Forest Area and Reducing Deforestation

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Subsidies can be effective policy tools to overcome financial and technological barriers to increasing forest area and reducing deforestation. Most mitigation activities aimed at reforestation or reducing deforestation require significant up-front investment, with benefits typically accruing years into the future. Financial incentives provided by governments can help to overcome financial barriers to implementation.

 

Industrialized and developing countries face different constraints on successfully implementing reforestation programs. Subsidies play a vital role in reforestation programs in industrialized countries, which generally have smaller amounts of unallocated public lands. Since governments typically have less authority to regulate land use on private lands, subsidies are used to encourage private landowners to adopt reforestation practices. In the United States, for example, several government programs promote the retention and improved management of forest cover on private lands.

 

Developing countries have weaker institutional and economic capacities, which affect their ability to successfully deploy forestry subsidies. Some developing countries have provided environmental service payments to private forest owners, but relatively high transaction costs and insecure land and resource tenure have limited applications of this approach in many countries. In cases where institutional and financial capacities are limited, governments may share the costs and benefits of land management by entering into joint management agreements with private landowners. Because of the significant initial investment capital required, the success of reforestation subsidies varies. International cooperation can alleviate some of the institutional, economic, and technological barriers to the success of forestry subsidies.