2 October, 2019 | 15:30-17:30 | R22 - PG

Governing innovation for sustainability in the forest sector – II

Innovation in the forest sector is a growing research interest. Various types and aspects of innovation have been tackled – ranging from new goods and services to process, marketing and organisational innovations and institutional and policy aspects. Institutional aspects and the question how to support innovativeness in the sector are a growing interest. Consequently, interdisciplinary views and systemic or integrated models of innovation gain importance in researching innovation. From a sectoral perspective, the emergence of bioeconomy as a paradigm and a highly complex policy area acts as a driver for a renewal of the forest sector. This session focuses on governance aspects, relating to and bridging business and policy levels. Research from around the globe and from all relevant business fields, including forest management and operations, timber and non-timber products and ecosystem services and all established and emerging new forest-based value chains are welcome.

Chair: Jose Guerrero


CIFOR Senior Associate
Conditional incentives: what governance lessons for the design of innovative environmental mechanisms?

In recent decades, a greater societal scrutiny of public spending for ‘value for money’ criteria has also penetrated the forestry and environmental sectors, thus promoting the use of performance-based instruments. Payments for Environmental Services (PES), ‘green’ production certification, reduced emissions from deforestation and forest degradation (REDD+), and ecological fiscal transfers (EFT) are all examples of ‘payments by results’, i.e. environmental incentives based on a quid-pro-quo,contractual principle: you only pay for what you get. In what contexts do such instruments provide an adequate governance framework for effective and cost-efficient environmental management between an environmental principal (e.g. a government) and agents (e.g. landowners)? We review meta-studies and systematic reviews related to these four instruments. Our results point to a number of conditions for these instruments to work adequately. For instance, the performance proxy has to be closely correlated to the underlying broader environmental service, and needs to be unambiguously measurable, with a well-defined environmental baseline or standard. Upfront investments for agents need to be either small or externally subsidized. Risks need to be carefully distributed between the two parties for incentive compatibility; agents usually need to be relatively well in control of the outcomes. Transactions costs of monitoring and verifying compliance need to remain manageable. Finally, the principal needs politically to be able to sanction incompliance, by effectively withholding payments independent of spending pressures. These observations provide some lessons for prospectively using the conditionality principle vis-à-vis other innovative mechanisms, e.g. in managing product markets and value chains.