Compensation payment scheme requisites and financial arrangements

Abstract

Having outlined a framework for the various benefits that environmental and forest-related goods and services provide, a subsequent requirement for the operation of a compensation scheme is the determination of economic values. (As the development of compensation schemes relies heavily on the application of economic principles, this chapter will focus on economic valuation methods. For an overview of noneconomic methods (e.g., multi-criteria, participatory, and deliberative methods), refer to Stagl (2007). It should be noted that an anthropogenic-based economic preference model is, per definition, incompatible with an approach arguing for intrinsic values that environmental and forest-related goods and services exhibit. Acknowledging the limitation, the operationalization of the economic approach still bears considerable advantages.) The assignation of values is crucial to assure that provided benefits are adequately taken into account in decision-making processes. The following section will present a framework for economic valuation of environmental and forest-related goods and services. Macro-oriented enabling conditions for compensation payment schemes will be discussed in succession, introducing the political context and arrangements that can be made at the policy level to favor their implementation. The section ends with an overview of current financial vehicles encountered for compensation.