1. Various Instruments


The goals and targets of forest policy can be achieved in different ways. We have emphasized that targets should be realistic, and this includes the financial requirements of a forest policy programme. Financial means for different purposes are always needed whenever the state intervenes in the forestry sector. The role of the state may vary within different societies and its sectors (including forest policy).

Political science has described two extremes for the role of state: a so called "night watch"-state (1) and what can be called an "omnipotent welfare" state (2).

(1) The "night-watch" state only takes on the absolute minimum of public tasks as a part of its responsibilities (i.e., basic administration, external defence, basic order, basic levels of other necessary duties) and leaves most other public kind services to the private sector and markets. Most parts of health care, education, mass-transportation and even parts of internal safety are in private hands. Markets are everywhere and the share of the public sector has a very small GDP (taxes are also low).

(2) The "omnipotent" state takes responsibility for all kinds of public services, controls everything and is largely involved in industries where it competes with the private sector (even in production - which does not only include an infrastructure type of production). These public services are usually very good and the share of the public sector in GDP is high and so are the taxes citizens pay. The latter still refers to market-economy based societies where the model is represented by a former centrally planned economy. Most if not all productive sectors that are managed by the state itself, represent yet another extreme.

Most states fall between the two extremes. The choices concerning roles in the public sector and in the private sector in providing public-types of services (perhaps including some goods such as water and electricity) and private-types of goods and services for the whole of society or for different sectors (such as forestry) have usually been handled over the course of time (and change comes about slowly). However, the transition from a planned economy to a market-based one can provide examples of a rather rapid and influential change that can occur throughout all sectors of society (including the forest sector). The privatization of forest industries, restitution, and the privatization of parts of forests (including structural changes within institutions) have been present in all these countries.

In older market economies changes regarding borderlines between public and market activities and the degree of state intervention to forestry, for example, are usually incremental. However, when there are significant changes in politics, brought on by the changing ideological "climate", even the larger scale reforms can occur during shorter periods. For example, since the eighties, many industrialized market economies either privatized their state forests, adopted business type state forest organizations or gave management of commercial forest resources to private companies retaining only the ownership of land (i.e., the United Kingdom, Sweden and New Zealand).

Are these significant moves changes in policy goals or means?

Riihinen and Järveläinen (2005) categorize forest policy means into three groups based on the kind of changes a policy aims at. In their view forest ownerships changes (from private to public or other way round) belong to the strong policy means called reforms (1). Reforms are changes affecting the foundations of society. Another reform could be the change within the entire taxation system of forestry.

The second group was named qualitative (2), as only the number of instruments were increased or decreased. The third group consists of quantitative (3) means of forest policy, where the values of policy instruments are changed. This occurs when the amounts of subsidies for forest investment or tax rate in the existing taxation system are changed.

For all kinds of instruments the logical-mathematical rule is that there must be at least one instrument for each single target (Riihinen and Järveläinen 2005). Often several policy instruments are used together. For example, wildlife policy employs public ownership of refuges, public research, regulation of hunting on all lands, and tax incentives for private owners in order to protect and manage wildlife populations and to provide recreational opportunities for citizens (Cubbage et al. 1993).

Forest ownership changes

If the motivator for the change is only ideological, the change will carry the character of a (value) goal. Most often the change of ownership from state to private forest is simultaneously argued on the basis of improved efficiency (i.e., the private owner uses the forest more economically, more efficiently) and this same change appears to be a means for better profitability. Yet one has to recognise that it is not unusual in politics to employ motivations, means and arguments that are assumed to work better than (perhaps) the underlying ones.

The Typology of Forest Policy Instruments can be assessed as follows:

1. Normative or regulatory instruments
Laws, decrees, orders and administrative rules.

Court decisions and sanctions due to the break of law.
2. Economic or financial
Subsidies (incentives, support): all measures that reduce the costs of production or increase the prices of forest goods and services.

Disincentives: measures that increases costs or decrease prices of production or an action.

Tax-concessions: exemptions from direct (income tax) or indirect (value added, gasoline) taxes.

Contracts between forest owner and public agency.

Forest taxes levied, for example, to finance public sector programs (health care, education etc.) have also impacts on forest management. Taxation may change, for example, the optimal rotation analyzed in ECON4 (Chang 1982). In addition, all forest taxes are capitalized into lower forest land values transferring forest land to other land uses (Johansson & Löfgren 1985). Hence, (non-neutral1) taxation quite commonly changes the resource allocation and becomes one potential source for a market failure. On the other hand, one goal for (non-neutral) forest taxation may be to create incentives for socially desirable changes in forest owner behaviour.
3. Informational
Use of information by the government to induce certain actions. For example, training of forest owners. Informing forest owners from the benefits of certain actions or altering their values and attitudes towards preferred behaviour. Raising ethical awareness or commitment. Focused campaigns to raise interest to some activities.

Forest research and its results. Education of forest professionals at different levels.
4. Planning instruments
Planning is necessary in forestry in particular due to the long rotations (maturing time of trees). Forest planning occurs usually at many levels in forestry: forest holding level (of the private forest owner) is the basic level, but different organizations such as state forestry agency may have several spatial levels and different planning horizons. Regional or landscape level planning may occur in many countries. All plans are important forest policy instruments but of course, for national forest policy the national level planning deserves special attention.
5. Reforms
Reforms are significant changes in the basic institutions of forestry, such as relatively rapid shifts in forest ownership, organisational structures, financial or legislative framework, which have been required either by external conditions or internal development in forestry. Reforms may be also be due to the changing paradigm (changing concepts, for example, in regard to the contents of forestry or to in regard to the state intervention in forestry).

In practice, forest policies employ most if not all of these policy instruments. The greater the importance of forests and forestry, the larger the variety of forest ownership structures and number of forest owners. The increase in socially needed benefits from forests, also increases the demands placed on the challenges of forest policy; thus more instruments are needed.

Many forest instruments have gradually been taken into account and they have been developed to suit to the prevailing conditions. Sometimes new instruments substitute old ones or some instruments simply are discarded because they are not needed anymore. New ideas and challenges may also alter the emphasis given to different policy instrument groups. During the last ten years economic and financial instruments have been given more consideration at the cost of traditional regulatory instruments. In some countries instruments are more directed related to have impacts on the outputs of forests rather than on the inputs. Efficiency and effectiveness of forest policy instruments have earlier on only seldom been studied but have nowadays become one area of focus in forest policy research (Tikkanen 1981, Ottitsch et al. 2002).

1. A neutral tax has the least likelihood of changing resource allocation.

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