Designing Fiscal Instruments for Sustainable Forests

Fiscal policies with the right incentives can be a powerful tool to help governments reduce deforestation and forest degradation and promote the sustainability of forests. The report on Designing Fiscal Instruments for Sustainable Forests identifies fiscal reforms that can positively influence forest conservation and management while freeing up resources to be used for national development. These reforms include:

• Environmental commodity taxation to encourage forest conservation and land use change.
• Ecological fiscal transfers in which more money is allocated to regional and local governments whose forests are better preserved.
• An agricultural subsidy reform which rewards the sustainable management of forests and farmland.
• A fee-and-rebate mechanism (known as a “feebate”) which offers tax discounts for companies that meet the required sustainability standards.