Reverse auctions pilot for biodiversity protection

Danish Forest Association in collaboration with University of Copenhagen

The debate around biodiversity conservation in Denmark is loud and is focused on state areas, especially the need to protect biodiversity in Danish forests. Adequate efforts for biodiversity need to bring both public and privately owned areas into play, and research shows that private forest owners are ready to participate if given appropriate incentives. Nevertheless, the area of forest focused on biodiversity conservation, such as typically untouched forest, is far below the level needed to achieve policy objectives.

This project contributes to a long-term ambition to change the way public support schemes for biodiversity conservation and other nature goals are designed in Denmark and potentially elsewhere in Europe.

The ambition is that the support schemes are designed so that protection of biodiversity and landscapes is equivalent to the production of other services, in the sense that nature protection is increasingly regarded as production. At the same time, they must be designed to ensure coordination and cost-effectiveness.

In Denmark, as in other EU countries, many of these support schemes are based on the funding and framework conditions of the EU rural programme. This means that compensation for restrictions on land use must cover the direct costs of the restriction for the individual owner. At the same time, typical schemes are designed as so-called “flat-rate schemes”, for example in the form of fixed aid amounts per hectare for certain types of operations or restrictions. Such schemes may be easy to manage. Unfortunately, however, the combined effect of these two considerations is that many support schemes do not make use of the budget foreseen every year because too few landowners bid for them. The consequence is that nature and biodiversity are prioritized lower in forest management and that the goals and wishes of society are not met.

From a socioeconomic point of view, it is important that these types of schemes are designed to stimulate participation from only those owners who can deliver the requested quality in nature conservation at the lowest socio-economic cost. Economic research calls this the coordination problem, but it is about ensuring the most environment for money.

This is not ensured by the current subsidy schemes. This project will change the existing system by designing a set of reverse auctions and demonstrating in practice how competitive efforts can improve the coordination of nature conservation efforts, cost-effectiveness, and awareness of landowners.

A wide range of stakeholders with interest in biodiversity protection, forest management and outdoor recreation will be involved in this project. Researchers and a range of types of forest owner will be involved in order to include a broad range of views and to anchor the new payment mechanism.

The project will produce concrete results on several levels. Denmark gets the first experience with using this type of measure for nature conservation and with this payment mechanism. It can have significant spill-over effects on nature conservation in Denmark, with increased transparency, an improved knowledge base and ownership of nature conservation by forest owners.

The project establishes a direct, equal and constructive dialogue between forest owners and society, which clarifies what society wants and what conditions it wishes to deliver.

The results and method of the project can be easily scaled up, and for modest additional development costs, to national level and to include other types of nature conservation measures.

Tanja Blindbæk Olsen