Remunerating nature conservation in central European forests: scope and limits of the Faustmann–Hartman approach

The elementary method based on Faustmannʹs analysis and extended by Hartman is used for the design of payment schemes inciting forest owners to manage their assets in a way more conducive to nature conservation. It is not aimed at extending the elementary theory but rather, to elicit its most important empirical implications. It is taken for granted that the conservation benefit of a forest increases linearly with time. Linearity is not only in sufficient agreement with ecological facts but also makes it easy to derive important conditions, in particular the minimal payment inducing owners never to harvest. The theory is applied to a German beech forest model (Fagus sylvatica). It is found that inciting owners to delay cutting cannot be recommended. The instrument should be used for the objective of abandoning cutting altogether which, however, demands that the conservation objective, as expressed in its present value, is granted a very high value by society. In the sequel, various aspects as to the schemeʹs practicability are discussed, including the need to capitalise annual payments into one single sum, the choice of a discount rate, the allowance for current costs in forestry and the likely approval of payments in the political arena. Although the discussion identifies several obstacles to the practical application of the scheme, there appears to exist no principal reason why a conservation policy based on the Faustmann–Hartman approach should not work in forestry.