Financial Mechanisms to Improve the Supply of Ecosystem Services from Privately-Owned Australian Native Forests

Much of Australia's native forest is privately-owned and is needing investment to maintain and improve the supply of a wide range of ecosystem services. This paper reviews mechanisms presently used in Australia to improve the supply of ecosystem services, with particular emphasis on financial mechanisms. Auction, green bond and biobanking schemes are widely and, so far, successfully used in a number of States, especially in projects where the actions required and ecosystem services can be readily measured. Measurement of biodiversity and biodiversity-based services remains problematic, despite some fairly widespread application of different measurement systems. Inadequate or variable measurement systems could engender a loss of investor interest if equivalence or gains cannot be appropriately verified. A new Biodiversity Investment Scheme is proposed, based on the structure used commercially in Managed Investment Schemes. The choice of mechanism, however, will be mainly determined by landowner attitudes to assignment of property rights, and by scale, the extent of public versus private consumption goods, and the transaction costs and risks.