Avoiding deforestation in the context of biofuel feedstock expansion: An analysis of the effectiveness of market-based instruments

Summary

This working paper assesses the likely effectiveness of market-based instruments (MBIs) in ensuring that expansion of biofuel feedstock development does not occur to the detriment of natural forests. The key message in this working paper is that nosingle instrument is likely to reduce the potential pressure of biofuel development on forests and thus avoid deforestation; rather, a host of complementary mechanisms will be needed to achieve this aim. Furthermore, the effectiveness of discrete MBIs depends on several factors related to their design, scope and scale, and the degree to which they are adopted and independently monitored in practice. In addition, for any measure to make a difference in avoiding deforestation, it would have to have an effect in economic terms so as to shape everyday practices of landholders and biofuel companies in meaningful ways. For this to happen, an instrument must be accompanied by measurable and verifiable indicators and conditionalities and – often – complementary state regulatory functions. In many contexts, this will in turn imply strengthening the overall governance system in which the different instruments are embedded. Therefore, we argue that there is a need to build greater synergies – both amongst the various MBIs and between MBIs and state regulatory frameworks at various scales – to reduce the direct and indirect threats of potential biofuel feedstock production to forests.