Implementation of Economic Instruments in the EU Forest-Based Sector: Case Study in Austria and the Czech Republic

Abstract

Economic instruments are political tools created to promote environmental stewardship by influencing consumption and production patterns, fostering technological innovation, and improving the environment; however, if current failures in their formulation or implementation persist, they can negatively impact the environment and society. This research aims to analyze the strengths, weaknesses, opportunities, and threats (SWOT) of economic instruments by extracting these aspects from the forest policy documents of the EU, Austria, and the Czech Republic using the qualitative content analysis method. It has been found that the EU channels its resources from economic instruments through various financing programs that make distribution more effective and align with the environmental objectives of the EU. Additionally, the SWOT analysis indicates that the economic instruments applied in the EU present significant differences in the application and management of forests and the performance of the financial instruments according to the national strategies and action plans used. These identified challenges, limitations, and improvement areas allow for generating suggestions that policymakers can apply concerning the use, implementation, dissemination, and access processes of financing mechanisms for sustainable forest management in the European Union.

1. Introduction

Since the end of the 20th century, there has been renewed interest in formulating and implementing sustainable development processes that allow using natural resources without compromising the development of future generations [1,2,3]. To this end, various strategies and agreements have been implemented to manage natural resources and sustainably improve their quality and status, such as Agenda 21, the Paris Agreement, and the Convention on Biological Diversity, among other legally binding international agreements. These treaties usually include tools such as economic instruments (EIs) to achieve the proposed objectives, improve the efficiency in allocating resources for sustainable development, and promote sustainable production and consumption models [4,5,6,7]. However, inadequate implementation and management of some EIs, such as subsidies and taxes, that were developed to improve the sustainable management of natural resources on which humans depend to survive have even resulted in adverse effects, such as increased air, water, and soil pollution, loss of biodiversity, and other consequences. In other words, instead of minimizing the consumption of natural resources, the EIs provided a means to finance activities that may not otherwise be financially viable [8,9,10].

Economic instruments are fiscal and financial incentives or disincentives designed to promote the internalization of environmental costs, using economic or market incentives to generate desired behaviors for producers and consumers to achieve environmentally sustainable objectives [2,11,12,13]. EIs are the most widely used political instruments mainly for the following reasons: First, they offer incentives to change the behavior of individuals or companies in ways that reduce environmental damage while minimizing costs. Second, they are often more flexible than other policy instruments due to their adaptability to specific circumstances and ability to adjust as conditions change. Third, they are seen as a source of revenue for governments that can be used to finance environmental programs. Fourth, they tend to be more politically acceptable because they are perceived as less intrusive and expensive to implement [2,14].

There are different EI classifications according to their characteristics [15,16,17]. Five EIs relevant to the forest-based sector are included in the investigation: taxes, fees and charges, marketable permits, subsidies, and payment for ecosystem services. (1) Taxes are all mandatory payments made by economic agents to the government; tax rates are based on negative environmental impacts and constitute the income that finances public spending [17,18,19]. (2) Fees and charges are mandatory payments to the government levied in proportion to the services provided, such as the volume of water consumed [17,19]. (3) Marketable permits are permissions to assign pollution under a trading system. There are two types: “cap-and-trade systems” and “baseline-and-credit systems.” First, pollution limits are set, and permits are assigned by auction or free of charge according to established criteria. On the other hand, the second type has no boundaries, and pollutants that reduce emissions over the standard can market their surplus to other polluting enterprises to achieve their goals [16,19]. (4) Subsidies are payments made by the government to influence production levels and prices as well as to control the creation of projects or activities that protect or restore the environment, such as grants or loans, tax exemptions or reductions, feed-in tariffs, price support, differential rates in credits, or totally or partially financed guarantees [16,17]. Finally, (5) payment for ecosystem services (PSE) is an incentive-based mechanism in which users pay an ecosystem service to communities or individuals who manage the resources to preserve ecosystem services over time. For this investigation, we only consider the case of the State as the ecosystem services payer [20,21,22].

Usually, the monetary funds generated by the EIs are channeled through environmental funds, state budgets, policies, or specific programs, designed to manage and distribute budget items according to a series of established criteria according to the environmental priorities of each country [23,24,25]. Bearing in mind that the European Union (EU) has one of the most efficient environmental regulatory frameworks in the world [26,27], we selected the EU as a reference to investigate the use, implementation, and management of EIs, specifically in the forest-based sector, through the qualitative analysis of policies and strategic documents of the forest-based sector, as well as the SWOT analysis of the economic instruments implemented in the forest-based sector.

Economic instruments in forestry also promote adaptation to climate change. One of the essential priorities of the forestry strategy is providing direct or indirect payments that encourage activities to reduce vulnerability to climate change, i.e., providing specific solutions to current issues through EU or local initiatives that promote research, the development of sustainable technologies, the evaluation of the needs of public and private forest owners in the face of floods, droughts, insect attacks, storms, among other events associated with climate change [17]. In the case of the EU, the European Commission has formulated long-term sectoral policies with action plans for research, technology development, and financial support to enable the development of sectors according to the adaptation and mitigation plan for climate change [25,28,29].

Forest land cover was chosen as the foundation for the research due to the ecosystem services it provides, which are endless and necessary for daily life, such as the supply of wood, carbon sequestration, and regulation of the quality of the environment, air, weather, and flood risk, as well as recreational, tourist, and educational opportunities, and essential functions such as soil formation and nutrient cycling, among other services [30]. Despite all the benefits that the forest offers humanity, forest ecosystems are in decline due to deforestation, overexploitation of natural resources, the loss of biodiversity, and the effects of climate change [31]. According to some studies and reports, the forest-based sector’s most frequently used economic instruments include subsidies and compensatory payments to forest owners [19,32]. For example, during 2014–2020, the EU contributed approximately EUR 8.1 billion to the European Agricultural Fund for Rural Development. However, the exact budget allocation for the forestry sector alone is not easily accessible. Insights suggest that the majority of the funding of the EAFRD is directed toward the agricultural sector, with relatively less investment being made in the forestry sector [33]. As a result, specific investment in sustainable forest management, afforestation, and other forest-related initiatives may be limited compared to agricultural investments. Financing includes various payment schemes such as direct payments, payments for sustainable farming methods, and payments for young farmers to promote sustainable forestry practices, protect and enhance forest ecosystems, and fight climate change [33]. However, inefficiencies have been reported in the distribution of the compensation payments and subsidies received, depending on the type of forest, property size, management type, and importance within the forest-based sector among policy strategies at the national or regional level [32,34,35].

There is a large number of publications on economic instruments [11,13,16,36,37,38,39,40], their performance [17,41], their association with harmful subsidies [42,43,44], and their implementation in relation to environmental components [45,46,47], such as biodiversity and ecosystem services [19,48], and their use on diverse economic sectors [49,50]. Likewise, there are various publications on the financing programs of the EU, specifically regarding their use, evaluation, and implementation since they were created [25,49,51,52,53]. However, articles that integrate the economic instruments and their operability and use through financing programs in the forest-based sector are limited [24,32]. Therefore, this study will focus on economic instruments with environmental domains that directly mention forest or indirectly benefit the forest, such as the sustainable management of water, landscape, soil, and biodiversity in the context of the European Union.

This article aims to identify the EIs that are used in the EU forest-based sector through the analysis of two case studies: Austria and the Czech Republic. This article aims to answer the following research questions: What existing economic instruments and financing schemes have been implemented for the forestry sector in the EU, Austria, and the Czech Republic? Additionally, what are the SWOT aspects of the economic instruments identified in the forestry sector? Austria and the Czech Republic are relatively similar in area, population, and forest cover. Although they have access to similar economic instruments, they show significant differences in the degree of development of the forest-based sector [54,55,56]. This paper also intends to analyze the strengths, opportunities, weaknesses, and threats by extracting and comparing data from the forestry policies and financing mechanisms of the European Union, Austria, and the Czech Republic to identify challenges and limitations and suggest the prioritization of the use of economic instruments in the forest-based sector. The results indicate that the use of EIs differ according to the political interest of each EU member country [33,34], which can provide information that policymakers can use to improve the management and application of economic instruments available in the EU forest-based sector as well as in other sectors. The methodology can be replicated in different regions or countries to achieve a better understanding of economic instruments and the financial mechanisms associated with them.

2. Materials and Methods

2.1. Study Area

The study area includes two European Union state members: Austria and the Czech Republic (Czechia), see Figure 1. These two countries were selected as case studies to identify and contrast the EIs implemented and the financial programs of the forest-based sector as they have comparable areas, share of forest area, and gross value added concerning the forestry industry in 2019 (83,878 km²; 46.4%; EUR 869.52 million in Austria and 78,871 km²; 37.9%; EUR 933.39 million in Czechia) [57].

Austria is a Central European country that has been part of the EU since 1995 and has a population of 8,932,664 [57]. The country has a national forestry strategy agreed upon with multiple actors to strengthen the forest-based sector, increase biodiversity, and conceptualize the forest as a provider of various ecosystem functions of provision, regulation, maintenance, and culture [58]. Likewise, it is aligned with other national policy documents that aim to allow the sustainable development of the forest-based sector and diversification of forest products, functions, and services it provides for society. Austria had 24,344 km² of protected areas in 2021 and a total roundwood production of 18,903.72 thousand m³ (2019), while the total environmental taxes from agriculture, forestry, and fishing in 2019 were reported to be EUR 127.65 million [57].

The Czech Republic is a country in Central Europe that joined the EU in 2004 and has 10,701,777 inhabitants [57]. The national forestry strategy was updated and launched in 2020. The action plan was established in 2021, meaning its implementation is in the initial stages and the modifications proposed for managing the forest-based sector still need to be observed. In 2021, Czechia, reported 17,273 km² of protected areas and a total roundwood production of 32,586 thousand m³ (2019), while the total environmental taxes from agriculture, forestry, and fishing in 2019 were reported to be EUR 169.66 million [57].

2.2. Methodological Approach

Figure 2 presents the methodological framework used to answer the aforementioned research questions. The first phase includes revising and selecting strategic documents of the forest-based sector to identify the existing economic instruments and the financing schemes implemented in the EU, Austria, and Czechia forest-based sector. The core documents under review were the forest strategies and the funding programs (see Table 1 and the explanation in Section 2.3). Then, the documents were coded into categories to group their content and compare the information contained in each document regarding objectives, vision, financing programs, and economic instruments of the forest-based sector, according to Section 2.4. Additionally, the strengths, weaknesses, opportunities, and threats were extracted to carry out a SWOT analysis to better understand the economic instruments proposed in the strategic documents of the forest-based sector, according to Section 2.5. The final phase corresponds to analyzing and preparing policy recommendations regarding the economic instruments available in the EU forest-based sector, especially in Austria and Czechia.

2.3. Core Documents

As mentioned earlier, monetary funds generated by EIs are typically channeled and distributed through environmental funds, state budgets, policies, or specific programs. To investigate how these funds are distributed for the sustainable management of the forestry sector, we examined policies and programs from the EU, Austria, and Czechia, as well as the respective budgets they allocate to environmental management activities. Our research focused on programs, policies, and strategies that were easily accessible online and allowed for comparison between EU member countries. Although there are financial aids available at the national and regional level, obtaining and comparing information is more complex due to the lack of integration and distinction by source type [23,32]. Consequently, we focused only on the EU funding framework (see Table 1). Documents AT02, CZ01, and CZ02 on forest strategies and forest law from Austria and Czechia were only available in the official languages. They were translated into English to use and extract quotations using the Microsoft Translator online service. The documents AT03 and CZ03 on forestry funds were included since they show financing for the sustainable management of the forest-based sector. However, AT03 was implemented as an additional measure during the coronavirus pandemic, and CZ02 is an initiative led by the Federation of Forestry and Timber Industry of the Czech Republic. The documents on financing programs allowed us to identify how the programs work in the EU and the selected countries. The EU04 and EU06 evaluations provide recommendations based on the performance evaluation of the programs and instruments, providing relevant information for the investigation.

2.4. Qualitative Content Analysis

The method selected to develop the research was qualitative content analysis since it allows for the interpretation of a wide range of written, visual, or verbal messages to make replicable and valid inferences through the systematic classification of codes and identification of themes or patterns to improve data understanding [59,60,61]. Since 1960, there have been computer programs capable of supporting text analysis. Still, it was not until 1980 that the potential of information technology for processing, storing, organizing, and manipulating text for the qualitative analysis of studied phenomena was demonstrated. From that point on, the availability of software has improved and expanded [59,61]. There are over 20 software programs that have distinct strengths and weaknesses, such as cost of use, interface friendliness, number of formats supported (text, audio, video), analysis tools included, and options for presenting results [59]. In the study, we used ATLAS.ti Windows Version 23.0.8 [62]. Atlas encodes text data into feature vectors to facilitate analysis. This allows the software to identify patterns, themes, and relationships within the data through a combination of text analysis and visualization techniques [60].

Table 1. Core documents and respective codes used during the analysis [25,33,34,58,63,64,65,66,67,68,69,70,71,72,73,74,75,76].

Document Type	European Union (EU)	Code	Austria (AT)	Code	Czechia (CZ)	Code
Forest Strategy	New EU Forest Strategy for 2030	EU01	Austrian Forest Strategy 2020+	AT01	The Concept of State Forestry Policy by 2035	CZ01
Forest Law	Sustainable Forestry and the European Union: initiatives of the European Commission	EU02	Federal Law Gazette I No. 1975/440	AT02	Forest Act No. 289/1995 Coll.	CZ02
Funding Programs	The EU’s 2021–2027 Long-term Budget and Next Generation EU	EU03	Austrian Forest Fund	AT03	Marketing Forest and Wood-Processing Fund 2021	CZ03
	Evaluation of the Regulation (EU) No 1305/2013 on support for rural development by the European Agricultural Fund for Rural Development (EAFRD)	EU04	Rural Development Programme for Austria—Factsheet on 2014–2020	AT04	Rural Development Programme for the Czech Republic—Factsheet on 2014–2020	CZ04
	Ready, steady, green! LIFE helps farming and forestry adapt to climate change.	EU05	LIFE Programme in Austria	AT05	LIFE Programme in Czechia	CZ05
	Special Report 23/2022: Synergies between Horizon 2020 and European Structural and Investment Funds	EU06	Austria Horizon 2020 country profile	AT06	Czechia Horizon 2020 country profile	CZ06

Table 1. Core documents and respective codes used during the analysis [25,33,34,58,63,64,65,66,67,68,69,70,71,72,73,74,75,76].

Document Type	European Union (EU)	Code	Austria (AT)	Code	Czechia (CZ)	Code
Forest Strategy	New EU Forest Strategy for 2030	EU01	Austrian Forest Strategy 2020+	AT01	The Concept of State Forestry Policy by 2035	CZ01
Forest Law	Sustainable Forestry and the European Union: initiatives of the European Commission	EU02	Federal Law Gazette I No. 1975/440	AT02	Forest Act No. 289/1995 Coll.	CZ02
Funding Programs	The EU’s 2021–2027 Long-term Budget and Next Generation EU	EU03	Austrian Forest Fund	AT03	Marketing Forest and Wood-Processing Fund 2021	CZ03
	Evaluation of the Regulation (EU) No 1305/2013 on support for rural development by the European Agricultural Fund for Rural Development (EAFRD)	EU04	Rural Development Programme for Austria—Factsheet on 2014–2020	AT04	Rural Development Programme for the Czech Republic—Factsheet on 2014–2020	CZ04
	Ready, steady, green! LIFE helps farming and forestry adapt to climate change.	EU05	LIFE Programme in Austria	AT05	LIFE Programme in Czechia	CZ05
	Special Report 23/2022: Synergies between Horizon 2020 and European Structural and Investment Funds	EU06	Austria Horizon 2020 country profile	AT06	Czechia Horizon 2020 country profile	CZ06

The analysis process was based on three phases: preparation, organization, and reporting [61]. A series of activities were developed within each phase to make the process more rigorous (see Figure 3). The basic unit of text analysis was defined during the preparation phase. In this case, the analysis unit is a text of any size representing a topic relevant to the research questions. In the organization phase, the categories and the coding scheme were defined according to the literary review, prior knowledge, and data collected. Additionally, each code was provided with a definition to avoid misinterpretation during the coding process. The main category includes general concepts such as economic instruments, SWOT analysis, or financing programs. At the same time, the subcategories refer to specific concepts such as subsidies, taxes, and charges within the economic instrument category. The coding system was then tested on a small sample (two policy documents), and the necessary modifications to the coding system were made. Once the scheme was improved, all the core documents selected were coded (in this case, 18 strategic documents for the operation of the forest-based sector in the EU, Austria, and Czechia—see Table 1). Then, the consistency of the coding was validated since new categories were included during the coding due to their relevance with respect to answering the research question. In the last phase (the reporting phase), the data coding was completed, and code diagrams were prepared (as well as different graphs) to present the results and enable us to move on to the next stage of our results analysis.

2.5. SWOT Analysis

The SWOT method of analysis was selected to assess the strengths, weaknesses, opportunities, and threats of the economic instruments implemented in the EU forest-based sector according to the content analysis (see Figure 3) of EU, Austrian, and Czech forest policy documents (see Table 1). The SWOT method was developed in the 1960s by Albert Humphrey, a consultant at the Stanford Research Institute. It is widely used in qualitative studies due to its simplicity in evaluating alternatives and complex decision situations, as well as the fact that it allows for the identification of impediments, advantages, external government roles, and internal problems of a phenomenon [77,78,79,80,81,82,83]. For the SWOT analysis, a series of questions were posed for each component to extract specific citations and relevant aspects of the available economic instruments, their use, evaluation, performance, and other elements that were found suitable in the selected documents for the analysis. The questions posed and the SWOT analysis scheme can be seen in Figure 4.

After identifying the strengths, weaknesses, opportunities, and threats, key concepts were extracted to form a comprehensive conceptual network. This network was developed by leveraging universal semantic relationships, facilitating an analysis of the interconnections among the identified terms [84]. The primary objective of this approach was to enhance our comprehension of the differentiations and shared characteristics among the key terms, thereby elucidating their implications for improving economic instruments and their role in financing the forest-based sector.

3. Results

3.1. EU Funding Programs Supporting the Forest-Based Sector

Ten EU funding programs that involve the forest-based sector and contribute directly or indirectly to the sustainable management, competitiveness, resilience, and adaptation and mitigation measures in EU forests were identified (see

Table 2. Explanation and results of the EU financing programs for the forest-based sector.

Heading *	Cluster	EU Funding Programs	Description, Linkage with the Forest-Based Sector, and Quotations Identified in the Core Documents
Single Market, Innovation and Digital	Research & Innovation	Horizon Europe	This is a funding program designed to improve research and innovation in the EU. Initiatives contributing to the European Green Deal for climate neutrality, resilience, biodiversity, and sustainable growth are financed through the program. This allows it to be a transversal program for the forest-based sector since it funds various forestry sustainable management initiatives, forest stand improvement, ecosystem services, and even the use of non-forest products that come from the forest. Each period of the program implements improvements according to the conclusions and recommendations of the management evaluations carried out. The most recent version of the program (2021–2027) includes actions for the forest-based sector in the thematic group “Food, Bioeconomy, Natural Resources, Agriculture and Environment.” Forty quotes on Horizon Europe were identified in four core documents, mainly The EU’s 2021–2027 long-term Budget and Next Generation EU [25], with nineteen quotes (47.50%), and the Special Report 23/2022: Synergies between Horizon 2020 and European Structural and Investment Funds [74], with fourteen quotes (35%).
	European Strategic Investments	Invest EU	This program aims to promote innovation, job creation, and more solid value chains in Europe through specific investments. It is administrated through accomplished partners, such as the EIB Group. It is also a transversal program for the forest-based sector because it finances four initiatives: sustainable infrastructure, research, innovation, digitization, SMEs and skills, and social financing, meaning that it aims to comply with the European Green Deal and the proposed environmental commitments. We pulled eleven program-related quotations from two core documents. The EU’s 2021–2027 long-term Budget and Next Generation EU [25] provided eight quotes (72.73%) while Ready, steady, green! LIFE [71] provided three quotes (27.27%).
Cohesion and Values	Regional Development & Cohesion	European Regional Development Fund (ERDF)	This is a fund to reduce social, economic, and territorial gaps through national or regional programs implemented by the European Commission and the national authorities of the member countries. The most recent version (2021–2027) outlines five priorities where the forest-based sector can access financing under the greener, low carbon, resilient line, sustainable tourism, and local and sustainable development throughout the EU. We identified 19 fund-related quotes from four core documents, primarily from the Special Report 23/2022: Synergies between Horizon 2020 and European Structural and Investment Funds [74], with 13 quotes (68.42%).
		Cohesion Fund (CF)	This fund aims to strengthen the social, economic, and territorial cohesion of EU member countries with a national per capita income of less than 90% (15 countries, including Czechia). It is administrated through public and regional authorities, and the forest-based sector can benefit since one of its priorities is investment in the environment. We identified 15 fund-related quotations from the EU’s 2021–2027 long-term Budget and Next Generation EU [25] and Special Report 23/2022: Synergies between Horizon 2020 and European Structural and Investment Funds [74] with the aforementioned documents providing 12 (80%) and 3 quotes (20%), respectively.
		REACT-EU	This is a complementary fund of the ERDF and the ESF which is to be implemented until the end of 2023 and strives to provide relief from the crisis generated by the COVID-19 pandemic. It has been used to support the forest-based sector with injections of capital to promote crisis repair and contribute to the green and resilient recovery of the economy. We drew nine fund-related quotations from the EU’s 2021–2027 long-term Budget and Next Generation EU [25].
	Investing in People, Social Cohesion & Values	European Social Fund+ (ESF+)	This is a fund designed to help cope with the crisis generated by the coronavirus pandemic. The forest-based sector can benefit by encouraging the workforce to train and develop skills to transition to a green economy. We drew sixteen fund-related quotations from three documents: the EU’s 2021–2027 long-term Budget and Next Generation EU [25] provided eight quotes (50%), Special Report 23/2022: Synergies between Horizon 2020 and European Structural and Investment Funds [74] provided five quotes (31.25%), and the New EU Forest Strategy for 2030 [63] provided three quotes (18.75%).
		Erasmus+	This is a program that aims to support education and training in the EU. It has been implemented through participating organizations (schools, universities, and organizations) and provides a grant to cover the participation costs. It benefits the forest-based sector by allowing participants to gain knowledge and develop skills through practice. We identified seven quotations related to the program from the EU’s 2021–2027 long-term Budget and Next Generation EU [25].
Natural Resources & Environment	Agriculture & Maritime Policy	European agricultural fund for rural development (EAFRD)	This fund finances rural development programs (RDPs) formulated at the national or regional level aligned with the EU’s rural development goals. This relates to the forest-based sector as it promotes the sustainable management of natural resources and climate action. We found 45 quotations related to the fund in ten core documents, primarily from the Evaluation of the Regulation (EU) No 1305/2013 on support for rural development by the European Agricultural Fund for Rural Development (EAFRD) [33], which provided 11 quotes (24.44%), and the EU’s 2021–2027 long-term Budget and Next Generation EU [25], which provided 9 quotes (20%).
	Environment & Climate Action	Programme for Environment and Climate Action (LIFE)	This program promotes the development of capacities and governance by financing strategic projects that promote regional, multi-regional, or national cooperation. It is directly related to the forest-based sector since it focuses on the protection, restoration, and improvement of the quality of the environment, arrest, and reversal of the loss of biodiversity and degradation of ecosystems through four subprograms: Nature and Biodiversity, Circular Economy and Quality of Life, Mitigation and Adaptation to Climate Change, and Clean Energy Transition. We drew 197 program-related quotations from nine core documents, primarily from the Ready, steady, green! LIFE helps farming and forestry adapt to climate change [71], which accounted for 139 of the 197 quotations (70.56%).
		Just Transition Fund (JTF)	This is a fund to support the transition to climate neutrality and reduce regional disparities that may arise from structural changes in the EU. The forest-based sector benefits from this fund since it finances the creation of new companies, research, innovation, environmental rehabilitation, clean energy, and transformation of existing carbon-intensive facilities. We drew ten fund-related quotations from the EU’s 2021–2027 long-term Budget and Next Generation EU [25].

Source: Adapted from EU funding programs [85] and core documents. (* Heading EU policy area).

). The analyzed core documents include financing amounts, methods to obtain them, description of their use, sanctions in case of misappropriation, and amounts financed in the previous periods (according to management reports), as well as evaluations and analyses of the use of some of the EU funding programs with respect to specific forestry or agricultural projects that have had direct or indirect effects on forest areas. In the core documents, we identified 369 quotations related to the financing programs associated with the forest-based sector available in the EU, Austria, and Czechia. Additionally, the Sankey diagram identified how the strategic documents and the public financing programs are connected. The strongest connections were evident between the Program for Environment and Climate Action (LIFE) and the document EU05, Ready, steady, green! LIFE helps farming and forestry adapt to climate change. In contrast, the funds React-EU, Just Transition Fund, and the program Erasmus+ have finer connections with the core document EU03 the EU’s 2021–2027 long-term Budget, and NextGenerationEU (see Figure 5).

3.2. Economic Instruments Identified in the Forest-Based Sector

The economic instruments were identified by searching for keywords related to each selected instrument. The terms were selected from three databases of economic instruments reported for the European Union, Austria, and Czechia [16,86,87].

3.2.1. Taxes

Environmental taxes were established using keywords such as pesticides, fertilizers, water abstraction, water discharge permits, taxes on forest products, permanent or temporary withdrawals from land, mortgages for real estate and land, landscape protection, nature conservation, and timber harvest. We identified 118 tax-related quotations from twelve core documents, mainly from the Czech Forest Act No. 289/1995 Coll. [66], which provided 50 quotes (42.37%), and the Austrian Forest Strategy 2020+ [58], which provided 18 quotes (15.25%). It can be seen in the Sankey diagram below that this environmental instrument had heavier connections to CZ02 and AT01 and finer relationships with the other ten core documents (see Figure 5).

3.2.2. Fees and Charges

The keywords used to identify environmental fees and charges were national park admission, environmental protection, hunting licenses, wastewater discharge, water abstraction, and fines for environmental non-compliance. We identified 62 relevant quotations from eight core documents, mainly from Forest Act No. 289/1995 Coll. [66], which provided 41 quotations (66.13%), and Federal Law Gazette I No. 1975/440 [65], which provided 10 quotes (16.13%). It can be seen in the Sankey diagram below that this environmental instrument had heavier connections to CZ02 and AT02 and thinner relationships with the other six core documents (see Figure 5).

3.2.3. Marketable Permits

The following keywords were used to identify documents regarding marketable permits: tradable, permits, emission system, and emission trading. Nine quotations were identified from four core documents, primarily in the New EU Forest Strategy for 2030 [63], which provided five quotes (55.56%), and the EU’s 2021–2027 long-term Budget and Next Generation EU [25], which provided two quotes (22.22%). It can be seen in the Sankey diagram below that this environmental instrument had heavier connections to EU01 and thinner links with EU03, EU02, and EU05 (see Figure 5).

3.2.4. Subsidies

Subsidies for environmental reasons were identified by the following keywords: forestry sustainable management, reforestation, soil conservation, ecological or environmentally friendly farming, and pesticide-free farming. We found 108 quotations from 14 core documents, primarily from Federal Law Gazette I No. 1975/440 [65], which provided 37 quotes (34.26%), and Forest Act No. 289/1995 Coll. [66], which provided 10 quotes (9.26%). It can be seen in the Sankey diagram below that this environmental instrument had heavier connections to AT02 and thinner links with the other twelve core documents (see Figure 5).

Figure 5. Sankey diagram of economic instruments, financial support, and financing programs identified in the core documents.

Figure 5. Sankey diagram of economic instruments, financial support, and financing programs identified in the core documents.

3.2.5. Payments for Ecosystem Services

Documents regarding payments for ecosystem services were extracted using words and combinations related to payments for ecosystem services, biodiversity offsetting schemes, agri-environmental measures (AEMs), and Agri-environment-climate measures (AECMs). We found 49 quotations from 10 core documents, mainly from the New EU Forest Strategy for 2030 [63], which provided 15 quotes (30.61%), and the Evaluation of the Regulation (EU) No 1305/2013 [33], which provided 12 quotes (24.49%). It can be seen in the Sankey diagram below that this environmental instrument had heavier connections to EU01 and EU04 and thinner links with the other eight core documents (see Figure 5).

3.3. SWOT Analysis

A total of 534 quotes related to the strengths, weaknesses, opportunities, and threats of using, implementing, and managing the forest-based sector’s economic instruments and financing mechanisms were extracted from the core documents (see

Table 3. Frequency of occurrence of SWOT factors per core document.

Core Document	Strengths Gr = 202	Ratio of Total Number of Quotes %	Weaknesses Gr = 125	Ratio of Total Number of Quotes %	Opportunities Gr = 180	Ratio of Total Number of Quotes %	Threats Gr = 27	Ratio of Total Number of Quotes %
EU01	11	5.45%	2	1.60%	44	24.44%	2	7.41%
EU02	18	8.91%	0	0.00%	1	0.56%	0	0.00%
EU03	18	8.91%	0	0.00%	15	8.33%	1	3.70%
EU04	34	16.83%	63	50.40%	15	8.33%	11	40.74%
EU05	35	17.33%	0	0.00%	6	3.33%	0	0.00%
EU06	13	6.44%	33	26.40%	17	9.44%	2	7.41%
AT01	10	4.95%	1	0.80%	15	8.33%	5	18.52%
AT02	14	6.93%	0	0.00%	0	0.00%	0	0.00%
AT03	2	0.99%	4	3.20%	4	2.22%	2	7.41%
AT04	3	1.49%	1	0.80%	14	7.78%	2	7.41%
AT05	7	3.47%	0	0.00%	6	3.33%	0	0.00%
AT06	6	2.97%	1	0.80%	2	1.11%	0	0.00%
CZ01	0	0.00%	9	7.20%	23	12.78%	0	0.00%
CZ02	12	5.94%	0	0.00%	0	0.00%	0	0.00%
CZ03	2	0.99%	0	0.00%	10	5.56%	0	0.00%
CZ04	5	2.48%	6	4.80%	4	2.22%	2	7.41%
CZ05	10	4.95%	1	0.80%	1	0.56%	0	0.00%
CZ06	2	0.99%	4	3.20%	3	1.67%	0	0.00%

Gr: code frequency. The shaded boxes correspond to the two highest values in each of the SWOT aspects analyzed.

). The document from which the most quotes were extracted from was the Evaluation of the Regulation (EU) No. 1305/2013 on support for rural development by the European Agricultural Fund for Rural Development (EAFRD) [33] since it provided an analysis of the forestry measures that have been adopted in the different member countries that are aligned with the rural development priorities proposed by the European Commission in the periods 2007–2013 and 2014–2020. This document is relevant to our research since it thoroughly analyzes the forest measures funded by European funds and evaluates the efficiency, coherence, relevance, and added value for the EU. Additionally, the SWOT analysis unveiled 14 pivotal concepts to effectively establish a framework that achieves the sustainable forest management objectives. These concepts include agroforestry, biodiversity, circular bioeconomy, cross-border cooperation, stake-holder dialogue, budget optimization, forest ecosystem services, informed decision-making, policy monitoring, forest multifunctionality, resilience, sustainable forest management, tourism industry, and planning-implementation trade-offs. These concepts were interconnected through universal semantic relationships to evaluate their potential use in enhancing the economic instruments accessible within the EU for financing the forestry sector. The key concepts have been categorized into distinct groups: orange symbolizes measures or strategies, purple pertains to social and political aspects, and green encompasses aspects directly related to the forest. This color-coded classification aids in visually discerning and organizing the key concepts based on their thematic domains (see Figure 6).

3.3.1. Strengths of the Economic Instruments in the EU Forest-Based Sector

A total of 202 relevant quotes on the strengths of financing mechanisms in the forest-based sector in the EU, Austria, and Czechia were extracted from 17 core documents (see Table 3). The strengths were drawn mainly from the following documents: Ready, steady, green! LIFE helps farming and forestry adapt to climate change [71], which provided 35 quotes (17.33), and Evaluation of the Regulation (EU) No 1305/2013 [33], which provided 34 quotes (16.83%). This was because they both carry out an in-depth analysis of the forest-based sector and highlight aspects of forest management by observing and assessing the use of different measures over long periods to measure the effects on forests and their sustainable management, as well as the perception and participation of managers, owners, and employees of the forest-based sector. Moreover, within the conceptual network, we have discerned seven pivotal concepts that epitomize the commendable attributes inherent in the policies of the EU (see Figure 6). These concepts encompass participatory processes and exemplary models for customizing forest strategies across all EU member nations. Furthermore, the EU exhibits a visionary approach toward sustainable forest management, emphasizing the optimal functioning of forests and carefully considering forest ecosystem services.

3.3.2. Weaknesses of the Economic Instruments in the EU Forest-Based Sector

A total of 125 quotations pertaining to the weaknesses of financing mechanisms in the forest-based sector in the EU, Austria, and Czechia were extracted from 11 core documents (see Table 3). The primary documents from which the weaknesses were extracted from were Evaluation of the Regulation (EU) No 1305/2013 [33], which provided 63 quotes (50.40%), and Special Report 23/2022: there are synergies between Horizon 2020 and European Structural and Investment Funds [74], which provided 33 quotes (26.40%). This is because they evaluate some of the financing programs of the EU and consider relationships between the available funds and aspects that can be improved and affect the use of the funds available for the sustainable management of the forest-based sector. Furthermore, within the framework of the conceptual network, we have identified six pivotal concepts that shed light on the shortcomings ingrained in the EU’s policies concerning the management of economic instruments and financing within the forestry sector (see Figure 6). These deficiencies encompass a disparity between implementation and planning and significant variations in forest management practices among member countries, leading to a decline in cross-border cooperation and the preservation of forests’ multifunctionality. Additionally, the absence of constructive dialogue with stakeholders has resulted in the prevalence of unsustainable forest management practices.

3.3.3. Opportunities of the Economic Instruments in the EU Forest-Based Sector

A total of 180 quotes about the opportunities related to financing mechanisms in the forest-based sector in the EU, Austria, and Czechia were extracted from 16 core documents (see Table 3). The ones that contributed the most quotes were the New EU Forest Strategy for 2030 [63], with 44 quotes (24.44%), and the Concept of State Forestry Policy by 2035 [34], with 23 quotes (12.78%). The opportunities were based on the measures proposed in the different documents that have the potential to improve the functioning of the financing mechanisms of the forest-based sector. For this reason, the most relevant documents are the forestry strategies. They propose various measures according to the current state of forestry functioning in the EU and each country, offer solutions or actions to improve the current task towards a more sustainable one, and adopt the proposed objectives in the policies to reach agreements settled upon by the EU and the signatory countries. Moreover, within the conceptual network, we have identified eleven key concepts that underscore the potential opportunities to be harnessed from the EU’s policies governing the management of economic instruments and financing within the forest-based sector (see Figure 6). These opportunities encompass integrating novel practices, such as agroforestry, and exploring the forest’s potential for developing the tourism industry. These avenues hold promise for diversifying the array of products and services derived from forests and integrating the principles of circular bioeconomy. It is feasible to foster biodiversity conservation and bolster the resilience of natural systems by embracing such practices. Furthermore, an enhanced monitoring framework for these policies can facilitate more informed decision-making and, as a result, optimize public expenditure—supporting protection and conservation efforts and the forest-based sector’s research and productivity.

3.3.4. Threats of the Economic Instruments in the EU Forest-Based Sector

A total of 27 quotes regarding the threats related to financing mechanisms in the forest-based sector in the EU, Austria, and Czechia were extracted from eight core documents (see Table 3). The documents that contributed the most quotes were the New EU Forest Strategy for 2030 [63], supplying eleven quotes (40.74%), and the Austrian Forest Strategy 2020+ [58], which provided five quotes (18.52%). A reduced number of threats was identified in comparison with the other factors of the SWOT analysis since the selected documents are based on the internal analysis of the sector and do not make extensive comparisons with other sectors (except agriculture) or external aspects that can be considered threats to the financing of actions in the forest-based sector. Furthermore, within the conceptual network, we identified nine key concepts that underscore the potential threats that may impede the effectiveness of EU policies governing the management of economic instruments and financing within the forestry sector (see Figure 6). These threats encompass various aspects, including the environmental repercussions that would arise if sustainable management practices were not embraced. The majority of these repercussions would pose a significant risk to forests and their multiple ecosystem services. Moreover, the potential degradation of the quality and quantity of ecosystem services provided by forests to the population is a matter of substantial concern. A threat arises from failing to achieve a consensus on efficient implementation plans for the proposed policies. This includes the crucial need to optimize the available budget to ensure the effective execution of climate change mitigation and adaptation measures within the forest-based sector.

4. Discussion

4.1. Economic Instruments and Financial Schemes

Economic instruments implemented worldwide have, at national and international levels, proved to be a tool for sustainable environmental management. Some of them have influenced consumption and production patterns, encouraging technological innovation and providing an essential source of funding for development programs to ensure the improvement of the environment [4,11,13,14]. The qualitative analysis of the core documents allowed us to identify the economic instruments included in the forest policies to regulate the use and sustainable management of natural resources and establish the implementation rules and processes for the withdrawal of land, discharging wastewater, water extraction, landscape protection, and conservation among other activities that have an impact on natural resources and influence the state of forests.

The economic instruments implemented in the EU, Austria, and Czechia allowed us to identify that EIs are generally associated with environmental protection expenditure [88]. In the EU, two classifications are used to provide information on environmental activities and products that prevent, reduce, and eliminate pollution or environmental degradation: the Classification of Environmental Protection Activities (CEPA) and the Classification of Resources Management Activities (CReMA) [89]. In addition, the economic instruments are based on policies that promote development and are generally accompanied by financing programs to improve the competitiveness and innovation of the sectors. In the EU, the European Commission has formulated long-term policies with action plans for research, technological development, financial support, and other aspects to develop the sectors and allocate the available environmental budget [25].

Subsidies, taxes, and environmental charges are the most widely used economic instruments worldwide [19]. Subsidies are the mechanisms that facilitate the direct financing of initiatives to improve ecological quality [90,91]. While taxes and charges are imposed to comply with the “polluter pays” principle by regulating activities and discouraging the use of polluting goods [92]. However, environmental taxes are constantly opposed because their economic effects are difficult to understand [18]. Tax reforms are introduced to disincentivize goods or services by increasing the tax. Still, society needs to be more informed about the environmental problems as a result of using fertilizers, pesticides, water collection and discharge, and landfills [18].

In the last 25 years, interest in payment for ecosystem services (PES) has been stimulated. However, there is a need to monitor and improve the design of the mechanism, which would alleviate uncertainty about the tool’s effectiveness. Additionally, some studies demonstrated that PES positively impacts forest cover; however, the diversity and conservation of forest ecosystems could be compromised. The mechanism’s effectiveness is linked to the environmental legal framework, which may lead to dependence on PES to achieve sustainable management [93].

Cap-and-trade systems have been criticized for their potential limitations and weaknesses, which may impact their effectiveness in reducing carbon emissions. For example, some studies have pointed out that the sale of carbon credits from forest conservation projects may not achieve desired environmental outcomes, such as the addition of carbon sequestration [35]. Additionally, there are market uncertainties surrounding the implementation of carbon taxes and emissions trading systems, as their economic impacts may depend on the structure of the linked energy market [50,94,95]. As a result, there is ongoing debate for more action to ensure that carbon offsets from tropical forest conservation projects can deliver real and measurable reductions in deforestation and greenhouse gas emissions [96]. For this reason, the core documents analyzed make minimal mention of this mechanism.

4.2. SWOT Analysis

4.2.1. Strengths

Identifying and analyzing the strengths of the economic instruments and financial mechanisms available in the EU forest-based sector yields valuable insights for promoting sustainable forest management practices. The strengths encompass the prioritization of multifunctionality and forest ecosystem services, effective EU programs, stakeholder involvement, flexible national decision-making, and adaptable budgetary frameworks. This process enables the recognition of best practices and practical approaches. For instance, the EU, Austria, and the Czech Republic’s forest strategies emphasize the multifunctionality of forests and recognize the pivotal role of forest ecosystem services [34,58,63]. Furthermore, the Czech strategy acknowledges the current state of the forestry sector and its limitations, thereby providing a foundation for implementing improvements in forest management and allocating available resources [34].

Additionally, EU programs such as LIFE and the RDP demonstrate a comprehensive approach by addressing social, environmental, and economic priorities through well-defined objectives. These programs foster the development of projects at various scales, ranging from regional to transnational, while promoting integrated landscape management, habitat and species protection, and restoration efforts [33,71,72,73]. Notably, LIFE forestry projects concentrate on forest fire prevention, the monitoring and modeling of forests, implementing adapted forest management practices, and safeguarding ecosystem services [71].

Furthermore, involving forest stakeholders in developing strategies and programs yields positive effects for their adoption and implementation. The analysis revealed that the Austrian Forest Strategy actively seeks stakeholder views on the necessity and content of forestry programs, thereby ensuring greater stakeholder engagement and buy-in [58].

Lastly, although there is no standardized legal basis for forest policy in the EU, voluntary strategies and legal acts related to forests, forestry, and the forest industry play a significant role. EU member states retain decision-making authority on forest-related issues, allowing flexibility in implementing strategies and legislation to address national forest priorities [63,64]. Moreover, the formulation of the Multiannual Financial Framework (MFF) facilitates the incorporation of improvements based on the results and performance of previous periods. For instance, the 2021–2027 long-term budget introduces new priorities, such as research, trans-European networks, external action, and programs directly managed at the EU level, to enhance the value of funded initiatives [25].

4.2.2. Weaknesses

Identifying and analyzing weaknesses in economic instruments and financing mechanisms are essential for enhancing their effectiveness and fostering improvements. The shortcomings identified in economic instruments and financing mechanisms encompass legislation, project management, long-term sustainability, monitoring and evaluation, financial allocation, counterfactual establishment, geographic information inclusion, socioeconomics, and a lack of holistic forest ecosystem perspectives. These weaknesses can serve as catalysts for the development of new instruments or the enhancement of existing ones.

At the country level, the legislation concerning sustainable forest management in the Czech Republic is characterized by complexity, heavy regulation, and a lack of incentive tools [34]. Meanwhile, several factors have been identified as weaknesses at the sectoral level. Forestry projects often face challenges due to their extended timelines in producing measurable results, which can hinder effective management and evaluation [33]. A myopic focus solely on immediate impacts on the forest-based sector, such as forest fires, sustainable management, and data collection, may inadvertently neglect the long-term preservation of forests and their ecosystem services [71]. A comprehensive approach that views the forest as a complete system rather than investigating isolated components is crucial for sustainable forest management.

Additionally, the lack of robust financial indicators and results at the sub-measure level poses challenges in monitoring the state of ecosystem services before and after project implementation [33,71]. National or regional reports often generalize investment items, making it challenging to identify specific investments. The allocation of financial resources to forestry measures within the rural development program was limited, representing less than 4.6% of public spending in the EU-28 from 2014 to 2020 [33]. Evaluating financing programs is further complicated by the difficulty in establishing reliable counterfactuals for comparison, making it challenging to assess the true impact of support [33,71]. To accurately evaluate the distribution of forests and stands affected by financial assistance, including geographic information is necessary [33,71]. There is also a notable absence of data on the socioeconomic effects of forestry measures on ecosystem services, highlighting the need for comprehensive assessments [33,71]. Moreover, a shift towards a more holistic approach that considers the entire forest and its ecosystem services is imperative, moving beyond a sole emphasis on trees, species, products, or functions [71]. Finally, the predominant prioritization of the timber function by sure forest owners hinders the development and diversification of the uses and services that forest areas provide [69,71,73].

4.2.3. Opportunities

Analyzing economic instruments and financing mechanisms reveals various opportunities for advancing sustainable forest management, fostering innovation, and improving efficiency. These opportunities encompass initiatives at the national level, such as strategic reorientation and political commitment, as well as sector-level prospects, such as tailored rural development programs, alignment with EU policies, agroforestry practices, cross-border cooperation, effective management, and evaluation, leveraging the tourism industry, stakeholder engagement, and promoting sustainable forest management for enhanced profitability and diversified benefits. Seizing these opportunities can lead to positive transformations within the forest-based sector.

At the national level, the shortcomings identified in the strategy provide valuable insights for reorienting sustainable forest management and strengthening the forestry sector [34]. However, clear political commitment is necessary to translate these findings into specific actions. National forest strategies outline objectives to improve sustainable forest management and propose using economic instruments to achieve these goals [34,58,63]. Moreover, several sector-level opportunities have been identified:

The rural development programs implemented by each member state or region address specific economic, environmental, and social priorities tailored to their circumstances [33,69,70]. Funding for initiatives aligned with EU policies, such as the circular economy, climate change mitigation and adaptation, and improving quality of life, contributes to achieving broader EU policy objectives [33,71,72,73]. As an agricultural system, agroforestry offers opportunities to enhance biodiversity, increase resilience and productivity, and sequester atmospheric carbon more effectively than conventional agriculture [71]. Emphasizing cross-border cooperation can optimize resource management and spending, particularly in shared areas, leading to better support for ecosystem services [25].

Effective management and regular evaluations contribute to the protection and efficient use of available budgets [25]. Corrective or preventive actions can be implemented by adhering to sustainability principles and supporting priority ecosystem services. The tourism industry presents significant business potential for the forestry sector and underscores forests’ essential role in society [63,97]. Maintaining ongoing dialogue among all forest stakeholders and continuously monitoring policies are necessary to incorporate new knowledge and ensure adaptive forest management [58,97]. Forest policy should prioritize sustainable forest management to generate profitability for individual owners, diversify the benefits derived from forests, and promote their development and utilization [58,97].

4.2.4. Threats

Analyzing the threats associated with economic instruments and financial mechanisms in the forestry sector within the European Union reveals potential risks that can undermine the effectiveness of policy instruments and have adverse environmental implications. Despite recognizing the multifunctionality of forests and their ecosystem services, the current sector and forest management policies exhibit a prioritization of wood utilization over other non-timber products or services [34,58,63]. This prioritization suggests a trade-off between planning and implementation, resulting in inadequate support for other crucial forest ecosystem services.

On the other hand, the level of development within the forestry sector varies among EU member countries [54]. Consequently, the efficacy of economic instruments necessitates robust enforcement mechanisms to ensure their effectiveness and avoid unintended consequences. Therefore, it is essential to demonstrate political will and possess the institutional capacity to implement the necessary measures effectively. Additionally, the rural development program’s success relies on regions’ willingness to design programs tailored to their specific circumstances [33,69,70]. However, challenges arise when attempting to assess the effectiveness of investments in forestry projects, as information on financing is often intertwined with the budgetary allocations of other sectors, such as agriculture [33,71].

Moreover, changes in forest policy instruments can affect property rights [97] and carry the risk of unintended consequences [24,92]. For instance, a financial incentive to promote the planting of a specific tree species may inadvertently result in the displacement of other ecologically significant species, negatively impacting biodiversity. To foster a transition towards long-term sustainable forest use, it is crucial to provide an adequate transition period that encourages forest owners to adapt to new policies and practices. Additionally, the uneven distribution of costs and benefits associated with economic instruments often gives rise to social, environmental, and political conflicts [98]. Excessive support for tourism, for example, can cause significant or irreversible damage to other vital ecosystem services.

Given that investments in the forestry sector are typically characterized by high costs and long-term commitments [97], it becomes imperative to establish stable framework conditions. It is important to note that such investments may negatively impact certain forest ecosystem services [9,99]. For instance, the biomass subsidies in Europe often fail to align with environmental and economic sustainability objectives, resulting in detrimental effects on biodiversity and soil quality. Additionally, the limited availability of logging residues constrains the use of wood for energy production without these subsidies [100].

Finally, the absence of a standardized legal framework for forest policy within the European Union can lead to incoherent forest management practices [97]. This lack of coherence can result in inadequate policies for forest protection in certain countries, posing a threat to biodiversity and impeding cooperation among member states. To address these challenges, it is crucial to improve coordination between economic instruments and policy implementation [33,74]. Policies that encourage subsidies for sustainable forest management may conflict with other measures to reduce greenhouse gas emissions or protect biodiversity.

5. Policy Recommendations

The analysis shows that the economic instruments used in the forest-based sector are essential to promote the industry, improve forest owners’ sustainable management, and enhance use by local communities. For this reason, EIs must be constantly evaluated and redesigned to avoid adverse effects on small foresters, ecosystem services, biodiversity, and other environmental components. It is advised that policymakers consider the following recommendations to improve sustainable forest management using EIs that the European Union channels through the different financing programs described previously.

• Promote stricter mechanisms so that the items earmarked for the forest-based sector have a more significant impact, limiting their use from being distributed in other sectors or aspects that may affect the functional status of forest ecosystem services. As observed in the comparison of Austria and Czechia, the distribution of environmental funds depends on the national interest in promoting or not promoting the forest-based sector and its multifunctionality.
• To enhance the protection and preservation of forest ecosystem services, it is essential to promote the implementation of economic instruments, such as payments for ecosystem services. Although there are successful cases in Germany, United Kingdom, and the United States, there is a need to expand the application of these instruments globally to promote sustainable forest management practices.
• Promote efficient communication mechanisms between the different forestry stakeholders to facilitate information at different levels and make early decisions to respond to the constant changes that occur in the forest-based sector, as well as improve cooperation and interaction between the industry, academia, owners, and forest managers according to the needs, limitations, and aspects that each group has identified. This would lead to greater coordination among stakeholders and improved productivity.
• Promote research and innovation to focus on the problems and challenges forest managers and owners face so that research results do not remain in laboratories but have real implications at local or regional levels.

6. Conclusions

This study shows that economic instruments are essential for financing sustainable forest management programs and measures. Despite the adverse effects triggered by the use of some economic instruments, generally speaking, they are more politically accepted because they can be evaluated and modified to reduce the adverse effects so that they can be implemented in society and the environment; therefore, periodically assessing and reformulating the economic instruments is extremely important.

The European Union has a legal framework and a series of strategies and policies to distribute the funds raised via economic instruments throughout the member states according to their priorities for a more sustainable European future. To achieve what they have to date, long periods of evaluations and the restructuring of environmental, social, and economic policies and priorities have been required. The case of the EU can serve as a reference for other countries or regions to improve the plans and programs of nations and channel the financial resources derived from the EIs to better fund environmental management strategies.

Despite the broad designation of social, environmental, and economic priorities within the EU financing programs and funds, the forest-based sector presents more limitations in the use and distribution of resources due to the long period required to keep the effects of the investments made and the limited interest placed in the forest-based sector in some of the member countries of the EU.

A long-term strategy for environmental performance helps as a guide and axis that frames all of the actions and resources available to complete the proposed objectives. In this sense, the EU and Austria present a formulation of policies more aligned with the goals of the European Green Deal. The policy strategies of the forest-based sector include specific measures and activities with designated budget items for each of the priorities planned. In contrast, the forest-based sector in Czechia has not been a priority within the national strategy. Therefore, only recently, a new forestry strategy includes a higher value being given to the diversification, sustainable management, and conservation of forests and their ecosystem services.

This study highlights the effectiveness of EU economic instruments in promoting sustainable forest management practices and offering financial incentives to forest producers and owners in the European Union, Austria, and Czechia. The SWOT analysis conducted in this study helped identify measures that have improved sustainable forest management and environmental components. However, regular evaluations are necessary to avoid unintended consequences and ensure that the EU’s objectives continue to be achieved. Additionally, the present study offers significant insights into the available economic instruments in the forest-based sector, providing decision-makers with valuable information to enhance forestry programs. Furthermore, this study identifies potential research opportunities to explore the effects of compensatory payments on forest management and stakeholder perceptions concerning their impact on sustainable forest management.

It is worth mentioning that some limitations arose during the identification of aspects for the SWOT analysis found in this study. Some aspects can be seen as opportunities or threats depending on how each situation is handled. Therefore, these aspects were analyzed more prudently, attempting to identify other investigations or reports that support the analysis prepared. An example is the use of wood to replace other raw materials. While, in this study, this is presented as an opportunity in terms of technological development and the economic effect it could have on a country’s economy, it could also seen as a threat in relation to forest management and ecosystem services.

Another limitation was that most of the measures and programs analyzed had already been implemented. Consequently, the analysis was based on available legal documents, reports of results, and evaluations to understand the uses and functions of economic instruments through the financing mechanisms available in the EU. However, at the national level, there were other documents that could have been included but were not due to a lack of access or the fact that they were not able to be translated into English. For instance, national environmental reports only briefly mention financing in the summary section and do not provide further detail. This opens up the opportunity for further research into the effects of compensatory payment initiatives and the perception of stakeholders in the forest-based sector on sustainable forest management.