Encouraging the Transition to Sustainable Forestry in Canada with Ecological Fiscal Reform – Potential and Pitfalls

There has been some slow but steady progress on sustainable forest management (SFM) in Canada over the last decade. While the change is positive, it is insufficient to keep up with the multiple demands on forest ecosystems. This paper argues that while the provinces should work towards fundamental regulatory reform in the forest sector (such as reforming tenure structures to better reflect Aboriginal, social and ecological needs and values), the federal government should concomitantly offer short-to-medium term fiscal incentives to encourage forest companies operating in Canada to voluntarily move faster and closer towards SFM. The paper argues that such measures would also serve to help level the playing field between leading forest companies (who are facing increased costs from implementing SFM) and other companies who continue to operate at the regulatory baseline. The paper discusses some of the challenges of using fiscal incentives (such as WTO subsidy rules) and offers suggestions for ensuring the measures avoid these pitfalls