Private land conservation through voluntary biodiversity conservation schemes: lessons from a payment for ecosystem services scheme in Finland

Abstract

In this study, we illustrate some of the most common challenges and pitfalls in payment for ecosystem services (PES) scheme design, through Finland's METSO program, a major forest-based PES policy in the European Union. We use four fundamental PES design concepts: conditionality, permanence, administrative targeting, and impact on social motivations. We find that METSO has primarily managed to avoid common design pitfalls. However, we identify some of the drawbacks of using timber volume as an ecosystem proxy for the conditions of payment. We then broaden our analysis with two issues that are novel in the literature: implications of achieving conservations targets such as the European Union Biodiversity Strategy 2030 through a private land conservation scheme such as METSO and implications of warming climate on the design of forest-based PES schemes. These issues call attention to the design of future policy instruments. Finally, we propose recommendations to policymakers on PES design.

The backbone of biodiversity conservation is the preservation of natural habitats within protected areas. Despite decades of efforts, only 16.64% of the world's land area has been protected (UNEP-WCMC and IUCN 2021). As biodiversity rapidly diminishes, conservation efforts outside protected areas are also needed. Private land conservation has become more relevant because of recent ambitious global and regional biodiversity commitments (EC 2020, CBD 2022) that cannot be met with strictly protected areas alone. For example, the European Union Biodiversity Strategy (EUBS) 2030 aims to protect 30% of Europe's land and sea areas by 2030 (EC 2020). Because much of Europe's land is privately owned and on small land parcels, the challenge is to devise effective policies with real influence over private land. To be widely adopted and effective, such policies will need to incorporate the needs and preferences of a large and diverse group of landowners and managers. Not only is this the case in Europe, but similar needs are arising globally (Abildtrup et al. 2021, Paletto et al. 2021).

Challenges and pitfalls of PES schemes

Payments for ecosystem services (PES) are payments or improved market access to encourage private landowners to manage or reserve their land to benefit biodiversity or reduce the intensity of their impact on the environment. The number of PES schemes has increased rapidly in the last two decades (Song et al. 2023), despite reporting mixed results (Salzman et al. 2018). PES schemes are at the cusp of further acceleration as the corporate financial sector is starting to realize their business potential (Thompson 2021). PES is perhaps the pioneering precedent of many market-based instruments; trading in natural values, biodiversity credits and certification, carbon trading, and offsetting are examples of many market-based instruments that are emerging. As such, PES research and synthesis is important not only for the continued betterment of PES but also for the development and design of newly emerging market-based instruments.

Because of the complexity of social, economic, and ecological components of PES schemes, designing an effective scheme is a challenging task but a vital one, given that they are likely to play a major role in complementing the role of protected areas. The latest comprehensive account of PES schemes suggests that there are around 550 programs globally with a combined annual value of US$36–42 billion (Salzman et al. 2018). At the time, this was comparable to the global total spending on conservation, estimated at US$51–53 billion (CBD 2014). Despite the large diversion of funds into PES schemes, the effectiveness of these schemes remains unclear, and they are difficult to measure and compare with other biodiversity conservation tools because of the vast diversity of programs and a lack of documented details (IPBES 2019).

The PES literature is rich and manifold. The main program challenges that are repeatedly raised in the literature are summarized in columns 2–5 of supplemental table S1: The conditionality of PES in relation to paying for unreliable (or wrong) proxies for ecosystem services: The choice of proxy does not fully capture the desired ecosystem services or has perverse side effects (see the “Choice of ecosystem services proxy” section) such as misalignment with conditions of the payment. Motivation crowding: Adverse effects on people's motivation to act positively for nature conservation and to practice biodiversity-focused land-management practices (see the “Impact on social motivation” section). A lack of permanence and certainty: Most PES programs do not offer fixed-term or long-term contracts that landowners can rely on, resulting in ecosystem services provision that does not have a lasting legacy (see the “Permanence” section). And poor administrative targeting: Poor or unambitious protection targets caused by ulterior nonenvironmental motives (e.g., political or economic) rather than objectively seeking to harness better ecosystem services provision (see the “Governance” section).

The vast majority of literature reviews do not discuss program-level details that could reveal the application, successes, and failures of alternative PES designs because they analyze the PES literature rather than the schemes themselves. This gap inhibits improvements to the design of future schemes (Salzman et al. 2018).

Structure and scope

In this article, we demonstrate how common challenges and pitfalls in PES schemes can be directly linked to on-the-ground program design. Insights that emerge from this discussion can provide a holistic view of the role and development needs of PES schemes in light of the global biodiversity policy ambitions. We do this by using the METSO program (for Metsien Monimuotoisuus, the Forest Biodiversity Programme for Southern Finland; box 1) in Finland, the European Union’s only forest-based PES with 17 years of history, as an example. In the “Common PES challenges illustrated through METSO” section, we summarize the strengths and weaknesses of the METSO program in relation to four common PES challenges described above and outline lessons learned from the program design. In that section, our aim is not to give an exhaustive overview of PES scheme challenges. Rather, we take well-defined and common issues to report on how they translate to on-the-ground program design features of METSO. On the basis of our review of the PES policy design literature overlap with our study (table S1), the four key challenges that we discuss do indeed appear to be ubiquitous, which makes our study broadly applicable to many PES programs.

Box 1. METSO program summary: Basic introduction, mechanism and types of contracts.

METSO, the Forest Biodiversity Action Program for Southern Finland, is a voluntary forest conservation program for nonindustrial forest owners in Southern Finland. Owners with valuable forests for biodiversity can volunteer their land to be protected for conservation and be compensated with a monetary sum. Starting in 2008, the aim of METSO is to protect 96,000 hectares (ha) of native forests by 2025. Access to the program is conditional on a minimum level of biodiversity value. The program is administrated by 15 regions across Southern Finland that independently assess forests against the biodiversity criteria. The compensation depends on the type of contract made.

Types of contracts: Private nature reserves involve permanent protection via a covenant applied to the land title, which remains in perpetuity. These covenants prohibit human intervention that reduces the biodiversity value of the forest. This excludes timber harvesting activities but allows recreational use of the land such as nature tourism and sports, mushroom and berry picking activities. Purchase by the state involves transfer of the land title to the state, in which case the monetary compensation includes the value of the land on top of timber value. Fixed-term nature reserves provide equivalent protections to private nature reserve but are enforced by a contract with a fixed term of 10 or 20 years.

Payment mechanism: The amount of compensation is calculated on the timber volume as a substitute for the economic loss of foregoing the income from selling the timber. For private nature reserves, the compensation is based on the economic value of the trees, using the average market prices (in euros per cubic meters) averaged across the past 3 years. For purchased by state, the compensation also includes the land value. For fixed-term contracts, the official compensation calculations account for aspects such as delayed revenue and reduced growth of forests due to not harvesting it at the end of the harvest cycle. The income from signing up to permanent protections and the 20-year fixed-term contracts is tax free.

Progress: Figure 1 shows the area of forest protected by these mechanisms through METSO since its commencement, up until 2023. To that date, METSO had spent approximately 400 million euros to protect a total of 80,313 ha (the sum of the bars in figure 1), toward a 96,000-ha target by 2025. The last decade has seen a consistent increase in the average cost of permanent protection, for both purchased by the state and private nature reserves, reflecting the increase in global timber value (the lines in figure 1) but also because of the directed focus on Southern Finland, where timber volume is generally higher per hectare.

Forests and owners: For most forest owners, the revenue from the forest does not constitute their main source of income. Most parcels protected under METSO are between 8 and 14 ha, which is smaller than the average size of forest holdings (30–48 ha; Kulju et al. 2022). This indicates that parcels protected are likely only a proportion of average forest holdings (between 16% and 47%).

Below, we further introduce two less commonly discussed topics in the PES design literature (table S1), which are topical in the rapidly developing policy environment. In the “Practicalities of using PES schemes to meet ambitious conservation policy targets” section, we evaluate the cost implications of using METSO-like tools to achieve ambitious biodiversity policy goals, focusing on the EUBS 2030 targets. Finally, we discuss the emerging challenges that externalities such as climate change pose for voluntary compensation schemes, which, so far, has been an absent topic in the PES literature (see the “Externalities in PES” section). We summarize METSO-related details in box 1 but discuss specific design features throughout the following sections under respective themes.

Although we examine the effectiveness of all types of PES, the METSO example narrows the focus to direct land protection, excluding biodiversity offsets and non-land-tethered values such as water and air quality. METSO nevertheless serves as a useful and timely case study, because the program has an extensively documented history, and as a voluntary private land conservation program, it represents one of the key mechanisms to achieving the EUBS 2030 targets. We focus on four common PES design-related challenges; however, there are several others that are not addressed in this article (i.e., are outside the scope), two of which are limited or no additionality, a lack of extra benefits in addition to the existing actions and behaviors of landowners that increase the provision of ecosystem services or biodiversity status despite the PES funding (Persson and Alpizar 2013; also column 5 of table S1), and a leakage effect, the risk that a PES scheme targeting one location manages to increase ecosystem services provision at local scale, but this, in turn, leads to exacerbation of land-use pressures elsewhere in the world (column 5 of table S1).

Approach and rationale

Our analysis was based on a combination of a literature review of PES schemes to identify common challenges faced by programs, followed by a close examination of METSO through data focused on the program. We followed the design criteria given in some of the seminal papers on PES schemes (Engel et al. 2008, Wunder et al. 2008, Pagiola 2011, Wunder et al. 2020) and considered their overlap with and relevance to the METSO program. We further confirmed the prevalence of these challenges in the program-based PES literature (table S1), compiled using search terms PES scheme effectiveness for biodiversity conservation, Payments for conservation, Payments for environmental services, Payments for ecosystem services in combination with the terms design and effectiveness. We used full text search on publications after 2000 using Google Scholar (English language) without any discipline specifications on two separate occasions, the last time on 14 May 2025. A small number of additional references were identified through a first-order snowball process from the articles that were identified through this search. The rest of our analysis is based on a combination of data sources including publicly available data on the METSO program, published data on timber volume in forest stands (Virkkala et al. 2022), published data on the conservation priority of forests produced to identify areas important for forest biodiversity conservation in Finland (Forsius et al. 2023, Mikkonen et al. 2023), and spatial data on public lands in Finland (supplemental table S2). We carried out area calculations for the EUBS targets using GIS (geographical information system) software ArcMap 10.8 (ESRI 2020).

Common PES challenges illustrated through METSO

In this section, we illustrate the four challenges that many PES schemes face (described above), using Finland's METSO program as an example: the choice of ecosystem services proxy, otherwise known as conditionality; the impact on social motivation; permanence; and governance.

The choice of ecosystem services proxy: Compensation based on the loss of economic opportunity rather than on a biodiversity outcome

Most PES payments are calculated on the basis of one of two quantities: either by input, where payments are based on people's efforts or management actions, or by outcome, where people are compensated for the actual biodiversity outcome that results from their efforts (Engel et al. 2008). The return on conservation investments is higher for outcome-based PES than for input-based PES (Kroeger 2013, McDonald et al. 2018, Wuepper and Huber 2022). However, outcomes are more difficult to measure, and comprehensive accounting of them comes with high costs. Therefore, many PES schemes resort to using raw natural resources as the main unit of compensation or payment to reduce administrative costs (Brownson et al. 2020, Wuepper and Huber 2022).

The current METSO compensation is based on timber volume. Old-growth forests have high timber volume, and therefore, offer high biodiversity values. Figure 2 shows that timber volume and conservation priority of Finnish forests are indeed correlated. Timber volume is naturally higher in southern and central Finland (in the METSO region) than in northern Finland (outside the METSO region); however, the correlation between conservation priority and timber volume is very weak at high conservation priority sites (closer to 1 on the y-axis), particularly in the METSO region. This is partly because some high conservation priority values relate to ecosystems that are naturally low in tree density. This means that landowners with sites that are naturally low in timber volume but high in biodiversity value are not proportionally rewarded for their contribution to biodiversity conservation, because their compensation is only related to the volume of wood.

Figure 2.

Correlation between timber volume (in cubic meters per hectare) and conservation priority inside and outside the METSO region. Conservation priority is given on a scale from 0 (lowest priority) to 1 (highest priority) on the y-axis. Each dot represents 1 of 30,000 randomly selected, approximately 1-hectare unprotected forested sites. Source: The data on volume are from Virkkala and colleagues (2022), and the data on priority are from Forsius and colleagues (2023).

There are many aspects of biodiversity that are not adequately accounted for by timber volume. This includes the amount of deadwood, understory structure, species diversity, and landscape features such as patch size and connectivity to other forest sites. Even though these features are part of the site selection criteria in METSO, a forest owner is not financially compensated for fostering and protecting these features. Deadwood is a particularly important biodiversity asset, because it provides habitat for many threatened forest species, including fungi, insects, and birds (Ranius et al. 2016, Parisi et al. 2018, Lofroth et al. 2023); therefore, it is a good indicator of forest biodiversity (Lassauce et al. 2011). Approximately 25% of all boreal forest species live in deadwood, and the volumes are higher in forests that are not intensively managed (Stokland et al. 2004). Site connectivity potential is another important feature that could be incorporated into the payment scheme, especially when demand for PES contracts exceed the uptake (discussed in the “Recommendations” section). Making the compensation proportional to site connectivity also incentivizes neighboring properties to conjoin conservation efforts (Reeson et al. 2011).

The missing direct link between PES and biodiversity values is one of the main reasons it is difficult to assess the effectiveness of PES schemes. Our literature review has revealed that there are only a few PES schemes that incorporate biodiversity values into the way compensation is calculated. This is despite there being potentially innovative approaches available, such as reverse auctions (Naidoo and Adamowitz 2005, Murdoch et al. 2007, Ens 2012) and methods for assessing aggregated biodiversity values of different kinds (e.g., Sinclair et al. 2021).

Impact on social motivation

PES schemes introduce many ethical and cultural dilemmas at community and society levels. Gomez-Baggethun and colleagues (2010) suggested that the cultural impacts of PES may include long-term changes in a landowner's quality of life, independence, attitudes or belief systems, and security, along with social changes such as the empowerment of women, changes to community identity, and changes in behavior and motivations for conserving nature. These changes introduce numerous ethical dimensions to the decision to implement PES schemes. One major ethical concern centers on the anthropocentric and utilitarian framing of most PES schemes. Many schemes assume that nature is there to service humans (i.e., ecosystem services assumption). The commodification of natural environments may force a utilitarian ideal on environmental protection, which could be creating a new social norm or expectation that protecting the environment should result in or require monetary reward. This is known as the motivation crowding out effect in literature (Rode et al. 2015).

On the other hand, the increasing globalization of the natural resources market means that landowners or producers in some parts of the world could miss out on financial opportunities by being forced to rely on said relational values toward nature protection while landowners on the other side of the world get paid to reduce the impact of the same product on biodiversity (Luck et al. 2012). Therefore, the balance between fostering relational values in landowners and economic levers to achieve biodiversity conservation on private land must be struck carefully.

The best-case scenario for a PES scheme is to protect the environment from degradation either in perpetuity (via permanent mechanisms) or to delay land-use pressures while promoting a more nature-oriented attitude by financially supporting landowners and managers. In the worst-case scenario, as soon as financial incentives stop, unsustainable land use returns, and the PES scheme achieves no long-term positive change (Engel et al. 2008, Wunder et al. 2008, Erbaugh 2022). Not all PES schemes result in these undesirable outcomes, and there have been many recent reports of improved nature-oriented intrinsic values (motivational crowding in), even after payments have stopped for environmental services (Jayachandran et al. 2017, Lliso et al. 2022, Vorlaufer et al. 2022, Blanco et al. 2023).

Thus far, only one study has investigated whether there have been any motivational crowding effects of METSO (Primmer et al. 2014). This research showed that, by adopting a hands-off voluntary approach and leaving the decision-making to the forest owners, the program did not reduce the landholders’ motivation toward conserving nature. Another study looking at how forest owners’ value systems affect their motivation to protect forest biodiversity showed that, in Finland, forest owners with stronger motivation to protect nature already act in ways that are additional to signing up to an incentives scheme (Koskela and Karppinen 2021), supporting the claim that there is little danger of motivation crowding out risk in the METSO program. However, it is important to acknowledge that data collection in this work was based on a random sample and was not targeted at METSO-contracted forest owners.

One of the major achievements of the METSO program so far has been the process of repairing the frayed relationship between nonindustrial private forest owners and the state, after the top-down approach adopted by the Finnish government as Finland became a member of the European Union in 1995 and joined the European Union’s Natura 2000 program. Under Natura 2000, private land was acquired for conservation with little or no negotiation with landowners, causing substantial conflict and distrust between the landowners and the authorities (Kati et al. 2015, Blicharska et al. 2016). In many ways, METSO is still dealing with the social ramifications of the Natura 2000 program.

Permanence: Contract arrangements

The details of contractual arrangements affect the success of PES schemes significantly (Pagiola 2011, Mahanty et al. 2013, Wunder et al. 2020), especially when it comes to the tenure, duration, and conditionality of the contracts. A major obstacle to the efficiency of PES schemes stems from the variable and often short length of contracts, because of uncertainty associated with funding, and the lack of temporal legacy of improved ecosystem services provision. The insecurity of these types of contractual arrangements often hinders the commitment of local people, therefore reducing the adoptability and success of PES schemes (Erbaugh 2022). Seven case studies from Mexico, Brazil, Uganda, Mozambique, the Phillipines, Indonesia and Nicaragua, and Colombia under the REDD+ program indicated that uncertain contractual terms hindered the effectiveness and sustainability of ecosystem services provision (Mahanty et al. 2013).

Because of the voluntary nature of most PES schemes and because they are often based on the landowner's efforts, most PES contracts globally are temporary (Mahanty et al. 2013). METSO is an exception, in the sense that 99% (figure 1) of the funding used by the environmental authorities (the Finnish Centers for Economic Development, Transport, and the Environment) for the implementation of the METSO program has been spent on permanent protection and less than 1% on temporary contracts. By focusing on permanent contracts and making fixed-term contract durations known to the forest owners prior to their signing up, METSO is largely safe from the pitfalls experienced by other PES schemes.

Figure 1.

Summary statistics for the METSO program. The bars represent the area protected in hectares (the left y-axis), and the smooth function represents the cost of protection through time (euros per hectare on the right y-axis). The shaded area around the smooth function represents the standard error of the fitted linear splines model of the cost of protection per hectare.

Fixed-term temporary contracts can be a useful governance tool, especially if they are used as a stepping stone to secure permanent protection through increased landowner motivation at the end of the contract (Sironen et al. 2020) while allowing time for negotiation for the owners to transition to a permanent contract. This is likely to be especially important in Finland, given the complex multigenerational family ownership of many forest parcels. Up until 2022, there were 206 temporary contracts signed under METSO, covering 1641 hectares (ha) of forests. Hänninen and colleagues (2021) found that 54% of environmental forestry subsidy agreements signed under the METSO program are renewed, a relatively high rate that does not suffer from the major issues of motivational crowding out described above.

Governance: Administrative targeting

A considerable proportion of threatened ecosystems globally are now located in and around densely populated areas and overlap with high land values and high pressures on natural resources (Sierra and Russman 2006). This nonrandom distribution of biodiversity assets and land-use pressures creates a myriad of administrative problems for PES schemes such as METSO. Primarily, it creates a spatial bias in conservation allocation because low-pressure areas tend to be protected disproportionately (Wunder et al. 2020), especially when PES policy is dominated by political and economic motives (Rosa da Conceição et al. 2015).

METSO largely avoids this trap through two key design features. First, the program is focused on southern and central Finland (figure 3), where the majority of high-pressure areas from timber harvesting and urbanization overlap with high conservation priority areas. Had METSO been focused on low-hanging fruit, the majority of the contracts would have been focused on northern Finland, a low-pressure and low merchantable timber-producing area where most of Finland's protected areas are located. Second, the administration of the program through regional Centers for Economic Development, Transport, and the Environment guarantees that contracts are evenly distributed across southern and central Finland, further reducing spatial biases.

Figure 3.

The inner line delineates Southern Finland, which is the operating area for METSO program. Shades indicate the gradient in boreal biogeographical zones: hemi boreal (darkest shade), southern boreal, middle boreal, northern boreal (lightest shade).

However, the overlap between conservation priority and high-pressure areas also creates difficulties in the administration of METSO (figure 3). This is due to the highly fragmented nature of the METSO region (Kouki et al. 2010), where forest holdings are smaller in size than those in northern Finland. Because forest protection contracts are negotiated on an individual basis, the administrative cost per hectare is higher in high-pressure areas. Another difficulty related to program administration is that because METSO is administered by multiple regions with different funding allocations, there is often a mismatch in conservation demand and uptake. Currently, in many areas, forest owners with high-value forests are unable to secure a protection contract because of limited funding in their region.

Governance structure and administrative capacity features determine the path of success or failure of PES (Ferraro 2017, Wunder et al. 2020), especially in the context of ambitious global biodiversity targets. We discuss what the practical implications may be for METSO in the context of EUBS 2030 in detail in the “Practicalities of using PES schemes to meet ambitious conservation policy targets” section. In our view, the above three features of the METSO program track well against the common challenges that PES schemes face elsewhere. Therefore, it is important that these continue to be maintained in the program, if METSO is to play a role in meeting EUBS target.

The practicalities of using PES schemes to meet ambitious conservation policy targets

The role of PES schemes in the global efforts to halt biodiversity loss remains debated (Salzman et al. 2018). The importance of voluntary conservation on privately owned lands is well established, but to what degree can such schemes deliver biodiversity outcomes? We explore the cost implications of using PES-like schemes to meet ambitious biodiversity targets such as the EUBS 2030.

The EUBS’s 30% protection target applies to all biogeographical regions, including the boreal region, which is mostly located in Finland and Sweden. There are no official country quotas, but following the equal-burden-sharing (Armstrong 2019) principle, all countries in the boreal region are likely expected to protect 30% of their boreal habitats. Furthermore, one-third of the 30% target (i.e., 10% of the total area) is to be strictly protected, a target most likely be inclusive of current protected areas (referred to as the 10/30 target). These directives are currently nonbinding, which means member states are not legally obligated to implement them. These targets pose challenges for Finland, because most of the high biodiversity areas are in southern Finland, where 71% of the forested land is privately owned (Hanski 2000, Kallio et al. 2008, Mikkonen et al. 2023). Therefore, if EUBS 10/30 is to be achieved, it will likely have to be through PES schemes such as METSO or land acquisition (Winkel et al. 2022).

In table 1, we explore the practical implications of reaching the EUBS 10/30 target using METSO under two conservation scenarios (the columns in table 1): where the 10/30 target is met nationally and where it is met at a regional scale. We estimated the remaining areas needed to achieve the 10/30 target on public and private land in Finland. For this, we used a previously developed conservation plan (Forsius et al. 2023) to determine the top 10% and 30% priority areas of the boreal bioregion in Finland under the assumption that Finland will strive to protect these high conservation value areas first. To factor in already strictly protected areas, we used the results of Kuusela and colleagues (2022). They calculated that 9.8% of all forested areas, including both high- and low-productivity forests, are protected in Finland, the majority of which are in northern Finland. Finland is currently in the process of deciding which types of areas will count toward other effective conservation measures. Because there is currently no comprehensive national dataset of other effective conservation measures, we opted to include only strictly protected forested areas in our analysis, whereas areas of potential other effective conservation measures such as biodiversity conservation sites on forestry land that are already in place were excluded. Although this gives only a partial picture of the current protection status, our analysis allows us to illustrate the scale of additional conservation measures needed to meet the EUBS targets and how this is split between private and public lands.

Table 1.

Proportion of land that needs to be protected in addition to the already-protected areas in private tenure versus public land, in percentage and hectares, rounded to the nearest thousand hectares.

	National priorities				Regional priorities
	10% strict protection		30%		10% strict protection		30%
Sector	Percentage	Area (in hectares)	Percentage	Area (in hectares)	Percentage	Area (in hectares)	Percentage	Area (in hectares)
Private	83	36,000	82	4,627,000	90	1,034,000	83	4,730,000
Public	17	7600	18	1,036,000	10	115,000	17	940,000

Note: National priority refers to the 10% and 30% protection targets being met nationally, and regional priority is what is being met for each of the administrative regions in Finland.

Our analysis suggests that, to meet the 30% overall protection target nationally, the Finnish government would need to acquire 4.6 million ha of privately owned forests (including the 10% strictly protected area quota). To meet the EUBS 30% target for boreal forests shared equally by the regions, Finland will likely have to protect 4.7 million ha of privately owned forests (including the 1 million ha under the strictly protected quota). These figures are in addition to the already protected areas. Our analysis complements that of the Finnish Nature Panel (Kotiaho et al. 2021), who also advised that the 10/30 target should be met in all administrative regions of Finland to ensure a better representation of all forest types, including, for example, the more southern herb-rich forests and broadleaf deciduous forests.

These figures illustrate the massive scale of private land protection needed to achieve the EUBS targets in Finland: Between 80% and 90% of the areas that need to be protected fall on privately owned land if this kind of prioritization (Forsius et al. 2023) is used. The area that is privately owned under the 10% strict protection target varies significantly when calculated at a national or regional level (nearly a thirtyfold difference), whereas, with the 30% target, the area that needs to be protected that falls on privately owned land is nearly the same (approximately 4.6–4.7 million ha) at either the national or the regional level.

To reach the 10% strict protection target, it is likely that the forested areas on privately owned land (36,000 ha) will have to be secured via a mechanism such as METSO. Using the cost of the last 5 years’ METSO compensation rates for permanent protection contracts (6314 euros per ha) and the area estimates required in hectares (table 1), the future budget of voluntary conservation programs is estimated to be around 225 million euros to reach the 10% strict protection target nationally, and 6 billion euros to reach the target regionally. This estimate assumes that future programs will continue to use timber volume as the basis of compensation and that timber growth and price remain constant, making these estimates the bare minimum. 36,000 ha of forest protection is nearly one-third of the current protection target for METSO over the 17-year period. It is unlikely that timber prices will remain the same in the near future; since the Ukrainian war and the trade sanctions on timber exports from Russia, Finland's domestic timber demands have increased dramatically (Dzian et al. 2022). Internationally, global timber prices could increase by two to four times by 2040 relative to 2020 prices (Daigneault et al. 2022).

To protect the remaining 20% of the boreal bioregion, Finland is likely to choose a less stringent and a less costly mechanism than METSO, such as other effective conservation measures in the form of forest subsidies. On the basis of the mean of the last 5 years of forest subsidization rates for protection of forest from timber harvesting (2448 euros per ha) under the Metka program (the Act on a Temporary Forestry Incentive Scheme; Koskela et al. 2024), and the area estimates required in hectares (table 1), the future budget to reach 30% overall protection target may range between 13 billion and 15 billion euros at a national and regional level respectively.

Externalities in PES: How climate change may induce currently unforeseen challenges

Climate change is a major external factor that affects PES scheme successes or efficiencies in all corners of the world. It introduces a multitude of challenges. In the present section, we focus on the biophysical implications of climate-induced changes in boreal forests and how these could affect the future protection targets for schemes such as METSO.

The implications of climate change effects in the boreal bioregion may manifest in divergent and nonlinear ways. On one hand, the increasing temperatures could increase tree growth in the near future (Alrahahleh et al. 2016, Pukkala et al. 2021, Triviño et al. 2023a), particularly in the northern boreal region (Triviño et al. 2023b). On the other hand, the increasing frequency and intensity of extreme events such as windstorms, wildfires, and insect and pathogen outbreaks could increase tree mortality (Venäläinen et al. 2020, Pukkala et al. 2021) in the long term. The interaction of these possible events into the future only adds to the complexity of predicting the net effect of climate change on ecosystem services provision and, therefore, PES schemes. Here we focus on a single factor, the effect of an increase or decrease in timber volume growth on future METSO compensation because of climate induced changes.

We use a recent publication by Triviño and colleagues (2023a), where they estimated that there would be an approximately 2% increase in harvested timber under RCP4.5 and RCP8.5 (the Intergovernmental Panel on Climate Change's Representative Concentration Pathways) under a business-as-usual management scenario (i.e., even-aged forestry with final clear cut) because of an overall increase in timber growth in this period relative to a no-climate-change scenario in the next 20 years (figure 4) in Finland. Taking the mean timber stocking volume per hectare estimates in southern Finland (141 cubic meters per ha) from Korhonen and colleagues (2021) and the mean METSO compensation (6314 Euro per ha) estimates, if we were to translate the 2% increase in timber volume into monetary terms, it would mean a difference of around 6.8 million euros extra that would be required to protect 36,000 ha to achieve the 10% strict protection quota for EUBS. Alrahahleh and colleagues (2016) predicted even a higher timber volume growth, with increase of 10% and 12% in southern Finland over 2010–2039 period under RCP4.5 and 8.5, respectively.

Figure 4.

Predicted amount of harvested timber and deadwood over 2021–2041 period under business as usual and continuous cover forestry harvesting scenarios under three climate change scenarios (no climate change, RCP4.5, and RCP8.5). Source: Adapted results from Triviño and colleagues (2023a).

At the same time, the same studies predict that in the mid- to long term (70–100 years), tree mortality could increase because of drought stress and other extreme weather events and insect outbreaks (particularly under RCP8.5) that could decrease timber volume. In this case, the cost of compensation based on timber volume could be less, contrary to the above estimate. They also predict a slight increase in deadwood under both RCP4.5 and 8.5 (figure 4; Alrahahleh et al. 2016, Venäläinen et al. 2020, Pukkala et al. 2021, Triviño et al. 2023a), which technically means increased biodiversity value, given that deadwood is a critical resource for many forest species (Stokland et al. 2012).

Overall, the combination of these events imposed by climate change impels a highly uncertain future for voluntary forest compensation schemes such as METSO. Climate change implications for future design and implementation of these types of schemes are, so far, an absent topic in the PES literature.

PES schemes moving forward

The key question around PES schemes is whether they are the most cost-efficient way for future conservation. Many researchers argue that schemes are not always the most cost-efficient mechanism for conservation as success relies on landowners’ willingness to sell (Knight et al. 2011). On the other hand, voluntary conservation agreements have been found to contain many very important components for the successful implementation of biodiversity conservation (Horne 2006, Miljand et al. 2021). The traditional top-down approach to achieving global biodiversity targets may be easier administratively and cost less fiscally than a voluntary approach using PES. However, the lessons from past top-down approaches (e.g., Natura 2000) demonstrate that land expropriation is likely to exact a heavy price in the form of negative public attitudes to conservation and loss of trust in institutions (Hiedanpää 2002). Nevertheless, the voluntary strategy in the form of PES is clearly not a straightforward approach, as is shown in this study.

The second prominent question about costs and benefits is around what PES expenditure could buy elsewhere, such as in the global south, where some countries face crippling poverty and where the consumption of natural resources is a matter of survival and livelihoods of people on the margins. Many developed countries choose to offset their impact on biodiversity outside their borders where gains are cheaper to secure. An example is neighboring Norway donating US$3.68 billion to the REDD+ program in 2020, targeting developing countries in tropical regions (Westholm et al. 2011, Morita and Matsumoto 2023). The Finnish case is, however, unique in that the boreal bioregion is a critical component of the continent's biodiversity representativeness, and therefore, offsetting externally would not be a viable option without trading away one asset for another.

The role of PES schemes in Europe

Programs such as the METSO are likely to be an integral part of achieving global biodiversity conservation targets as protected areas alone are not sufficient for meeting these, let alone halting the biodiversity crisis. METSO has been important in shifting the public sentiment about forest conservation in Finland. The design was strongly motivated by the trauma caused by the top-down land acquisition approach in building the Natura 2000 network (Hiedanpää 2002), which created resistance toward conservation among landowners in Finland and more widely in Europe (Tiebel et al. 2021). By allowing landowners to voluntarily offer their forests for protection, the program attempts to reverse the power dynamics traditionally seen in conservation. The trust relationship between stakeholders and the government is often underrated, but it plays a vital role in successful PES schemes (Matthews and Missingham 2009, Ford et al. 2012).

Given the METSO program's history and continuity, cumulative corporate knowledge is likely to be essential to achieve ambitious targets such as the EUBS 2030. The present study illustrates that there are some noteworthy practical challenges for PES schemes that are likely ubiquitous. Choosing the right ecosystem services proxy is crucial; a compensation mechanism based on a market-related commodity rather than biodiversity outcome leaves PES schemes exposed to pitfalls such as price inflation of conservation contracts without the proportional increase in conservation outcome. The added complication of externalities such as climate-induced effects on the future cost of conservation contracts and to the ability or willingness of landowners to participate need to be incorporated into future PES planning and biodiversity targets, particularly in the global south and in agricultural PES schemes. If biodiversity conservation targets such as the EUBS 2030 are to be achieved, PES schemes such as METSO must be expanded massively (10–50 times), especially in the case of high private ownership and the highly parcellated nature of land tenure in Europe.

There are some good news stories that should be shared from METSO—namely, the legacy of the scheme that will leave over 90,000 ha of forests permanently protected, the careful strategy that aims not to tamper with landowners’ social motivation around nature conservation, and the good administrative targeting of high conservation priority areas.

Climate change implications for the timber volume-based compensation mechanism proves a challenging reality for Finland's future conservation efforts if METSO was to be part of their commitment to EUBS 2030 target. This challenge is likely to be a reality for many other countries in Europe.

Biodiversity loss and ecosystem degradation issues cannot be solved by PES schemes alone, so these should be implemented alongside other policy measures in a complimentary manner. For example, one of the main avenues for climate change mitigation is the emerging carbon market, where retaining mature forests from timber production will play an important role and forest owners may have the option to earn income from keeping their forest plots intact. How the carbon market fits into forest conservation, whether there might be synergies that could optimize both biodiversity and climate benefits, and whether they may have opposing incentives targeting landowners are topics under discussion (Kangas and Ollikainen 2022). Another development in this space is the expansion of wind farms in forested landscapes in Europe, which may create a competing demand for forest conservation (Balotari-Chiebao et al. 2023).

Despite the unified aim to conserve nature, it is widely documented that environmental policies create competing opportunities and demands for landowners (Lister 2011, Gulbrandsen 2014, Lambin et al. 2014). In the case of Finland, there are some clear synergies with other environmental policies. An example is forest subsidies granted by the Ministry of Agriculture and Forestry in Finland (the Metka program). These reward forest owners who elect to keep parts of their forests intact from forestry activities and leave waterways undisturbed. This subsidy policy is not mutually exclusive with METSO sites, and the two can work in tandem. Broadly speaking, environmental subsidies often have mixed effects on biodiversity conservation; this topic is large and complex and therefore outside the scope of this discussion.

Key knowledge gaps in PES studies

There has been a concerted research effort focused on forest owners’ preferences and their attitudes toward conservation. However, attitudes alone do not always translate to positive behavior or action. People will often have positive attitudes toward nature conservation, but when it comes to acting on these values, such as signing up for a conservation covenant, they stumble for variety of reasons; this effect is termed the value–behavior gap (Conte and Griffin 2019, Robb et al. 2019). Research on understanding the reasons landowners stumble on signing PES contracts for conservation is a key knowledge gap.

We discuss the potential immediate biophysical effects of climate-induced forest change on the METSO program. However, the effects of climate change extend further than ecological systems alone. A knowledge gap that needs to be urgently addressed for any future PES scheme design and or reforms is research on how exactly landowners understand the effects of climate change on their harvest or crop and whether the understanding translates to a shift toward or away from PES schemes. This will help anticipate future needs for setting targets and other design features that we discuss in this article.

Climate change may also bring other indirect effects on ecosystems that could affect PES. For example, in the boreal region there are projected biotic (e.g., insect outbreak) and abiotic (e.g., windstorm) factors that may affect forest ecosystems (Peltola et al. 2010, Venäläinen et al. 2020). There is evidence that forest owners are starting to shift their forest management practices in light of climate change (Blennow 2012, Vehola et al. 2022) already. This may change their attitude toward conservation contracts, especially if they see them as risks to future harvest yield. How the awareness of forest owners about the impacts of climate change on their harvest or production may change their attitude to voluntary protection contracts is an important research question that needs to be investigated urgently in Finland and globally. We found no research that directly investigates this chain of questions in the PES literature.

A consideration that we did not account for in our estimates of cost of protection of other effective conservation measures to reach EU biodiversity targets, is the feedback effect of voluntary forest conservation contracts on the supply of timber products (known as market equilibrium see Adamowicz et al. 2019). In addition, there will be subsequent effects on global market prices, which could then affect future conservation contracts; if other effective conservation measures such as METSO were to be used to reach EU biodiversity targets. We note a lack of discussion on this issue in the PES literature, although we acknowledge for such an effect to be a real concern the said program or policy will have to be many magnitudes larger than METSO and concern the whole of boreal Europe.

Recommendations: METSO program and beyond

Enough time has passed to allow for pilot PES projects to finish, initial insights to be shared, and the PES literature to proliferate but apparently not long enough for a systematic reporting framework to be developed and adopted. This makes it difficult to synthesize and communicate research results. There are enough publications in this space to justify a conventional reporting requirement when assessing and communicating the effectiveness of PES schemes.

We demonstrate that compensation based on timber volume alone is an unreliable proxy for biodiversity value and therefore reduces the biodiversity return on investment and exposes the program to climate change related impacts that would result in higher compensation costs in the future. Our recommendation is to combine the information from initial site visits for assessing forest quality and use this as a biodiversity value proxy in combination with timber volume, so that there is a direct biodiversity-related measurement associated with the compensation. This also allows landowners who retain forest features such as deadwood and habitat trees to benefit from higher payments and their motivations to be rewarded.

As our case study from Finland demonstrates, supply and demand for PES schemes are not distributed evenly in space, particularly when climate change effects on land use and natural products such as timber become more pronounced. This requires more agile policy instruments such as introducing competitive contract mechanisms, especially when demand exceeds the supply of PES contracts. An example of such a policy instrument is reverse tendering, where landowners can place bids at an auction where they compete for the same contract for more land or conservation management actions (Naidoo and Adamowitz 2005, Murdoch et al. 2007, Ens 2012). Auction-based PES also reduces the information rent, the true opportunity cost to the landowner to take actions that benefit biodiversity or improve ecosystem services provision (Conte and Griffin 2019 and Banerjee and Conte 2018).

Offering certainty and permanence in contracts offered to landowners is vital to the success of PES schemes, as was discussed in the “Permanence” section. Deciding the future of one's forest or land parcel can often be a complex and time-consuming process. Under METSO, the option for fixed-term temporary contracts was intended to give landowners the time and flexibility they required before making final decisions about their forests (Terhi Koskela, Natural Resources Institute Finland, personal communication, 1 November 2023.). In small reserves, the ecological benefits of fixed-term temporary contracts over a 20–30-year period match to those of permanent contracts (Mönkkönen et al. 2011).

Author Biography

Khorloo Batpurev (khorloo.batpurev@helsinki.fi) and Heini Kujala are affiliated with the Conservation Biology Informatics Group, Finnish Natural History Museum, in Helsinki, Finland. Khorloo Batpurev and Steve J. Sinclair are affiliated with the Department of Energy, Environment, and Climate Action, at the Arthur Rylah Institute for Environmental Research, in Heidelberg, Victoria, Australia. Khorloo Batpurev and Mar Cabeza are affiliated with the Global Change Conservation Lab, in the Faculty of Biological and Environmental Sciences at the University of Helsinki, in Helsinki, Finland. Kimmo Syrjänen is affiliated with the Finnish Environment Institute, in Helsinki, Finland. María Triviño is affiliated with the Department of Biological and Environmental Science and the School of Resource Wisdom at the University of Jyväskylä, in Jyväskylä, Finland.

Funding

KB acknowledges Finnish Ministry of Education EDUFI grant (no. OPH-930–2022) and a PhD grant from the Kone Foundation (no. 202205885). HK acknowledges funding from the Finnish Strategic Research Council projects ICB-Carbon (grant no. 312559) and BOOST (grant no. 345709).

Author contributions

Khorloo Batpurev (Conceptualization, Data curation, Formal Analysis, Funding acquisition, Investigation, Methodology, Project administration, Software, Visualization, Writing – original draft, Writing – review & editing), Steve J. Sinclair (Conceptualization, Supervision, Writing – review & editing), Mar Cabeza (Conceptualization, Supervision, Writing – review & editing), Kimmo Syrjänen (Investigation, Validation, Writing – review & editing), María Triviño (Formal Analysis, Investigation, Methodology, Software, Validation, Visualization, Writing – review & editing), Heini Kujala (Conceptualization, Data curation, Formal Analysis, Funding acquisition, Investigation, Methodology, Project administration, Resources, Software, Supervision, Validation, Writing – review & editing).

Data availability

All publicly available data used in this article are listed in table 2 (Appendix) with their associated links.