Defining the forest landowner’s utility–loss compensative subsidy level for a biodiversity object

New, cost efficient and voluntary biodiversity protection tools may require bidding price definition on part of the seller. Both the seller and the buyer can withdraw from negotiations if they find that the conditions of the protection contract are unacceptable. However, it can be very difficult for non-industrial, private landowners to define the bidding price demand for their biodiversity objects. The terms of the protection contract, the production possibilities of the forest holding, the forest owner’s multiple forest management goals and their substitutability, and the possible monetary subsidy paid for biodiversity protection should all be simultaneously taken into account when estimating the owner’s price demand for protecting the biodiversity object. This study strives to provide relief in resolving this problem by presenting an approach in which the landowner’s utility–loss compensative subsidy can be defined based on the owner’s forest-holding level utility function and the production possibilities of the holding. The properties of the approach are illustrated by four planning cases in which the length of the protection period (permanent or 20-year temporary protection) and the holding-level goals were varied. The utility functions of the cases were derived by selecting numeric goal variables for the goals, and by defining weights and sub-utility functions for these variables. Varying subsidies for protecting an old-growth spruce stand were included into the simulation of “No treatment” schedules for the examined stand, and the holding-level total utility was maximized for every price level. The utility–loss compensative subsidy was found when the holding-level total utility equaled the total utility achieved in the plan where the stand was regenerated. This subsidy, however, is not necessarily the exact price that the owner should ask from the buyer; all prices above the defined subsidy level will increase owner’s utility if the buyer accepts them. It was concluded that the presented approach provided consistent results in the four cases and that it thus offers valuable decision support for current biodiversity-protection programs.