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Market-based Instruments and Farm Forestry
The environment performs important 'ecosystem services', which are the services of manufacturing the air we breathe, creating and maintaining the fertility of our soils, breaking down our waste and cleaning our water.
Our civilisation is absolutely dependant on these services for its well-being and for many of the profits our industries make, yet we take them completely for granted because they are happening around us all the time. However, in the two hundred years since this continent was settled by Europeans we have dramatically modified the landscape and many of those services are now under pressure and at risk.
Market-based instruments (MBIs) may offer landholders an opportunity to provide ecosystem services if these ecosystem services are given a market value, as well as traditional farm forestry timber and non-timber products.
To investigate and improve Australia’s capacity to use MBIs, the Commonwealth, State and Territory governments, through the National Action Plan for Salinity and Water Quality established the National Market-based Instruments Pilots Program in 2003.
Farm forestry market-based instruments
Studies point to opportunities in Australia to develop MBIs, as indicated above through the National MBI Pilot Program and the Ecosystem Services Projects (also see JVAP publication Making Farm Forestry Pay 
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One of the major challenges to developing them is devising broadly accepted and legally defensible ways of measuring the environmental services a particular farm forestry project provides.
Examples of farm forestry markets that may be developed under the National MBI Pilot program follow:
- carbon credits based on carbon sequestered by plantations
- salinity credits based on the positive impact of plantations on dryland and irrigation salinity
- water filtration credits based on farm forestry reducing salt, excess nutrients and turbidity in our waterways, and
- biodiversity credits where farm forestry activities maintain and restore a region’s natural flora and fauna.
Landholders could trade credits produced by farm forestry as environmental services. Potential customers for credits may include a manufacturer buying carbon credits, a downstream landholder for salinity credits, local government for water filtration credits and a philanthropic investor for biodiversity credits.
