MONETIZATION AND DEVELOPMENT OF THE ECOSYSTEM SERVICES MARKET IN THE CONTEXT OF IMPROVING FOREST POLICY INSTRUMENTS

The article explores innovative approaches to the monetization of ecosystem services in Ukraine’s forest sector, focusing on the modernization of forest policy instruments in the face of increasing environmental challenges. The urgency of the topic stems from climate change, environmental degradation, and the pressing need to transition from resource-exploitative forestry practices to an ecosystem-based model of forest management. A thorough analysis of scientific literature has identified a range of monetization models, including payments for ecosystem services (PES), license markets, certification systems, tax relief measures, subsidies, and voluntary forest conservation initiatives. These instruments serve as key mechanisms for enhancing forest sustainability and for promoting multifunctional forest management that accounts for both market and non-market values. The paper argues that economic tools, when properly designed and implemented, can become powerful levers for the conservation and sustainable use of forest ecosystems. However, an essential condition is the establishment of a balance between the commodity function of forests, such as timber production, and their intangible benefits, including biodiversity support, climate regulation, water purification, and recreational services. The study classifies ecosystem service markets and financial mechanisms, highlighting the dominance of investments in timber-related markets, while other critical services remain marginalized and lack systematic financial support. In light of these findings, the article proposes ways to integrate the ecosystem services market into Ukraine’s Forest Sector Development Strategy. This includes the development of a comprehensive legal and regulatory framework that would support accurate assessment, monitoring, and long-term financing of ecosystem services. The paper concludes that the introduction of ecosystem service-based mechanisms into forest policy could foster more sustainable, resilient forest landscapes and enhance Ukraine’s alignment with global environmental and climate policy goals. The research offers valuable insights for policymakers, environmental economists, forest managers, and scientists engaged in promoting sustainable forest governance.