This paper examines the level of payment for ecosystem services (PES) concept implementation in the financing of water-related forest ecosystem services (ES) in the Republic of Croatia, the Federation of Bosnia and Herzegovina (FB&H), the Republic of Slovenia, and the Republic of Serbia. The focus is on water-related forest ES recognised by the millennium ecosystem assessment (MEA). For the purpose of this paper, the term pure PES describes schemes that comply to all five conditions set by Wunder definition and term PES like for those schemes that miss some of those conditions. In the first step, the most important legislative documents related to forests, water, and environmental protection were selected. The second consists of a content analysis; focusing on the definition of ES; the definition of fees or payments; the establishment of ‘forest funds’, ‘water funds’, or ‘environmental funds’; and the way these funds were spent. Here we looked at the flow of funding into the forestry sector recognising forest management as the main water-related forest ES provider. Research revealed existence of well-established payments schemes in forestry in Croatia for almost 30 years and in FB&H for some 20 years which were assessed as closest to pure PES. In Serbia and Slovenia, there were no PES or PES like schemes in the forestry sector. In the water sector the well-established PES like payments schemes existing in all four countries. The environmental protection sector, however, rely more on the tax like rather than on the PES like schemes. Legislation in general recognised the link between forests and water, but this was much more evident in the forestry than in the water or environment sector. The role of the state is strongly pronounced in all countries studied, and was the main driving force behind all payments. However, this position of the state represents also the main obstacle for the development of pure PES schemes, together with underdeveloped private forestry and complex socio-economic conditions. Nevertheless, there is room for further development of pure PES and PES like schemes based on EU or global experiences.

Background and purpose: Croatia is one of the countries with a long practice of payments for environmental forests' services (PES). Following the implementation of green tax in Croatia and present European trends, the aim of this research is to investigate state of economic mechanisms and possible need for change or adaptation to the new trends. Material and methods: Primary data were collected by interviewing forestry professionals in charge of collection and distributions of green tax to gain an insight of their perception on importance of green tax, their comments on recent decrease in prescribed rate and what are the issues related to tax collection. Also very short telephone questionnaires were conducted with taxpayers to get an impression on how taxpayers perceive their obligation, their awareness of the purpose of this payment, their participation in discussion related to green tax and do they receive annual reports from Croatian Forest Ltd. company related to money collected and spent. Secondary data consisted of review of relevant literature, legislation overview and analysis of reports on collection and distribution of green tax provided by Croatian Forests Ltd. company. Results and conclusion: Collected amount of green tax grew constantly given the period 1993-2009. Important factor was increased monitoring of tax collection. Main problems with green tax were constant change of governmental decisions and lack of transparency of tax distribution. Green tax was perceived as burden by taxpayers and their knowledge of its purpose was general at best. Transparency of tax distribution and better public relations by Croatian Forests Ltd. company could improve public acceptance of green tax.

Background and purpose: Even-aged forests prevail in Croatia's forestry. Rotation period is based mostly on natural parameters. In practice, rotation period is given by Croatian Rulebook of forest management. Cutting age is determined based on inventory data and many other stand characteristics. Rotation period is a planned time and it always has to be unique for particular tree species, and cutting age is the age of a stand at the moment of the final cut. The aim of the paper is to compare rotation period based on economic parameters and rotation period determined by using forest inventory data. Material and methods: Owing to absence of long term stand calculation data, research object was taken from Forest Management Handbook (1995). Mean annual increment (MAI) and current annual increment (CAI) provided fundamental data for calculations. The research was conducted at one hectare Common Beech (Fagus sylvatica L.) stand. Assortment structure and value of timber was estimated by the present cutting value method calculated by using Croatian forests Ltd. Price list for the year 2008. Labor costs in forest exploitation were also taken into account. Results and conclusion: In order to achieve cost-effective management of common beech stands, it is necessary to adjust current optimal rotation period. Optimal rotation period should be based on management goals as the main factors. So far the most common criterion adopted in Croatian forestry has been the rotation of maximum sustained yield or maximum Mean annual increment. The presented results indicate that common forest management practice should be changed in order to achieve cost-effective management of beech stands in the future.

The EU Water Framework Directive aims to ensure restoration of Europe’s water bodies to “good ecological status” by 2027. Many Member States will struggle to meet this target, with around half of EU river catchments currently reporting below standard water quality. Diffuse pollution from agriculture represents a major pressure, affecting over 90% of river basins. Accumulating evidence shows that recent improvements to agricultural practices are benefiting water quality but in many cases will be insufficient to achieve WFD objectives. There is growing support for land use change to help bridge the gap, with a particular focus on targeted tree planting to intercept and reduce the delivery of diffuse pollutants to water. This form of integrated catchment management offers multiple benefits to society but a significant cost to landowners and managers. New economic instruments, in combination with spatial targeting, need to be developed to ensure cost effective solutions – including tree planting for water benefits - are realised. Payments for Ecosystem Services (PES) are flexible, incentive-based mechanisms that could play an important role in promoting land use change to deliver water quality targets. The PESFOR-W COST Action will consolidate learning from existing woodlands for water PES schemes in Europe and help standardize approaches to evaluating the environmental effectiveness and cost-effectiveness of woodland measures. It will also create a European network through which PES schemes can be facilitated, extended and improved, for example by incorporating other ecosystem services linking with aims of the wider forests-carbon policy nexus.

The cluster approach has been used as a guiding framework for policy action, which, by definition, nurtures the existing strengths and growth potential of functionally interrelated and geographically co-located groups of specialized firms cross-sectorally linked by technologies, markets or value chains. The cluster approach has been used to define cluster-based policy agendas in innovation policy and traditional policy fields. The approach offers a wider view on the needs and benefits of improving coordination across policy sectors. The cluster concept has been used widely to reveal and tackle the needs to improve coordination between actions, which fall under the remit of different policy sectors. Cluster promotion policies are often delivered by discrete action singled out in particular action programmes, which are targeted on pre-selected functionally and geographically delimited groups of firms and industries. We report on the following discrete cluster promotion activities in European timber industries: the Finnish Living Cluster 'Lahden alueen asumisklusteri', the national Scottish 'Forest Industries Cluster', the Croatian North-West Timber Cluster 'Drvni klaster zapadne Hrvatske', and the Styrian Wood Cluster 'Holzcluster Steiermark'. Key findings are that cluster promotion, instead of covering all aspects of competitiveness, is being focused towards selected fields of strategic priority. Cluster strategies are clearly differentiated in this respect. Cluster promotion activities are targeted narrowly on corporate business network formation and management or more broadly on reshaping industrial districts into innovation-enabling business environments. Strategies may be mixed both to ensure immediate economic benefits to firms and to develop the cluster's innovative capacity and growth potential in the medium and long term. Clusters operate at the national or regional level. Cluster strategies are more or less purposely and formally integrated and aligned with regional development strategies. The recommendations for how to improve policy efficacy and efficiency include catalytic funding, exploiting value chain linkages for leverage effects, improved strategic alignment and replacing 'wishful thinking' by formal analysis of real cluster potentials.