Paying for biodiversity-increasing management in non-industrial production private forests: evidence of divergent public welfare consequences

European land management initiatives aim to increase biodiversity within overarching climate goals, but these impose implementation costs on landowners. What would be the welfare consequences for the public if they shared costs of compensating domestic private landowners via additional taxation? Using data from a discrete choice experiment conducted in Sweden, this study assessed public welfare impacts using Pareto and Kaldor–Hicks criteria of compensating non-industrial landowners for adopting three biodiversity-augmenting management types (set-asides, uneven-aged stands, species mixtures) – in production forests. Results from a random parameter logit indicated average public preferences for prevalent production-oriented management as well as biodiversity-increasing interventions. Beyond population averages, a two-group latent class logit model revealed highly divergent welfare consequences arising from compensations: 58% of our sample experienced substantial welfare gains, while the other 42% exhibited small welfare losses. These indicate that compensating landowners through public taxation fulfills the Kaldor–Hicks criterion but violates the Pareto criterion. This study discusses how voluntary public contributions could ameliorate Pareto inefficiency and support biodiversity across managed private forestlands.