Europe needs innovation-friendly markets. In that context European Union (EU) formulated a Lisabon Strategy in 2000 by emphassing the need for innovativeness and competitivness of the European market with the aim of turning it into the world's most competitive economy. In order to achive that aim the concept of Lead Markets was developed and this concept is in the focus of the current paper. Particular emphasis is on the renewable energy market and market for sustainable construction. Within them this paper also examines the role of forestry and sustainable forest management in supplying raw matherials and offers insides into the Forest Based Sector Technology Platform as a new governance mechanism bringing together science, economy and the state toward achieving commonly set goals. These concepts and initiatives are relevant for Serbia and Croatia, being EU member candidates and signatories of many international conventions (e.g. the Kyoto Protocol). In view of that these two countries are engaged in harmonization of national with EU legislation and we therefore handle also national legislative framework in this paper, especially with respect to forest biomass (revewable energy) and sustainable construction.