Forest carbon sequestration subsidy and carbon tax as part of China's forestry policies

Abstract

Forestry is an effective strategy for climate change mitigation. However, forestry activities not only sequester carbon but also release CO2. It is therefore important to formulate carbon subsidy and carbon taxation policies on the basis of the price of carbon. In this study, a forestry-based Computable General Equilibrium (CGE) model was built by using input-output data of China in 2014 to construct a Social Accounting Matrix (SAM). The model simulates different carbon price scenarios and was used to explore the effects of carbon subsidy and carbon taxation policies on the forestry economy. The main results can be summarized as follows: When the carbon price is low, the implementation of the policy increases forestry output and causes forest product prices to rise. When the carbon price is high, the carbon tax will produce an inhibitory effect, and output and prices will decline. With the constant rise of the carbon price, value addition will decrease, with flow to other industries. For the carbon sequestration policy, there is a reasonable carbon price range bound. In light of these results, relevant policies are proposed.