Browsing by Subject "Carbon leakage"

This study analyses the effects of carbon subsidy schemes on the optimal forest management in forest sites of different productivity. Forest stand level analysis shows the changes in the optimal stand management due to carbon subsidies. Market level analysis evaluates the market level implications of mutual and unilateral carbon subsidy policies and their effects outside the policy area. In the first chapter, we study the effects of carbon subsidies on a forest stand level. The results show that carbon subsidies lengthen the optimal rotation period, increase the annual timber output and increase the amount of CO2 sequestered in the forest stand. A sufficiently high carbon price leads to forest conservation. All the effects are stronger in the forest of poor productivity. The market level analysis presents an age-class structured model with an endogenous timber price and alternative land use. The numerical examples show that, in addition to the effects shown in the stand-level analysis, carbon subsidies encourage afforestation. An increase in the annual timber output may lead to a lower stumpage price. Unilateral policies may lead to an increase in timber output inside the policy, which decreases the timber price and result in deforestation outside the policy. As a sufficiently high carbon price leads to forest conservation, timber price increases and results in afforestation and decrease carbon emissions outside the policy. The results are in contradiction with the common hypothesis that increasing carbon sequestration in forests by unilateral policy would inevitably lead to an increase in carbon emissions outside the policy area.