Is forest conservation a socially optimal strategy for increasing forest carbon sequestration?

Peichen Gong and Andres Susaeta

Forest Policy and Economics, 2025, vol. 176, issue C

Abstract: Previous studies show that the optimal rotation period would be infinitely long when carbon price is sufficiently high, indicating that forest preservation could serve as an optimal strategy for mitigating global warming. This paper examines the impact of the substitution effect of harvested wood products (HWP) and the risk of natural disturbances on the optimality of infinitely long rotation period. Our analysis shows that when the substitution effects of HWP are significant, the optimal rotation remains finite regardless of how high the carbon price is. Conversely, when the substitution effects are minimal, there exists a threshold carbon price beyond which the optimal rotation period becomes infinite. Furthermore, we demonstrate that the risk of natural disturbances can either increase or decrease the likelihood that forest preservation remains the optimal choice for climate change mitigation. A numerical example illustrates that even with conservative assumptions about the substitution effect of HWP, the optimal rotation remains finite, and the risk of forest damage further reduces the optimal rotation.

Keywords: Forest carbon sequestration; Optimal rotation age; Forest damage; Harvested wood products (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:forpol:v:176:y:2025:i:c:s1389934125000905

DOI: 10.1016/j.forpol.2025.103511

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