Reforestation Policy under Carbon Taxation: Climate Efficacy, Biodiversity, and Macro-Financial Risks

Matthieu Bordenave ()
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Matthieu Bordenave: USPC - Université Sorbonne Paris Cité, UniPi - University of Pisa [Italy] = Università di Pisa [Italia] = Université de Pise [Italie]

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Abstract: This paper presents a global stock-flow consistent (SFC) macroeconomic model that couples climate damages with an explicit forestry module to examine how carbon pricing and reforestation policies interact to shape climate outcomes and financial stability. Built on a Goodwin-Keen framework, the model endogenizes underemployment, income distribution, inflation, and private debt, and tracks biome-specific biomass, harvesting, and sequestration, adding a biodiversity-relevant dimension. Baseline (no/low/high damage) counterfactuals are contrasted with convex carbon-tax schedules and linearly phased reforestation controls of varying intensity. Simulations to 2100 show strong policy interactions: carbon taxes curb fossil emissions but, by stimulating biomass substitution, can attenuate reforestation gains unless forest controls are sufficiently ambitious; reforestation expands stocks and sequestration yet raises implementation costs and private-debt burdens, reinforcing long-run deflationary pressures. By jointly evaluating climate efficacy and macro-financial risks, the framework clarifies trade-offs and complementarities in the design of carbon and forest policies.

Keywords: Carbon Tax JEL classification codes: C53; Out of Equilibrium; Stock Flow Consistent Dynamics; Goodwin-Keen; Climate Damages; Forestry Policies; Bioeconomic model; Bioeconomic model Forestry Policies Climate Damages Goodwin-Keen Stock Flow Consistent Dynamics Out of Equilibrium Carbon Tax JEL classification codes: C53 D72 E12 F64 Q23 Q41 (search for similar items in EconPapers)
Date: 2026-09
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