Potential impacts of carbon taxes on carbon flux in western Oregon private forests

This study considers a carbon tax system as a policy tool for encouraging carbon sequestration through modification of management in existing forests and examines its welfare impacts and costs of the carbon sequestered. The simulated carbon tax leads to reduced harvest and increased carbon stock in the standing trees and understory biomass. Changes in the level of silvicultural investments vary by owner, depending on the nature of their initial inventory: In general investment under the tax is concentrated in regimes that establish faster growing plantations. Average rotation age increases, varying in extent across ownerships and site qualities. The carbon tax reduces both consumer and producer surpluses in regional timber markets. Producers are compensated by the carbon subsidies, except at low carbon tax levels. Not all rates of carbon tax will attract interest from private owners if participation is voluntary. Estimates of the marginal cost of sequestering carbon in western Oregon private forests are shown to be within the range of costs for projects considering afforestation alone in some eastern regions of the United States. (C) 2006 Published by Elsevier B.V.