Estimating the optimal internal carbon prices for balancing forest wood production and carbon sequestration: The case of northeast China

The mechanisms of carbon trading and taxes are two of the most important routes the forest sector might follow to mitigate global climate change. However, the carbon price that best suits a carbon forestry management perspective is still a critical issue in practice. The present study advances an effective method to estimate the optimal internal carbon price, based on a fitted logistic regression of amount of carbon sequestered on carbon price. The inflection point of the fitted curve was treated as the optimal internal carbon price, and the corresponding slope at the inflection point was further considered to be the maximum potential carbon sequestration rate. The novel method was applied to three increasingly difficult forest planning problems, in which the constraints regarding the harvest flow of timber and maximum opening areas were all included. The effects of different time horizons and discount rates on the estimated optimal internal carbon prices were also evaluated for the three planning formulations. The results indicate that the logistic function was able to describe the relationship between carbon price and carbon sequestration under each planning scenario very well, with coefficient of determination values all as large as 0.97. The estimated optimal internal carbon prices varied from US$ 114.84 to US$ 367.41 per ton, decreased slightly with increasing discount rates and the complexities of planning problems, and increased dramatically with increasing time horizons. The corresponding marginal benefits of price on carbon sequestration ranged from 2.4845 to 10.5783 thousand tons per US dollar, where significant declining trends were observed with increases in the time horizons, discount rates, and complexities of planning problems. The economic benefits of net carbon sequestration accounted for approximately 54.03%-61.34% of total benefits when estimated optimal internal carbon prices were employed. (C) 2020 Elsevier Ltd. All rights reserved.

Automated summary

This study proposes an effective method to estimate the optimal internal carbon price, using logistic regression of carbon sequestration on carbon price. The results show that the estimated optimal internal carbon prices decrease slightly with increasing discount rates and complexities of planning problems, but increase significantly with increasing time horizons. The economic benefits of net carbon sequestration accounted for a majority of total benefits when estimated optimal internal carbon prices were utilized.