How Does Carbon Trading Impact China’s Forest Carbon Sequestration Potential and Carbon Leakage?

Abstract

This paper presents an in-depth analysis of the impact of forest carbon sink trading in China, examining its effects from 2018 to 2030 under various carbon pricing scenarios. Using the Global Timber Market Model (GFPM) along with the IPCC Carbon Sink Model, we simulate the potential shifts in China’s forest resources and the global timber market. The study finds that forest carbon trading markedly boosts China’s forest stock and carbon sequestration, aligning with its dual carbon objectives. China’s implementation of forest carbon trading is likely to result in a degree of carbon leakage on a global scale. During the forecast period, our study reveals that the carbon leakage rates under three different forest carbon trading price scenarios, which at estimated at 81.5% (USD 9.8/ton), 64.0% (USD 25/ton), and 57.8% (USD 54/ton), respectively. Notably, the leakage rate diminishes as the forest carbon sink price increases. Furthermore, analysis also suggests that regional variations in the average carbon sequestration capacity of forests, alongside the structure of China’s timber imports, emerge as significant factors influencing the extent of carbon leakage.