The land-use effects of a forest carbon policy in the US

Abstract

The inclusion of forest sinks as a carbon dioxide (CO 2) mitigation strategy at the climate negotiations in Marakech (November, 2001) is expected to lead to increased investments in forest establishment and management by many developed countries. Previous studies in this area have typically focused on market impacts in the forestry sector, such as changes in production, consumption, prices, and trade, as a result of sinks. Here, we consider their inter-sectoral linkages and examine the potential economy-wide impacts of a forest carbon policy for the US over the next 20 years. Specifically, we employ a dynamic computable general equilibrium (CGE) model to simulate the scenario of a global forest carbon policy with and without US participation, and analyze their impacts on national economic welfare and land use distribution among the different sectors in the US. Our findings suggest that the establishment of carbon plantations in the US will have a small and favorable impact on the overall economy and particularly, on the farm and forest sectors. Alternatively, US inaction with regards to ratifying the Kyoto Protocol is likely to have adverse consequences for the economy as a whole, particularly when taking into consideration the loss of benefits foregone.