At what carbon price forest cutting should stop

The carbon sink of boreal forests can be increased by paying forest landowners for carbon sequestration and taxing carbon releases. The aim of the study was to analyze the effect of carbon pricing on optimal forest management when forests are managed for maximal discounted benefits from timber production and carbon payments. A 0.5% random sample of all private forest stands of Finland was used in the analyses (48,842 stands). Calculations were performed for a 100-year time horizon. It was assumed that the carbon balance (difference between sequestrated carbon and released carbon) in the forest (trees and soil) or the carbon balance of forestry (trees, soil and wood-based products) was subsidized (positive balance) or taxed (negative balance) by 0, 50, 100 or 150 euro t(-1), corresponding to CO2 prices of 0, 13.6, 27.3 or 40.9 euro t(-1), respectively. The results showed that paying forest landowners 150 euro t(-1) of carbon sequestrated in forests would lead to the cessation of all cuttings everywhere in Finland for at least 100 years. In the northern part of the country, a carbon price of 100 euro t(-1) would be enough to make the no-cutting management economically optimal. A low carbon price had the highest relative impact (value of increased sequestration divided by the cost of carbon payments). The benefit/cost ratio of carbon subsidies was higher in the northern part of boreal zone than in the southern parts. Subsidizing within-forest carbon sequestration by 50 euro t(-1) would increase the carbon sequestration of Finnish forestry by 50%, ranging from 36% (south Finland) to 116% (north Finland). A payment of 100 euro t(-1) or more would increase carbon sequestration by 70%, which is nearly the maximum possible increase that can be obtained by carbon subsidies.