Whereas climate change mitigation involving payments to forest landowners for accumulating carbon on their land may increase carbon stored in forests, it will also affect timber supply and prices. This study estimated the effect on US timber and primary forest product markets of hypothetical timber set-aside scenarios where US forest landowners would be paid to forego timber harvests for 100 years to increase carbon storage on US timberland. The scenarios featured payments to landowners of $0 (business-as-usual (BAU)), $10, and $15 per each additional metric ton (t) of carbon dioxide equivalent (CO2e) sequestered on the set-aside timberlands, with maximum annual expenditures of $3 billion. For the set-aside scenarios, reduction in timberland available for harvest resulted in increased timber prices and changes in US domestic production, consumption, net export, and timber market welfare. Economic analyses indicated that the scenario with more area set aside and the largest carbon mitigation benefit (lower carbon price, $10/t CO2e) would result in the largest decrease in market welfare, suggesting that climate change mitigation policies and programs would need to consider such impacts when evaluating the costs and benefits of climate change mitigation strategies in the forest sector.
Nepal, Prakash; Ince, Peter J.; Skog, Kenneth E.; Chang, Sun J. 2013. Projected U.S. timber and primary forest product market impacts of climate change mitigation through timber set-asides. Can. J. For. Res. 43: 245–255.