EFFECT OF CARBON TAXES AND SUBSIDIES ON OPTIMAL FOREST ROTATION AGE AND SUPPLY OF CARBON SERVICES

Carbon taxes and subsidies will affect the optimal forest rotation and , consequently, the carbon stored in forests. Unlike the Hartman rotat ion, where externality benefits are a function of the volume of timber growing on a site at any time, carbon benefits are a function of the change in biomass. Theoretical and empirical results (for coastal Brit ish Columbia and northern Alberta) indicate that, under some tax regim es, it may be socially optimal never to harvest the trees. In general, inclusion of the external benefits from carbon uptake results in rota tion ages only a bit longer than the financial (Faustmann) rotation ag e.