Carbon and Timber Management in Western Oregon under Tax-Financed Investments in Wildfire Risk Mitigation
By: Rossi, David; Kuusela, Olli-Pekka
Rossi, David; Kuusela, Olli-Pekka, Carbon and Timber Management in Western Oregon under Tax-Financed Investments in Wildfire Risk Mitigation, Journal of Agricultural and Resource Economics, Volume 48, Issue 2, May 2023, Pages 376-397
We examine how forest taxation should be designed when tax revenues are used to finance expenditures on wildfire risk mitigation and when forest carbon storage has value. A model is solved sequentially in two stages by a forest tax planner and a representative private landowner. The planner considers two forest tax instruments currently used by state agencies in Oregon: 1) a per acre land tax, and 2) a unit tax on timber harvest. A numerical representation of the model shows that the optimal tax rates depend on whether private landowners are compensated for stored carbon. Our results show that neither the acre-based fee or a harvest tax is able to incentivize the same levels of sequestration as a carbon price. However, a neutral tax like the acre-based fee is preferred when the external benefits of carbon sequestration are captured by the private landowner.