Potentials and costs of climate change mitigation in the Norwegian forest sector: Does choice of policy matter?

Forests are important contributors to the global carbon cycle and mitigate climate change through carbon sequestration and the supply of wood that substitutes for fossil fuels and greenhouse gas (GHG)-intensive building materials. However, current climate policies only partially credit forest carbon sequestration and bioenergy policies are handled independently of forestry. Using Norway as a case study, we analyze two sets of simulated carbon tax/subsidy policies, one crediting forest carbon sequestration while maintaining predetermined harvest levels and utilization of wood, and another targeting GHG fluxes in the entire forest industrial sector allowing harvest levels and wood markets to change in response to the policy. Results indicate that GHG emission reduction potentials differ substantially between the two policies, being several times higher for the latter than the former policy at a given carbon price. This suggests that (i) previous research efforts in Europe have not captured the full mitigation potential as they have not included adaptations in the harvest level and the wood market and (ii) climate policies should target GHG fluxes in the entire sector to utilize its potential contribution for mitigating climate change.