Are There Spatial Spillover Effects of Carbon Emission Trading Policy on Forest Carbon Sink Growth in China?

Forests, with their ecosystem services capabilities, play a critical role in absorbing carbon dioxide from the atmosphere, positioning forest carbon sinks as important components of China’s strategy to achieve carbon neutrality. However, due to the spatial correlation inherent in forest carbon sink dynamics, the development of these sinks cannot be fully segmented by region. Due to the interconnected nature of forest ecosystems, carbon sink growth exhibits regional interactions rather than isolated developments, necessitating a transregional perspective to comprehensively understand carbon sinks in China. This study derives a spatial effect model to analyze carbon sink growth and assess the transregional spillover effects of forest carbon sink growth. The analysis is based on panel data from 26 provinces in China from 2003 to 2021. The results show that the forest carbon sink growth in one province is often influenced by the neighboring regions, highlighting significant transregional spillover effects. Policies, e.g., Carbon Emission Trading (CET), and forest management practices like tending were found to positively influence the local forest carbon sink growth and generate substantial positive spillover effects in the neighboring provinces. Our results indicate that the total effect of the implementation of the CET policy leads to a 3% increase in carbon sink growth across the 26 provinces in China over the study period from spatial DID estimation. In contrast, urbanization and the increasing value-added services associated with economic growth negatively impact forest carbon sink growth both locally and in neighboring regions. These findings underscore the necessity of a coordinated national strategy to enhance forest carbon sinks, integrating both direct and indirect regional effects. Aligning economic development with carbon sink goals will enable China to effectively balance environmental and economic priorities. Policy recommendations are provided to improve CET mechanisms and foster regional collaboration for sustainable forest management.