Biodiversity implications of forest carbon payments

Carbon payments have been proposed as a means of incentivizing forest management that jointly optimizes timber production and carbon storage benefits. We analyze the impacts of such payment schemes on forest biodiversity using a detailed model describing Finland’s forest resources, timber markets, and forest and energy industries. In the model, forest-owners’ heterogenous valuations of forest amenities affect their harvesting behavior and willingness to join a carbon payment scheme. We measure forest biodiversity using an ecosystem condition index based on habitat-specific structural components. Our results indicate that forest carbon payments have a small to moderate positive effect on forest ecosystem condition. The improvements in ecosystem condition result from longer rotations and greater volumes of broadleaved trees and dead wood. The effects are weakest on low productivity sites. Under a partial-coverage carbon payment scheme, impacts on ecosystem condition vary according to forest-owner type, but are positive in aggregate. According to our sensitivity analysis, the ecosystem condition-improving effect of carbon payments is stronger under high demand for harvested wood products. Our results suggest that forest carbon payments are likely to have biodiversity co-benefits in boreal conditions, but halting biodiversity loss will require additional biodiversity-targeted policies.