Evaluating the impacts of a carbon tax on imported forest products—evidence from Taiwan

Levying a carbon tax is one of the approaches used to reduce greenhouse gas emissions (GHGEs) and has been adopted in a number of countries since the Kyoto Protocol. Applying such an approach in the forest sector may have important policy implications. The main purpose of this paper is to investigate the effects of a carbon tax on imported forest products using Taiwan as an example. Taiwan relies on foreign imported timber and such consumption of harvested wood products (HWPs) lengthens the storage of carbon beyond the life of the tree. This study investigates the impacts of implementing a carbon tax on seven types of HWPs by applying the ARDL approach to imported timber demand functions in Taiwan. The empirical results show that the volumes of imported HWPs as well as carbon dioxide are significantly reduced once a carbon tax is implemented. These empirical outcomes provide some important forest policy implications for countries importing wood products.