Would an Economy-Wide Carbon Tax Hinder or Help the Forest Sector? Insights from the French Forest Sector Model

It is often argued that forest sectors may benefit from the introduction of an economy-wide carbon tax. This is due to the fact that wood products have generally lower carbon content than their direct substitute. We test this assumption numerically using the French Forest Sector Model (Caurla et al., 2010). For most products reviewed in this exercise, the substitution effect between wood and non-wood substitutes dominates the revenue effect of the wood product prices, leading to overall gains for the forest sector. There is, however, one main caveat: the impact of the tax appears strongly dependent on the definition of the tax base, notably the underlying accounting norms related to carbon measurement.