Damned if you do, Damned if you don't – Reduced Climate Impact vs. Sustainable Forests in Sweden

The main objective of this paper is to analyze the potential goal conflict between two of Sweden’s environmental objectives: Sustainable Forests and Reduced Climate Impact – or, more precisely, the conflict between forest conservation and the supply of wood fuel. To accomplish this, we use a forest sector model that includes the suppliers and major users of roundwood. The econometric results, based on a data set that spans 40 years, show that all the own price elasticities have the expected signs. Among the three forestry products, the supply and (long-term) demand of forest fuel seems to be most sensitive to a price change. In a second step, the estimated model is used to simulate the effect of increased forest conservation -- the Sustainable Forest objective -- on the supply of wood fuel. If oil is used as a substitute, Swedish emissions of greenhouse gases will increase by almost 0.92 percent, which indicates a clear conflict with the Reduced Climate Impact objective.