We consider the effect of carbon subsidies and taxes in the form of carbon credit allocations on forest owners' land use and harvest decisions. We introduce three possible credit allocation regimes: one where credits are allocated according to the annual flow of carbon another where annual...

We consider the effect of carbon credit payment schemes on forest owners' land use and harvest decisions. We study two possible credit allocation regimes: one where credits are allocated according to the actual amount of carbon sequestered by the trees on a piece of land, and another where...