Do impoverished regions benefit from climate change mitigation measures? Evidence from the Forest Carbon Sink Project in China

Forests play a crucial role in achieving global climate change mitigation goals. The Forest Carbon Sink Project (FCSP) was initially proposed by the Clean Development Mechanism under the Kyoto Protocol, aiming to address externalities in climate governance through ecological compensation mechanisms. For impoverished regions, the FCSP is more attractive than the mandatory administrative approaches to forest protection. This Currently, due to the lack of empirical research, there is still debate in the academic community about whether the FCSP can produce overall positive economic benefits in poor areas. Based on panel data from 634 impoverished counties in China from 2002 to 2019, this study attempts to address this issue using a multi-period Difference-in-Differences (DID) model. The results demonstrate that, compared to non project counties, the implementation of the FCSP led to an increase in actual GDP and per capita GDP of 8.40% and 11.10% in project counties, respectively. That is, the FCSP can expand the economic scale while also promoting economic growth of project counties. The results of the dynamic model show that the economic benefits generated by the FCSP in these counties are long-term and sustainable. Based on the results of theoretical analysis and mechanism testing models, this study concludes that the FCSP generates short-term economic benefits through capital investment. It generates long-term economic benefits by improving the productivity of the primary industry labour force, increasing the level of fixed asset construction, and optimizing the industrial structure in poverty-stricken counties. Additionally, this study also conducted a heterogeneity analysis. In summary, this study concludes that the FCSP is a climate change mitigation measure worthy of promotion in impoverished regions.Implementing the Forest Carbon Sink Project (FCSP) in China's poverty-stricken counties can expand the economic scale and promote economic growth.Impoverished regions could enhance labour productivity, promote fixed asset investment, and optimize industrial structure by participating in the FCSP.In China, the FCSP from the international voluntary carbon offset market yields superior economic benefits compared to those from the international mandatory carbon offset market.Drawing from China's experience, other developing countries could consider prioritizing participation in the FCSP from the international voluntary carbon offset market or establishing their own domestic carbon offset markets.