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Reforestation Policy under Carbon Taxation: Climate Efficacy, Biodiversity, and Macro-Financial Risks

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  • Matthieu Bordenave

    (USPC - Université Sorbonne Paris Cité, UniPi - University of Pisa [Italy] = Università di Pisa [Italia] = Université de Pise [Italie])

Abstract

This paper presents a global stock-flow consistent (SFC) macroeconomic model that couples climate damages with an explicit forestry module to examine how carbon pricing and reforestation policies interact to shape climate outcomes and financial stability. Built on a Goodwin-Keen framework, the model endogenizes underemployment, income distribution, inflation, and private debt, and tracks biome-specific biomass, harvesting, and sequestration, adding a biodiversity-relevant dimension. Baseline (no/low/high damage) counterfactuals are contrasted with convex carbon-tax schedules and linearly phased reforestation controls of varying intensity. Simulations to 2100 show strong policy interactions: carbon taxes curb fossil emissions but, by stimulating biomass substitution, can attenuate reforestation gains unless forest controls are sufficiently ambitious; reforestation expands stocks and sequestration yet raises implementation costs and private-debt burdens, reinforcing long-run deflationary pressures. By jointly evaluating climate efficacy and macro-financial risks, the framework clarifies trade-offs and complementarities in the design of carbon and forest policies.

Suggested Citation

  • Matthieu Bordenave, 2026. "Reforestation Policy under Carbon Taxation: Climate Efficacy, Biodiversity, and Macro-Financial Risks," Working Papers hal-05754509, HAL.
    • Handle: RePEc:hal:wpaper:hal-05754509
    Note: View the original document on HAL open archive server: https://hal.science/hal-05754509v1
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    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • F64 - International Economics - - Economic Impacts of Globalization - - - Environment
    • Q23 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Forestry
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices

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