Can carbon emission trading policy promote forest carbon sink growth in China?

Abstract As a market-oriented ecological compensation mechanism, carbon emission trading (CET) integrates forest carbon sinks into exchange and pricing markets by offering carbon offset credits. Understanding the impact and mechanism of the CET policy on forest carbon sink growth can provide policy guidance for leveraging these sinks in achieving carbon neutrality goals. This study employs a difference-in-differences model with two-way fixed effects to empirically examine the influence of the CET policy on forest carbon sink growth and its underlying mechanism. The results reveal that the CET policy significantly promotes forest carbon sink growth, primarily by stimulating afforestation and forest management. Based on these results, several policy implications are proposed to promote forest carbon sink growth: policymakers should leverage market mechanisms to optimize the resource allocation and enhance forest carbon sink, forest-related policies should be better coordinated to maximize their complementary strengths and give full play to the synergistic effect, the government should strengthen sustainable forest management practices to achieve a long-term improvement in forest carbon sinks.