The role of price incentives in enhancing carbon sequestration in the forestry sector of Hungary

Abstract

This paper investigates the carbon sequestration potential of forests in Hungary through the introduction of a carbon price incentive, assuming an integrative national climate policy. We have developed a bio-economic mathematical optimisation model to represent the area and species distribution of Hungarian forests and we are optimising harvesting cycles without and with carbon payments. We assess the cost and volume of potentially available carbon removal by forests in the context of the national climate policy. To align our results with other climate policy instruments, we integrate the estimated carbon removal potential of the forests with the marginal carbon abatement cost curve of the energy sector in Hungary. We find that enhanced forest carbon sequestration can be more cost-effective than most other climate policy instruments. We find that forests could intervene at the lower end of the combined cost curve and shift it significantly to the right, resulting in much lower marginal and total costs of achieving the net zero target for Hungary.