Abstract
China seeks to expand forest-based carbon sinks, yet it remains unclear which pricing instruments and price levels deliver the largest additional sequestration under China’s land and governance constraints. We develop an evaluative framework that separates the extensive and intensive margins by pairing a province-level land-use share model for the extensive margin with a rotation model for the intensive margin, and benchmark all results against a dynamic business-as-usual projection (2020–2060). We compare three instruments—tax-only, subsidy-only, and hybrid (tax-and-subsidy)—across carbon prices. Four results emerge. First, while the hybrid consistently produces the largest sink, its advantage over a subsidy-only policy is small (≈ 1.08–9.38%), making subsidy-only the practical second-best once administrative/transaction costs of the tax leg are considered. Second, policy responses are non-monotonic in the price signal: a low-efficiency band exists around 200–300 CNY/tCO 2 , whereas the carbon price of 100 CNY/tCO 2 delivers the second-highest sink at the lowest average cost, making it the cost-effective choice in our setting. Third, policy effectiveness in China is transmitted primarily through the intensive margin: most additional sinks arise from longer rotations and higher stand densities on existing forests, not from large net area gains. Fourth, a tax-only instrument risks a “carbon-tax trap”: the harvest tax has little leverage on rotations but depresses forestland rent, yielding net area losses and a negative total effect. These findings provide useful evidence for policy-making to incentivize forest carbon sequestration in China.