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Abstract

This paper uses an advanced computable general equilibrium model to evaluate the extent to which incorporation of climate change induced changes in crop yields could impact forest carbon sequestration with a carbon tax. We find that the reduction in crop yields in many regions does negatively impact the potential for forest carbon sequestration. The yield reduction causes more land to be needed for crop production making less available for forest. In addition, the crop yield reduction reduces overall crop production and significantly increases crop and livestock prices. These prices increase substantially even though demand has been reduced due to the negative economic impacts of the carbon tax. Developing countries have much more negative economic impacts than rich countries.

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