Strategies of Forestry Carbon Sink under Forest Insurance and Subsidies

Abstract

We take the forest insurance supply chain, composed of a forestry enterprise and an insurance company, as the research object. The forestry carbon sink, operated by the forestry enterprise, is the subject matter of insurance. The Stackelberg game model is constructed to study the optimal strategies of the forestry enterprise and insurance company under the forest insurance mechanism, as well as the impact of government subsidies, probability of deforestation, and carbon limit level on the decision-making and profit of the forestry enterprise and insurance company. The results show that the larger the carbon limit, the looser carbon restraint policy, which causes the forestry enterprise to reduce the scale of carbon sink forest, and the insurance company lowers the premium level. As the probability of deforestation increases, both the scale of the carbon sink forest and the premium level will decrease. Direct subsidies for the premiums of the forestry enterprise are conducive to expanding the scale of carbon sink forest, but will lead to the insurance company improving the premium level. Providing indirect subsidies to the insurance company’s operating costs will not only expand the scale of the carbon sink forest, but also lower the premium level. In the case of the same number of premium subsidies, indirect subsidies are more effective than direct subsidies in increasing the forestry enterprise’s income and promoting it to expand the forest scale.

Forest Insurance for Natural Events: An Overview by Economists

“…Some articles deal with the impact of public assistance on forest owners' insurance decisions. They focus on various types of assistance such as subsidy of the insurance premium, conditional (to the subscription of an insurance contract) and unconditional assistance [18,19,[28][29][30]33,36]. The results depend on the type of public assistance considered.…”

Setting the Forestry Carbon Sink Insurance compensation standard for reducing losses from forest fires: An empirical study estimating CO2 emissions from forest fires in a sample of 15 provinces

“…Regarding Forestry Carbon Sink Insurance, Song et al (2019) built a Stackelberg game model to study the optimal strategies of forestry enterprises and insurance companies under the forest insurance mechanism, as well as the factors affecting their decisions and profits. Feng et al (2021) put forward policy suggestions on addressing climate change from various aspects based on the climate change risk situation in China and the development stage of green insurance services.…”

Mechanism Analysis of Applying Blockchain Technology to Forestry Carbon Sink Projects Based on the Differential Game Model

“…These characteristics lead to high development costs for FCS projects and harm the enthusiasm of forest farmers severely [10]. High investment costs and low output efficiency are important constraints for the development of FCS projects [2]. The "crosssubject interaction" feature of the blockchain can set the complex and coherent FCS as a "smart contract" to realize electronic interaction between multiple related subjects, which can reduce costs and improve operations efficiency [29].…”

“…In December 2015, the United Nations Climate Conference included forestry as a separate clause in the newly reached Paris Agreement, clearly stipulating that after 2020, countries should take actions to protect and enhance FCS, and continue to encourage developing countries to implement REDD+ [1]. Compared with other emission reduction measures, FCS projects have more advantages in terms of economic, social, and ecological benefits [2] FCS projects not only provide forest farmers profit and employment opportunities but also provide emission reduction channels for enterprises to control emissions [3,4].…”