ABSTRACT
This chapter surveys forest taxation literature from two angles. The traditional results of forest taxation in the Faustmann and Hartman models are reviewed and used to discuss first-best and second-best forest tax policies. Theoretical results are illustrated using numerical simulations. Forest tax literature is then related to modern forest policies promoting multiple ecosystem services. Using biodiversity benefits, climate mitigation and nutrient load policies as examples, it is shown that forest taxation plays an important role as a part of targeted policy packages promoting ecosystem services. The heterogeneity of landowners’ preferences provides empirical and theoretical challenges for optimal tax policies.
