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.