Summary/Abstract
This paper explores the optimal regulation of forest carbon and albedo for climate change mitigation. It develops a partial equilibrium market-level model with socially optimal carbon and albedo pricing and characterizes optimal land allocation and harvests. The paper numerically assesses the policy’s market-level impacts on land allocation, harvests, and climate forcing, and evaluates how parameter choices (albedo strength, productivity of forest land, and carbon and albedo prices) affect the outcomes. Carbon pricing alone leads to an overprovision of climate benefits at the expense of food and timber production. The paper posits that complementing the policy with albedo pricing reduces these welfare losses.