Abstract
Although the inefficiency of subsidies to forestry is well known, forest environmental tax will be imposed from 2024 which can lead to an increase in subsidies to forestry. This study examines Japan’s forestry policy by analyzing the advantage to Japan and disadvantage to foreign countries from subsidies to forestry. The study results are as follows: (1) If reduction in subsidies would increase the cost of domestic timber production by 1 billion yen, domestic producer surplus would decrease by 400 million yen and consumer surplus by 320 million yen, resulting in a deadweight loss reduction of 280 million yen. Moreover, the social welfare of foreign countries would improve by 320 million yen. Subsidies to forestry have a deadweight loss and impose losses on foreign countries. (2) Subsidies to domestic timber production have lower deadweight loss than sawmill or domestic cut wood but foreign countries face greater welfare loss. This study quantitatively clarifies the changes in welfare as a result of the forestry policy. We will enable a comprehensive evaluation of forestry policy by also incorporating many studies that measure the positive externalities of subsidies on forests.
