Carbon taxation as a means to incentivize forest and fire management

Wildland fires are increasingly becoming a major concern for many European countries, affecting ecosystems and societies, and they are expected to become more prevalent in future due to climate change. Forests provide various ecosystem services not valued by traditional markets, such as carbon sequestration. Recently, Portugal has created new environmental policies that address climate change, fire management, and biodiversity conservation through payment for ecosystem services schemes. In this context, this study’s objective is to evaluate the newly established carbon taxation in Portugal to incentivize forest restoration and fire management measures. Using publicly available data, this is done by comparing the carbon emissions savings by avoided fires and the income of the carbon taxation with the costs of the payment for ecosystem services scheme and prescribed burning. The results indicate that investing in forest management to avoid fires repays itself regarding carbon storage and economically. The ecosystem services payment scheme’s incentives are in the order of 5–20 euros per hectare, while the carbon sequestration benefits can vary between 75 and 671 euros per hectare. The National Prescribed Burning Program policy is able to reduce overall wildfire emissions, which can correspond to a benefit in the order of 134–2476 euros per hectare, while its costs are in the order 120 euros per hectare. Finally, the results have shown that these policies can work synergistically, both economically and environmentally, as development agendas, such as the Sustainable Development Goals, recommend. This analysis framework might be useful for other countries, especially in the Mediterranean Basin.