Reply to the comment by Thorsen et al. on “Diverging incentives for afforestation from carbon sequestration: An economic analysis of the EU afforestation program in the south of Italy”

In their comment Thorsen, Strange, and Helles (this journal) suggest that the model we use in our paper “Diverging incentives for afforestation from carbon sequestration: an economic analysis of the EU afforestation program in the south of Italy.” Forest Policy and Economics 6, 567–578 includes a misspecification of subsidy payments under Regulation (EEC) 2080/92. They further claim that a correct specification of the subsidy payments would neither change the optimal forest rotation rate nor result in welfare changes. Indeed, the comment is important, because if the subsidies under Regulation (EEC) 2080/92 would not have an impact on the private optimal rotation rate there would be no welfare changes due to the payment of subsidies. The authors further argue that even if our model were correct, it would not allow conclusions to be derived on potential welfare changes. We argue that neither of the two positions are correct.