Abstract: Developing forestry carbon sink projects is crucial for China to achieve its dual carbon goals, yet such projects have long suffered from underinvestment. An interesting phenomenon is that although investment in forestry carbon sink projects remains lukewarm, their Chinese Certified Emission Reduction (CCER) trading prices are consistently high. If one only considers the carbon offset value of CCER, it is difficult to explain why compliance firms are willing to purchase forestry CCER at premium prices. Clearly, there are deeper motivations behind this phenomenon. This study takes into account compliance firms' corporate social responsibility (CSR) and uses it to explain the premium phenomenon. We therefore propose the following research question: Under conditions of uncertain CCER demand and CSR, how should investing firms determine the strategic timing for switching from renewable energy power generation projects to forestry carbon sink projects? To investigate this question, this study adopts an analytical approach combining real options theory and game theory to construct a model, and conducts numerical simulations using data from China's carbon market and CCER projects. The main findings are as follows: (1) The higher the CSR value of a forestry carbon sink project, the earlier the strategy switching timing; the higher the CSR value of a competitor's project, the later the switching timing. Comparatively, the positive effect of the former is stronger. (2) When a firm does not face competition in investing in forestry carbon sink projects, compliance firms' CSR willingness always shortens the strategy switching timing. However, when facing competition, the effect of CSR willingness depends on the CSR values of the projects in which both competing parties invest. (3) Increasing both the CCER offset ratio and the growth rate of CCER demand facilitates earlier strategy switching, with the former having a more pronounced incentive effect. (4) A lump-sum subsidy always induces firms to switch strategies earlier, while a continuous subsidy is effective only within a certain range. (5) Unanticipated policy events also affect the strategy switching timing, with the direction of the effect depending on whether such events tighten or favor CCER demand. Finally, this study proposes recommendations including how to implement subsidy policies dynamically. This research provides a micro-theoretical explanation for the high-price phenomenon of forestry CCER and enriches the application of real options theory in the field of carbon sink investment.

Key words: carbon sink, CSR, option gaming theory, subsidy, CCER