Although Finland＇s forest resources have been utilized intensively, the size of the total volume of the growing stock has increased since the mid-1960s, and hence increasing amounts of carbon have been sequestered by forests. The net sequestration by forests has also been substantial when compared with the CO2 emissions resulting from energy generation and consumption based on fossil fuels and peat. It is also important, from the point of view of mitigating the effects of climate change, to assess how the sequestration capacity of forests may change under changing climatic conditions. This paper presents the results of a study assessing the development of the forest and wood-product carbon budget for Finland, based on regionally measured data, detailed dynamic models, and recent predictions concerning the changing climate. At the starting point for the simulation (1990), nearly 90% of the forest sector＇s carbon storage was found in the forest. Regular management transferred carbon from forests to wood products. Under the current climatic conditions, the simulated forest carbon storage increased 45% by the year 2100, and the wood-product storage by 320%, as a consequence of continuous production. Under changing climate conditions, the forest carbon storage increased, but started to decline when the temperature increase exceeded 2.5 degrees C within 40 years.