The forestlands of the Pacific Northwest store a significant amount of carbon, provide wildlife habitat, generate revenue for forestland owners, and provide for sustainable generation of forest products. Promoting forest carbon storage is increasingly recognized as a key management objective to mitigate climate change. We developed an agent-based model to examine the effectiveness of current land management practices in sustaining forest carbon storage and revenue flows, and the utility of market-based carbon payments in improving carbon storage while also improving revenue generation in the Pacific Northwest. We find that while market-based incentives can improve both forest carbon storage and revenue, they are limited in their benefit to small forest owners. Our results highlight the crucial need for additional policy interventions to reduce barriers to market access for small private owners and ensure sustainable forest management in this region. We further show that a forest owners’ cooperative, which aggregates small owners to reduce the costs of participating in a carbon market, can help overcome these barriers and result in both greater carbon storage and a more equitable benefit from carbon payments. •Forest carbon management is crucial for climate mitigation; forest owners’ management practices play a vital role.•We developed an agent-based model of forest owners’ management and their adaptations to carbon-focused policies.•We analyze policy effectiveness for landscape-level and forest owner-level carbon sequestration and revenue generation.•We show policy efficacy for carbon storage and revenue generation, and inequitable economic outcomes across owner groups.•We highlight the need and effectiveness of additional institutional intervention to ensure equitable outcomes.