【Objective】This research develops an innovative valuation framework incorporating volatility dynamics for forestry carbon sequestration projects. 【Method】Using the afforestation project at Gaotianyan Ecological Forest Farm in Jiangxi Province as a case study, we systematically examine the value composition mechanisms and key determinants under non-constant volatility conditions. The constant elasticity of variance (CEV) option pricing model is established by integrating carbon revenues into the valuation system, followed by comprehensive sensitivity tests and scenario analyses on critical parameters the including risk-free rate, timber price, carbon price and operational costs.【Result】(1) The CEV model yields more conservative option values compared to the traditional B-S model. (2) Option value exhibits accelerated growth with increasing elasticity coefficients. (3) Carbon price volatility, timber price and carbon price demonstrate positive effects on option value, while risk-free rate and operational costs show negative impacts, with timber price and risk-free rate being the most significant marginal factors. (4) The influence of uncertainties on option value becomes substantially magni fied under conditions of minimum elasticity coefficients.【Conclusion】The CEV model effectively resolves market anomalies like “fat tails” and “volatility smile” caused by the constant volatility assumption, better thereflecting actual market dynamics of China’s forestry carbon sector, thereby providing both theoretical foundation and practical guidance for enhancing valuation accuracy.