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Reasonably assessing the effectiveness of government expenditure on the Grain for Green project (GFG) in providing forest carbon sequestration would contribute to the development of China’s forest carbon sequestration. Using the government expenditure data from the GFG in Yunnan Province from 2001 to 2015 and the MODIS Land Cover Type (MCD12Q1) time-series datasets, we calculated the forest carbon sequestration of various counties (cities or districts). The impacts of GFG government expenditure on forest carbon sequestration were empirically evaluated by the least squares dummy variables method (LSDV). The research results indicate that a 1% increase in government expenditure on the GFG yielded a 0.0364% increase in forest carbon sequestration. However, the effects of GFG government expenditure on forest carbon sequestration differed greatly in different areas because of the diversity of the natural environments, forest resource endowment, and government policies. If the initial forest endowment was not considered, the effectiveness of government expenditure on the GFG in providing forest carbon sequestration would have been overestimated. This study argues that, to improve the efficiency of GFG government expenditure in Yunnan Province, more investment should be made in regions with positive regression coefficients that have passed the significance t-test, such as Diqing Tibetan Autonomous Prefecture in the northwest, Baoshan City in the west, Honghe Hani and Yi Autonomous Prefecture in the south, and Wenshan Zhuang and Miao Autonomous Prefecture in the east.
