Issues associated with the need for an understanding of the response of subsistence households to new forest policy are examined, using household evidence from the two major populated regions of Nepal (the mid-hills and the tarai region). Market prices, labour opportunities, the availability of substitutes (to fuelwood), and measure of access to the basic resource are the most reliable predictive variables for fuelwood consumption and production. There are, however, regional differences and important distinctions between the elasticities of fuelwood collecting or purchasing households with respect to these predictive variables. The difference between collecting and purchasing households is notable. It recommends forestry policies that target the labour opportunity and the physical resource in regions where collecting households dominate, and policies that affect the fuelwood market itself in regions where purchasing households are important. A second interesting finding is that fuelwood is relatively scarcer (prices are higher) in the mid- hills, and both collecting and purchasing households in this region are beginning to respond to deforestation by using their own land for fuelwood production.