Subsistence households are a leading source of deforestation and their consumption of fuelwood, in particular, is important in many Developing Countries. Yet the empirical economic examinations of fuelwood consumption are sparse, particularly for rural areas where the deforestation occurs. It is argued that forest policy is often designed without a good understanding of the potential responses of subsistence households to the new policy. This paper addresses these issues with household evidence from Nepal. It estimates household consumption and production of fuelwood. It finds significant distinctions with respect to responsiveness to market or resource oriented policies between households that collect fuelwood and households that also participate in the market. The obvious conclusion is that development agencies should consider fuelwood consumption and production distinctions in the local subsistence markets before they decide to promote, for example, improved stoves or other fuelwood substitutes and kerosene price supports, or seedlings and technical forestry assistance. Ill-advised policy choices will waste resources and fail to achieve the full desired effect on deforestation.