Summary Carbon (C) allocation plays a central role in tree responses to environmental changes. Yet, fundamental questions remain about how trees allocate C to different sinks, for example, growth vs storage and defense. In order to elucidate allocation priorities, we manipulated the whole‐tree C balance by modifying atmospheric CO2 concentrations [CO2] to create two distinct gradients of declining C availability, and compared how C was allocated among fluxes (respiration and volatile monoterpenes) and biomass C pools (total biomass, nonstructural carbohydrates (NSC) and secondary metabolites (SM)) in well‐watered Norway spruce (Picea abies) saplings. Continuous isotope labelling was used to trace the fate of newly‐assimilated C. Reducing [CO2] to 120 ppm caused an aboveground C compensation point (i.e. net C balance was zero) and resulted in decreases in growth and respiration. By contrast, soluble sugars and SM remained relatively constant in aboveground young organs and were partially maintained with a constant allocation of newly‐assimilated C, even at expense of root death from C exhaustion. We conclude that spruce trees have a conservative allocation strategy under source limitation: growth and respiration can be downregulated to maintain ‘operational’ concentrations of NSC while investing newly‐assimilated C into future survival by producing SM.