The increasing opportunity cost of sequestering CO2 in the Brazilian Amazon forest

Bush fires raged across the Brazilian Amazon in 2019. The CO2 that was sequestered in those forests is now in the atmosphere, adding to the rate of global warming. The burned-over land will likely be converted to agriculture. Possible contributors to these events include climate change itself, creating hotter, drier conditions, and what is reportedly a reduction in the vigor of forest preservation efforts under a new government. But here we explore a third possible contributor: technical change may have been increasing the incentives to convert forests to agriculture. We examine the nature of technical change from 2003 to 2015, across 287 municipalities within Brazil’s “arc of deforestation.” We consider grains, livestock and timber as agricultural outputs and CO2 emission from deforestation as an undesirable output. On average across the region, we estimate the annual rate of technical change in agriculture over this period to have been 4.9%, with a significant bias toward agricultural outputs and away from CO2 emissions, meaning that it has been increasingly attractive to convert these forests to agriculture. This technological incentive for deforestation has thus been building up during the early part of this century, but actual deforestation was held in check somewhat by forest preservation policies until recently, when a more relaxed policy environment has allowed the increased technological incentive for deforestation to be more fully expressed. These changes have added to climate change as contributors to the recent burst in Amazon forest destruction.