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Ethanol Expansion and Indirect Land Use Change in Brazil

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  • Joaquim Bento Ferreira-Filho
  • Mark Horridge

Abstract

In this paper we analyze the Indirect Land Use Change (ILUC) effects of ethanol production expansion in Brazil through the use of an inter-regional, bottom-up, dynamic general equilibrium model calibrated with the 2005 Brazilian I-O table. A new methodology to deal with ILUC effects is developed, using a transition matrix of land uses calibrated with Agricultural Censuses data. Agriculture and land use are modeled separately in each of 15 Brazilian regions with different agricultural mix. This regional detail captures a good deal of the differences in soil, climate and history that cause particular land to be used for particular purposes. Brazilian land area data distinguish three broad types of agricultural land use, Crop, Pasture, and Plantation Forestry. Between one year and the next the model allows land to move between those categories, or for Unused land to convert to one of these three, driven initially by the transition matrix, changing land supply for agriculture between years. The transition matrix shows Markov probabilities that a particular hectare of land used in one year for some use would be in an other use next period. These probabilities are modified endogenously in the model according to the average unit rentals of each land type in each region. A simulation with ethanol expansion scenario is performed for year 2020, in which land supply is allowed to increase only in states located in the agricultural frontier. Results show that the ILUC effects of ethanol expansion are of the order of 0.14 hectare of new land coming from previously unused land for each new hectare of sugar cane. This value is higher than values found in the Brazilian literature. ILUC effects for pastures are around 0.47. Finally, regional differences in sugarcane productivity are found to be important elements in ILUC effects of sugar cane expansion.

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Bibliographic Info

Paper provided by Victoria University, Centre of Policy Studies/IMPACT Centre in its series Centre of Policy Studies/IMPACT Centre Working Papers with number g-218.

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Date of creation: Jun 2011
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Publication status: Published in Land Use Policy, Volume 36, January 2014.
Handle: RePEc:cop:wpaper:g-218

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Keywords: CGE; ethanol; biofuels; land use; Brazil;

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  1. Harrison, W Jill & Pearson, K R, 1996. "Computing Solutions for Large General Equilibrium Models Using GEMPACK," Computational Economics, Society for Computational Economics, Society for Computational Economics, vol. 9(2), pages 83-127, May.
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Cited by:
  1. Joaquim Ferreira-Filho & Mark Horridge, 2012. "Endogenous land use and supply, and food security in Brazil," Centre of Policy Studies/IMPACT Centre Working Papers, Victoria University, Centre of Policy Studies/IMPACT Centre g-229, Victoria University, Centre of Policy Studies/IMPACT Centre.
  2. Giesecke, James A. & Madden, John R., 2013. "Regional Computable General Equilibrium Modeling," Handbook of Computable General Equilibrium Modeling, Elsevier, Elsevier.
  3. Ferreira Filho, Joaquim Bento de Souza, 2012. "Food Security, Labor Market And Poverty Of The Bio-Economy In Brazil," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil, International Association of Agricultural Economists 126158, International Association of Agricultural Economists.
  4. Mariano, Marc Jim M. & Giesecke, James A., 2014. "The macroeconomic and food security implications of price interventions in the Philippine rice market," Economic Modelling, Elsevier, Elsevier, vol. 37(C), pages 350-361.

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