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The opportunity cost of preserving the Brazilian Amazon forest

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  • Felipe de Figueiredo Silva
  • Richard K. Perrin
  • Lilyan E. Fulginiti

Abstract

We estimate the trade‐off between forest preservation and agricultural production for the Legal Amazon region, using census and deforestation data for municipalities in 2006. We use a directional distance function to represent the production possibility frontier, and then calculate the shadow price of reducing deforestation in terms of agricultural income foregone. Results indicate that, on average, to preserve 1 ha of forest, $797 in annual agricultural GDP must be foregone. Using a discount rate of 10% and average forest carbon density of 132 tons per hectare, these results imply an average shadow price of $16 per ton of CO2 permanently sequestered.

Suggested Citation

  • Felipe de Figueiredo Silva & Richard K. Perrin & Lilyan E. Fulginiti, 2019. "The opportunity cost of preserving the Brazilian Amazon forest," Agricultural Economics, International Association of Agricultural Economists, vol. 50(2), pages 219-227, March.
    • Handle: RePEc:bla:agecon:v:50:y:2019:i:2:p:219-227
    DOI: 10.1111/agec.12478
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    Cited by:

    1. DePaula, Guilherme M. & Justino, Leandro, 2020. "Can Markets Save the Brazilian Forests?," 2020 Annual Meeting, July 26-28, Kansas City, Missouri 304482, Agricultural and Applied Economics Association.
    2. Flavius Badau & Nicholas Rada, 2022. "Disequilibrium effects from misallocated markets: An application to agriculture," Agricultural Economics, International Association of Agricultural Economists, vol. 53(4), pages 592-604, July.
    3. Queiroz, Pedro & Fulginiti, Lilyan & Perrin, Richard, 2021. "Induced Innovation in South American Agriculture: Deforestation and Directed Technical Change," 2021 Conference, August 17-31, 2021, Virtual 315416, International Association of Agricultural Economists.
    4. Zaheer Allam & David S. Jones & Can Biyik, 2021. "Introducing a global planetary ecosystem accounting in the wake of the Amazon Forest fires," Palgrave Communications, Palgrave Macmillan, vol. 8(1), pages 1-8, December.

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