Beyond Deforestation Reductions: Public Disclosure, Land-Use Change and Commodity Sourcing

Global commodity supply chains contribute significantly to environmental degradation and greenhouse gas emissions. Improving supply chain transparency can create public awareness and encourage relevant actors to improve their ecological footprint. We exploit Brazil’s Priority List policy for the Amazon region, a public disclosure mechanism introduced in 2008 that effectively reduced deforestation rates, to study how land users and commodity traders respond to the corresponding reputational risk exposure. Specifically, we combine remotely sensed land use data with spatio-temporally disaggregated soy trade statistics covering 15 years and 770 municipalities to measure the effect of priority listing on land-use change, sourcing patterns, and trade destinations. Using the Generalized Synthetic Control method, we find that priority listing led to a sizeable drop in deforestation and a corresponding reduction in pasture expansion. At the same time, soy expansion increased significantly, but instead of expanding into natural forests, it mostly replaced existing pastures and other cropland. The additional soy production was exported predominantly to China, whereas exports to the EU stagnated.