Costs of Reducing Deforestation In Brazil: a General Equilibrium Approach

Climate change is the major environmental concern of global scale nowadays, and is caused by excessive greenhouse gas (GHG)emissions. Brazil is the seventh larger GHG polluter and land use changes have been the major source of such emissions historically. We investigate the potential economic impacts of stopping illegal deforestation in Brazil by 2030. We employ a dynamic and global computable general equilibrium model, able to represent the competition for alternative land uses. The results indicate that land use constraining policies cause agriculture intensification and increase yields. The livestock production is slightly negatively affected by 2.3% to 3.6% in comparison with a baseline scenario in 2030 and 2050, respectively. The Brazilian GDP suffers less than 0.1% decrease. There are negligible changes in deforestation on the rest of the world. Equivalent payments for environmental services of US$1.3 billion in 2030 and US$3.9 billion in 2050 would be required to incentive farmers to avoid deforestation in those areas allowed by the current land use law (New Forest Code).