IDEAS home Printed from https://ideas.repec.org/p/bfr/banfra/998.html
   My bibliography  Save this paper

Green Finance and Deforestation Reduction in Brazil: a PVAR Analysis of the Amazon Fund

Author

Listed:
  • Loris André
  • Julio Ramos-Tallada

Abstract

The Amazon rainforest is emitting more carbon dioxide than it can absorb due to deforestation since 2021, leading to significant impacts on global warming. The loss of biodiversity due to land use change in the Amazon biome is also a major issue. Legal Amazon is an administrative area in Brazil that encompasses 64% of the Amazon biome and nine federal states. The Amazon Fund is the main international climate finance vehicle that operates in Legal Amazon. However, its disbursements have recently dropped due to disagreements between donors and the Brazilian government up to 2022. This paper aims to assess the impact of the Amazon Fund’s projects in reducing deforestation along with other factors, such as the national environmental agency sanctions and agricultural production. Using satellite observations and microeconomic data, a panel dataset has been constructed to analyze the evolution of various environmental features, climate finance, regulation, and production from 2002 to 2020 across 760 municipalities in Legal Amazon. A Panel Vector Auto Regression (PVAR) is used to model a stylized economic system in which variables can affect each other at different lags. Our main findings suggest that the Amazon Fund’s disbursements significantly reduce deforestation rates. Federal-managed projects are more effective than those led by states or municipalities. The most efficient projects are those devoted to land use planning, which involves the development and the protection of local autochthonous communities. Overall, we estimate that the Amazon Fund operates with a low abatement cost (between 0.4 and 1.1 EUR per saved ton of CO2).

Suggested Citation

  • Loris André & Julio Ramos-Tallada, 2025. "Green Finance and Deforestation Reduction in Brazil: a PVAR Analysis of the Amazon Fund," Working papers 998, Banque de France.
    • Handle: RePEc:bfr:banfra:998
    as

    Download full text from publisher

    File URL: https://www.banque-france.fr/system/files/2025-07/WP998.pdf
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    ;
    ;
    ;
    ;

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C81 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Methodology for Collecting, Estimating, and Organizing Microeconomic Data; Data Access
    • F35 - International Economics - - International Finance - - - Foreign Aid
    • Q20 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - General
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • Q56 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Environment and Development; Environment and Trade; Sustainability; Environmental Accounts and Accounting; Environmental Equity; Population Growth

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bfr:banfra:998. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Michael brassart (email available below). General contact details of provider: https://edirc.repec.org/data/bdfgvfr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.