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Ethanol expansion and indirect land use change in Brazil

Author

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  • Joaquim Bento de Souza Ferreira Filho

    () (Escola Superior de Agricultura Luiz de Queiroz, Universidade de São Paulo)

  • Mark Horridge

    () (Centre of Policy Studies – COPS, Monash University)

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 on 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.

Suggested Citation

  • Joaquim Bento de Souza Ferreira Filho & Mark Horridge, 2011. "Ethanol expansion and indirect land use change in Brazil," Working Papers 0114, Universidade Federal do Paraná, Department of Economics.
  • Handle: RePEc:fup:wpaper:0114
    Note: Creation Date corresponds to the year in which the paper was published on the Department of Economics website. The paper may have been written a small number of months before its publication date.
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    References listed on IDEAS

    as
    1. Joaquim Bento de Souza Ferreira-Filho & Mark Horridge, 2016. "Climate change impacts on agriculture and internal migrations in Brazil," Centre of Policy Studies/IMPACT Centre Working Papers g-262, Victoria University, Centre of Policy Studies/IMPACT Centre.
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    1. repec:gam:jeners:v:10:y:2017:i:7:p:940-:d:104006 is not listed on IDEAS
    2. Joaquim Ferreira-Filho & Mark Horridge, 2012. "Endogenous land use and supply, and food security in Brazil," Centre of Policy Studies/IMPACT Centre Working Papers g-229, Victoria University, Centre of Policy Studies/IMPACT Centre.
    3. Andrade de Sá, Saraly & Palmer, Charles & di Falco, Salvatore, 2013. "Dynamics of indirect land-use change: Empirical evidence from Brazil," Journal of Environmental Economics and Management, Elsevier, vol. 65(3), pages 377-393.
    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, vol. 37(C), pages 350-361.
    5. Jonathan Gonçalves Da Silva & Joaquim Bento De Souza Ferreira Filho, 2016. "Climate Change, Agriculture And Livestock Intensification In Brazil: The Borlaug Hypothesis," Anais do XLIII Encontro Nacional de Economia [Proceedings of the 43rd Brazilian Economics Meeting] 184, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    6. Giesecke, James A. & Madden, John R., 2013. "Regional Computable General Equilibrium Modeling," Handbook of Computable General Equilibrium Modeling, Elsevier.
    7. Deborah Bentivoglio & Adele Finco & Mirian Rumenos Piedade Bacchi, 2016. "Interdependencies between Biofuel, Fuel and Food Prices: The Case of the Brazilian Ethanol Market," Energies, MDPI, Open Access Journal, vol. 9(6), pages 1-16, June.
    8. Marc Jim M. Mariano & James A. Giesecke & Nhi H. Tran, 2015. "The effects of domestic rice market interventions outside business-as-usual conditions for imported rice prices," Applied Economics, Taylor & Francis Journals, vol. 47(8), pages 809-832, February.
    9. Joaquim Bento de Souza Ferreira-Filho & Mark Horridge, 2017. "Biome composition in deforestation deterrence and GHG emissions in Brazil," Centre of Policy Studies/IMPACT Centre Working Papers g-274, Victoria University, Centre of Policy Studies/IMPACT Centre.
    10. Terciane Sabadini Carvalho & Edson Paulo Domingues, 2016. "Controlling Deforestation In The Brazilian Amazon: Regional Economic Impacts And Land-Use Change," Anais do XLIII Encontro Nacional de Economia [Proceedings of the 43rd Brazilian Economics Meeting] 192, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    11. repec:wsi:ccexxx:v:03:y:2012:i:03:n:s2010007812500157 is not listed on IDEAS
    12. Rasetti, Michele & Ferreira, Joaquim B.S., Filho & Finco, Adele & Pena-Levano, Luis M. & Zhao, Xin & Opgrand, Jeffrey, 2015. "Economic and Environmental Effects of the European Biofuel Policy," 2015 Conference, August 9-14, 2015, Milan, Italy 212489, International Association of Agricultural Economists.
    13. Miguel Carriquiry & Amani Elobeid & Ryan Goodrich, 2016. "Comparing the trends and strength of determinants to deforestation in the Brazilian Amazon in consideration of biofuel policies in Brazil and the United States," Documentos de Trabajo (working papers) 16-12, Instituto de Economía - IECON.
    14. 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 126158, International Association of Agricultural Economists.

    More about this item

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
    • Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment
    • Q16 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - R&D; Agricultural Technology; Biofuels; Agricultural Extension Services

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