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A Cost-benefit Analysis of Deforestation in the Brazilian Amazon

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  • Lykke E. Andersen

Abstract

This paper compares the Total Economic Value of standing Amazonian rain forest with the Net Present Value of alternative agricultural land uses. It is shown that, at the current level of deforestation, the potential benefits of deforestation are higher than the expected costs. As the level of deforestation increases, however, the global costs of deforestation will rise, and eventually pass the value of agricultural land. At that point, the international community will have to provide incentives to induce Brazil to preserve the remainder of its rain forest.

Suggested Citation

  • Lykke E. Andersen, 2015. "A Cost-benefit Analysis of Deforestation in the Brazilian Amazon," Discussion Papers 0065, Instituto de Pesquisa Econômica Aplicada - IPEA.
    • Handle: RePEc:ipe:ipetds:0065
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    References listed on IDEAS

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    Cited by:

    1. Andre Chagas & Luiza Andrade, 2013. "Opportunity cost of environmental preservation: the case of the Brazilian Legal Amazon," ERSA conference papers ersa13p644, European Regional Science Association.
    2. Franklin, Sergio L. & Pindyck, Robert S., 2018. "Tropical Forests, Tipping Points, and the Social Cost of Deforestation," Ecological Economics, Elsevier, vol. 153(C), pages 161-171.
    3. Giudice, Renzo & Börner, Jan, 2021. "Benefits and costs of incentive-based forest conservation in the Peruvian Amazon," Forest Policy and Economics, Elsevier, vol. 131(C).
    4. Sergio Margulis, 2004. "Causes of Deforestation of the Brazilian Amazon," World Bank Publications - Books, The World Bank Group, number 15060.
    5. Lykke E. Andersen & Eustáquio J. Reis, 2015. "Deforestation, Development, and Government Policy in the Brazilian Amazon: an Econometric Analysis," Discussion Papers 0069, Instituto de Pesquisa Econômica Aplicada - IPEA.
    6. May, Peter H. & Soares-Filho, Britaldo Silveira & Strand, Jon, 2013. "How much is the Amazon worth ? the state of knowledge concerning the value of preserving amazon rainforests," Policy Research Working Paper Series 6668, The World Bank.
    7. Cavatassi, Romina, 2004. "Valuation methods for environmental benefits in forestry and watershed investment projects," ESA Working Papers 23799, Food and Agriculture Organization of the United Nations, Agricultural Development Economics Division (ESA).
    8. Turner, R. Kerry & Paavola, Jouni & Cooper, Philip & Farber, Stephen & Jessamy, Valma & Georgiou, Stavros, 2003. "Valuing nature: lessons learned and future research directions," Ecological Economics, Elsevier, vol. 46(3), pages 493-510, October.
    9. Weinhold, Diana, 1999. "Estimating the loss of agricultural productivity in the Amazon," Ecological Economics, Elsevier, vol. 31(1), pages 63-76, October.
    10. Octavio Ramirez & Carlos Carpio & Rosalba Ortiz & Brian Finnegan, 2002. "Economic Value of the Carbon Sink Services of Tropical Secondary Forests and Its Management Implications," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 21(1), pages 23-46, January.
    11. Casse, Thorkil & Milhoj, Anders & Ranaivoson, Socrate & Romuald Randriamanarivo, Jean, 2004. "Causes of deforestation in southwestern Madagascar: what do we know?," Forest Policy and Economics, Elsevier, vol. 6(1), pages 33-48, January.
    12. Diniz, Marcelo Bentes & Diniz, Márcia Jucá Teixeira & Alves, Vanesa Da Paixão, 2018. "Does Amazonian land use display market failure? An opportunity-cost approach to the analysis of Amazonian environmental services," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), December.
    13. Isabel Mendes, 2018. "Social risks of forest fires: a methodological proposal for their monetary evaluation," Working Papers Department of Economics 2018/02, ISEG - Lisbon School of Economics and Management, Department of Economics, Universidade de Lisboa.

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