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Commodity Prices and Robust Environmental Regulation: Evidence from Deforestation in Brazil

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  • Torfinn Harding
  • Julika Herzberg
  • Karlygash Kuralbayeva

Abstract

Increasing international agricultural commodity prices create pressure on tropical forests. We study the effectiveness of three regulatory policies implemented by Brazil in reducing this pressure: blacklisting of municipalities, the Soy Moratorium, and conservation zones. We use a triple difference approach that combines international agricultural commodity prices with the policies across three million km2 in the Brazilian Amazon. We find that the blacklisting program is effective, as it reduces deforestation related to the prices by 40%. The Soy Moratorium made deforestation in exposed municipalities more sensitive to non-soy prices, in line with crop substitution. Conservation zones amplify the effect of prices on deforestation on the remaining unprotected land, consistent with reduced land supply. Our results highlight that the effect of environmental regulation depends on the economic pressure to use natural resources.

Suggested Citation

  • Torfinn Harding & Julika Herzberg & Karlygash Kuralbayeva, 2020. "Commodity Prices and Robust Environmental Regulation: Evidence from Deforestation in Brazil," OxCarre Working Papers 225, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
    • Handle: RePEc:oxf:oxcrwp:225
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    1. Zhen Feng & Sainan Cheng & Guohua Qu & Yunlong Cui & Jiameng Ye, 2022. "Research on Theoretical Mechanism and Promotion Path of Digital Economy Driving China’s Green Development under “Double Carbon” Background," IJERPH, MDPI, vol. 20(1), pages 1-27, December.
    2. Berman, Nicolas & Couttenier, Mathieu & Leblois, Antoine & Soubeyran, Raphael, 2023. "Crop prices and deforestation in the tropics," Journal of Environmental Economics and Management, Elsevier, vol. 119(C).
    3. Bai, Caiquan & Liu, Hangjuan & Zhang, Rongjie & Feng, Chen, 2023. "Blessing or curse? Market-driven environmental regulation and enterprises' total factor productivity: Evidence from China's carbon market pilots," Energy Economics, Elsevier, vol. 117(C).
    4. Po Yin Wong & Karlygash Kuralbayeva & Liana O. Anderson & Ana M. Pessoa & Torfinn Harding, 2023. "Individual Pay for Collective Performance and Deforestation: Evidence from Brazil," Working Papers 110, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research.
    5. Carreira, Igor & Costa, Francisco & Pessoa, João Paulo, 2024. "The deforestation effects of trade and agricultural productivity in Brazil," Journal of Development Economics, Elsevier, vol. 167(C).
    6. Jouf, C. & Lawson, L.A., 2022. "European farmers’ responses to higher commodity prices: Cropland expansion or forestlands preservation?," Ecological Economics, Elsevier, vol. 191(C).
    7. Léa Crepin, 2022. "Do forest conservation policies undermine the soybean sector in the Brazilian Amazon? Evidence from the blacklisting of municipalities," Working Papers 2022.07, FAERE - French Association of Environmental and Resource Economists.

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    More about this item

    Keywords

    deforestation; commodity prices; protected areas; soy moratorium; priority municipalities; environmental regulation; climate change;
    All these keywords.

    JEL classification:

    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment
    • Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade
    • Q28 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Government Policy
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming

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