Opportunity Cost of Avoiding Legal Deforestation in Mato Grosso, Brazil

Authors: Breno Pietracci*, Environmental Defense Fund, Ruben Lubowski, Environmental Defense Fund, Gabriela Leslie, Environmental Defense Fund
Topics: Land Use and Land Cover Change, Latin America, Spatial Analysis & Modeling
Keywords: deforestation, opportunity cost, compensation mechanisms
Session Type: Paper
Day: 4/5/2019
Start / End Time: 9:55 AM / 11:35 AM
Room: Roosevelt 2, Marriott, Exhibition Level
Presentation File: No File Uploaded

Tropical deforestation and forest degradation still represent a major source of greenhouse gases. Brazil, the host of the largest tropical forest in the world, has successfully reduced deforestation rates by deploying an arsenal of forest conservation policies in the last decades. Noteworthy is the 2012 Forest Code, determining areas that must be preserved as native vegetation, known as the legal reserves, and which areas could be lawfully cleared within rural private properties. We estimate the opportunity cost of avoiding legal deforestation of 7.9 million hectares within rural properties in the State of Mato Grosso, the main soybean and beef producer in Brazil. We employ a logit model to regress land prices on deforestation using fine resolution spatial data. Coupling a novel dataset of rural property boundaries with remote sensing data on remaining vegetation, we forecast deforestation of 1.3 million hectares of excess legal reserve by 2030. We analyze different compensation mechanisms aimed at farmers to forego their right of legally deforesting. We find that payments up to 406.75 reais per hectare per year can spare 1 million hectares of excess legal reserve by 2030 and costs 1.7 billion Reais (496 Million USD). This compensation mechanism translates into low CO2 abatement cost of 1 USD per ton to permanently protect 200 million tons CO2. Our results are relevant to the design of jurisdictional conservation mechanisms by demonstrating how incentive-based policies targeted at private lands can complement command and control polices and help curb deforestation at scale.

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