Carbon Prices and Forest Preservation Over Space and Time in the Brazilian Amazon

Abstract

Reforestation in the Brazilian Amazon absorbs carbon, and deforestation for cattle-ranching produces carbon emissions. The social productivities vary across locations for the alternative activities. We analyze a spatial/dynamic model of efficient land allocation to establish a benchmark for policies. We treat cattle prices as stochastic and location-specific productivities as uncertain when assessing the consequences of imposing alternative prices of carbon emissions. Modest price increases would incentivize Brazil to choose policies that capture a significant amount of greenhouse gases in the next 30 years. Our analysis pinpoints tropical forest management as an important contributor to climate change mitigation.