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Impacts of carbon-based policy instruments and taxes on tropical deforestation

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  • Barua, Sepul K.
  • Uusivuori, Jussi
  • Kuuluvainen, Jari

Abstract

The impacts of carbon payments and income taxes on curbing tropical forest loss are analyzed under a market equilibrium framework. The supply of cleared forest land was derived by using a two-period utility maximization model when the carbon sequestration of a private forestholder is credited. The land demand was derived from the profit maximization problem of a cash-crop farmer. The model was applied to data from the humid Chaco eco-region of Paraguay. The results indicate that taxes on cash-crop and forestry incomes may in fact be ineffective in curbing forest loss. Carbon payments, however, would effectively reduce forest clearing. In the context studied, a carbon payment of €30 per ton of carbon would limit deforestation to 10% of existing forest cover. A reversible carbon crediting system, in which a forestholder can redeem a credited forest, seems to substantially increase, at least in the short run, the effectiveness of carbon payments. Carbon payments could also complement the tax on cash-crop income in curbing tropical forest loss. An effective policy to combat tropical deforestation should, therefore, jointly consider forestry and cash-crop sectors.

Suggested Citation

  • Barua, Sepul K. & Uusivuori, Jussi & Kuuluvainen, Jari, 2012. "Impacts of carbon-based policy instruments and taxes on tropical deforestation," Ecological Economics, Elsevier, vol. 73(C), pages 211-219.
    • Handle: RePEc:eee:ecolec:v:73:y:2012:i:c:p:211-219
    DOI: 10.1016/j.ecolecon.2011.10.029
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    2. Fang, Guochang & Tian, Lixin & Fu, Min & Sun, Mei, 2013. "The impacts of carbon tax on energy intensity and economic growth – A dynamic evolution analysis on the case of China," Applied Energy, Elsevier, vol. 110(C), pages 17-28.
    3. Noel Perceval Assogba & Daowei Zhang, 2020. "An Economic Analysis of Tropical Forest Resource Conservation in a Protected Area," Sustainability, MDPI, vol. 12(14), pages 1-12, July.
    4. Matthias Kalkuhl & Ottmar Edenhofer, 2017. "Ramsey meets Thünen: the impact of land taxes on economic development and land conservation," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 24(2), pages 350-380, April.
    5. Alix-Garcia, Jennifer & Wolff, Hendrik, 2014. "Payment for Ecosystem Services from Forests," IZA Discussion Papers 8179, Institute of Labor Economics (IZA).
    6. Indarto, Jarot & Mutaqin, Dadang J., 2016. "An overview of theoretical and empirical studies on deforestation," MPRA Paper 70178, University Library of Munich, Germany.
    7. Kalkuhl, Matthias & Fernandez Milan, Blanca & Schwerhoff, Gregor & Jakob, Michael & Hahnen, Maren & Creutzig, Felix, 2018. "Can land taxes foster sustainable development? An assessment of fiscal, distributional and implementation issues," Land Use Policy, Elsevier, vol. 78(C), pages 338-352.
    8. Djoni Hartono & Tony Irawan & Ahmad Komarulzaman, 2014. "Energy Pricing Policies in Indonesia: A Computable General Equilibrium Model," EcoMod2014 7344, EcoMod.
    9. Barua, Sepul K. & Lintunen, Jussi & Uusivuori, Jussi & Kuuluvainen, Jari, 2014. "On the economics of tropical deforestation: Carbon credit markets and national policies," Forest Policy and Economics, Elsevier, vol. 47(C), pages 36-45.
    10. Bruno Locatelli & Paulina Aldunce & Abigaïl Fallot & Jean-François Le Coq & Eric Sabourin & Jeimar Tapasco, 2017. "Research on Climate Change Policies and Rural Development in Latin America: Scope and Gaps," Sustainability, MDPI, vol. 9(10), pages 1-17, October.
    11. Cunha, Felipe Arias Fogliano de Souza & Börner, Jan & Wunder, Sven & Cosenza, Carlos Alberto Nunes & Lucena, André F.P., 2016. "The implementation costs of forest conservation policies in Brazil," Ecological Economics, Elsevier, vol. 130(C), pages 209-220.

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