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The environmental costs of political interference: Evidence from power plants in the Amazon

Author

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  • Costa, Francisco
  • Szerman, Dimitri
  • Assunção, Juliano

Abstract

This paper estimates the impacts of ten recently built hydroelectric power plants in the Brazilian Amazon on deforestation. Using the inventory of all sites with undeveloped hydropower potential, we apply the synthetic control method to estimate the causal impact of each power plant on forest loss. Overall, the construction of the ten plants contributed to 13 percent of the observed forest loss within a 50-kilometer radius of the construction site. Notably, this impact is solely attributed to four plants. In at least three of these plants, construction licenses were granted despite technical recommendations against them. In contrast, the remaining plants, which received technical clearance from the environmental agency, have negligible effects. These findings highlight the effectiveness of robust environmental regulations and underscore their vulnerability to high-level political interference.

Suggested Citation

  • Costa, Francisco & Szerman, Dimitri & Assunção, Juliano, 2025. "The environmental costs of political interference: Evidence from power plants in the Amazon," Journal of Public Economics, Elsevier, vol. 242(C).
    • Handle: RePEc:eee:pubeco:v:242:y:2025:i:c:s004727272500012x
    DOI: 10.1016/j.jpubeco.2025.105314
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    More about this item

    Keywords

    Hydro-power; Amazon; Deforestation; Brazil; Infrastructure; political economy;
    All these keywords.

    JEL classification:

    • O13 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Agriculture; Natural Resources; Environment; Other Primary Products
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • Q23 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Renewable Resources and Conservation - - - Forestry
    • Q40 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - General
    • H54 - Public Economics - - National Government Expenditures and Related Policies - - - Infrastructures

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