IDEAS home Printed from https://ideas.repec.org/p/ags/aaea16/235800.html
   My bibliography  Save this paper

Trade-off between amazon forest and agriculture in Brazil – shadow price and their substitution estimative for 2006

Author

Listed:
  • Silva, Felipe
  • Fulginiti, Lilyan
  • Perrin, Richard

Abstract

Agriculture has led to deforestation in the northern states of Brazil during the last decades, generating a tradeoff between forest and agricultural commodities. In this study we estimate this tradeoff for the Brazilian Amazon region. To calculate the tradeoff, we use a directional distance function to estimate a production possibility frontier and the marginal rate of transformation between deforestation and agricultural activities. Using this information and market prices we calculate the shadow price of deforestation in terms of agricultural GDP foregone. Results indicate that, on average, US$ 129.48 in agricultural GDP has to be foregone to keep one hectare of virgin tropical forest. Marginal rates of transformation suggest a higher tradeoff between livestock and deforestation given the currently extensive production in the region. Also, we found that these rates vary across states due to the relevance of each agricultural activity for them, illustrating the heterogeneity of the region with respect to agricultural production. We also found an average perpetuity shadow price of a ton of CO2 emissions of US$4.16. A market-price equilibrium for tCO2 at this average price would lead to a reduction of at least 468 thousand hectares, around 43% of 2006 deforestation.

Suggested Citation

  • Silva, Felipe & Fulginiti, Lilyan & Perrin, Richard, 2016. "Trade-off between amazon forest and agriculture in Brazil – shadow price and their substitution estimative for 2006," 2016 Annual Meeting, July 31-August 2, Boston, Massachusetts 235800, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea16:235800
    DOI: 10.22004/ag.econ.235800
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/235800/files/Trade-off%20between%20amazon%20forest%20and%20agriculture%20in%20Brazil.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.235800?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Araujo, Claudio & Bonjean, Catherine Araujo & Combes, Jean-Louis & Combes Motel, Pascale & Reis, Eustaquio J., 2009. "Property rights and deforestation in the Brazilian Amazon," Ecological Economics, Elsevier, vol. 68(8-9), pages 2461-2468, June.
    2. Färe, Rolf & Grosskopf, Shawna & Pasurka, Carl A., 2014. "Potential gains from trading bad outputs: The case of U.S. electric power plants," Resource and Energy Economics, Elsevier, vol. 36(1), pages 99-112.
    3. Rada, Nicholas E. & Valdes, Constanza, 2012. "Policy, Technology, and Efficiency of Brazilian Agriculture," Economic Research Report 127498, United States Department of Agriculture, Economic Research Service.
    4. Cassiano Bragagnolo & Humberto F. S. Spolador & Geraldo Sant’Ana de Camargo Barros, 2010. "Regional Brazilian Agriculture TFP Analysis: A Stochastic Frontier Analysis Approach," Economia, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics], vol. 11(4), pages 217-242.
    5. Rolf Färe & Shawna Grosskopf & Carl A. Pasurka & William L. Weber, 2012. "Substitutability among undesirable outputs," Applied Economics, Taylor & Francis Journals, vol. 44(1), pages 39-47, January.
    6. Fare, Rolf & Grosskopf, Shawna & Noh, Dong-Woon & Weber, William, 2005. "Characteristics of a polluting technology: theory and practice," Journal of Econometrics, Elsevier, vol. 126(2), pages 469-492, June.
    7. Färe, Rolf & Grosskopf, Shawna & Pasurka, Carl A., 2007. "Environmental production functions and environmental directional distance functions," Energy, Elsevier, vol. 32(7), pages 1055-1066.
    8. Joaquim Bento de Souza Ferreira Filho & Luis Ribera & Mark Horridge, 2015. "Deforestation Control and Agricultural Supply in Brazil," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 97(2), pages 589-601.
    9. Rodolfo Coelho Prates & Maurício Serra, 2009. "O impacto dos gastos do governo federal no desmatamento no Estado do Pará [The impact of federal government expenses on deforestation in the state of Pará]," Nova Economia, Economics Department, Universidade Federal de Minas Gerais (Brazil), vol. 19(1), pages 95-116, January-A.
    10. Sérgio Rivero & Oriana Almeida & Saulo Ávila & Wesley Oliveira, 2009. "Pecuária e desmatamento: uma análise das principais causas diretas do desmatamento na Amazônia [Ranching and deforestation: an analysis of the main direct causes of deforestation in the Amazon]," Nova Economia, Economics Department, Universidade Federal de Minas Gerais (Brazil), vol. 19(1), pages 41-66, January-A.
    11. Rafael Cuesta & José Zofío, 2005. "Hyperbolic Efficiency and Parametric Distance Functions: With Application to Spanish Savings Banks," Journal of Productivity Analysis, Springer, vol. 24(1), pages 31-48, September.
    12. Fare, Rolf & Grosskopf, Shawna & Weber, William L., 2006. "Shadow prices and pollution costs in U.S. agriculture," Ecological Economics, Elsevier, vol. 56(1), pages 89-103, January.
    13. Kumbhakar,Subal C. & Wang,Hung-Jen & Horncastle,Alan P., 2015. "A Practitioner's Guide to Stochastic Frontier Analysis Using Stata," Cambridge Books, Cambridge University Press, number 9781107609464, November.
    14. Marcelo Bentes Diniz & José Nilo de Oliveira Junior & Nicolino Trompieri Neto & Márcia Jucá Teixeira Diniz, 2009. "Causas do desmatamento da Amazônia: uma aplicação do teste de causalidade de Granger acerca das principais fontes de desmatamento nos municípios da Amazônia Legal brasileira [Causes of deforestation i," Nova Economia, Economics Department, Universidade Federal de Minas Gerais (Brazil), vol. 19(1), pages 121-151, January-A.
    15. Bokusheva, Raushan & Kumbhakar, Subal C., 2014. "A Distance Function Model with Good and Bad Outputs," 2014 International Congress, August 26-29, 2014, Ljubljana, Slovenia 182765, European Association of Agricultural Economists.
    16. Andersen,Lykke E. & Granger,Clive W. J. & Reis,Eustaquio J. & Weinhold,Diana & Wunder,Sven, 2002. "The Dynamics of Deforestation and Economic Growth in the Brazilian Amazon," Cambridge Books, Cambridge University Press, number 9780521811972, November.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Silva, F.D.F. & Fulginiti, L. & Perrin, R., 2018. "Agricultural productivity and forest preservation in the Brazilian Amazon," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277167, International Association of Agricultural Economists.
    2. Felipe Figueiredo Silva & Lilyan E. Fulginiti & Richard K. Perrin & Marcelo Jose Braga, 2022. "The increasing opportunity cost of sequestering CO2 in the Brazilian Amazon forest," Empirical Economics, Springer, vol. 62(2), pages 439-460, February.
    3. Silva, Felipe & Fulginiti, Lilyan E. & Perrin, Richard K., 2016. "Did technical change in agricultural production decrease the emission of pollutants on the Amazon Forest during 1990-2009?," 2016 Annual Meeting, February 6-9, 2016, San Antonio, Texas 230092, Southern Agricultural Economics Association.
    4. Silva, Felipe & Perrin, Richard K. & Fulginiti, Lilyan E., 2016. "Tradeoffs between forests and farming in the Legal Amazon Region of Brazil," 2016 Annual Meeting, February 6-9, 2016, San Antonio, Texas 230040, Southern Agricultural Economics Association.
    5. Kumar, Surender & Managi, Shunsuke & Jain, Rakesh Kumar, 2020. "CO2 mitigation policy for Indian thermal power sector: Potential gains from emission trading," Energy Economics, Elsevier, vol. 86(C).
    6. Wei, Chu & Löschel, Andreas & Liu, Bing, 2013. "An empirical analysis of the CO2 shadow price in Chinese thermal power enterprises," Energy Economics, Elsevier, vol. 40(C), pages 22-31.
    7. Ke Wang & Yujiao Xian & Chia-Yen Lee & Yi-Ming Wei & Zhimin Huang, 2019. "On selecting directions for directional distance functions in a non-parametric framework: a review," Annals of Operations Research, Springer, vol. 278(1), pages 43-76, July.
    8. Adewale Henry Adenuga & John Davis & George Hutchinson & Trevor Donnellan & Myles Patton, 2019. "Environmental Efficiency and Pollution Costs of Nitrogen Surplus in Dairy Farms: A Parametric Hyperbolic Technology Distance Function Approach," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 74(3), pages 1273-1298, November.
    9. Yung-Hsiang Lu & Ku-Hsieh Chen & Jen-Chi Cheng & Chih-Chun Chen & Sian-Yuan Li, 2019. "Analysis of Environmental Productivity on Fossil Fuel Power Plants in the U.S," Sustainability, MDPI, vol. 11(24), pages 1-27, December.
    10. Bonilla, Jorge & Coria, Jessica & Sterner, Thomas, 2012. "Synergies and Trade-offs between Climate and Local Air Pollution: Policies in Sweden," Working Papers in Economics 529, University of Gothenburg, Department of Economics.
    11. Njuki, Eric & Bravo-Ureta, Boris B., 2014. "A Bayesian Approach to Analyzing the Economic Costs of Environmental Regulation in U.S. Dairy Farming," Working Paper series 290098, University of Connecticut, Charles J. Zwick Center for Food and Resource Policy.
    12. Färe, Rolf & Grosskopf, Shawna & Pasurka, Carl, 2016. "Technical change and pollution abatement costs," European Journal of Operational Research, Elsevier, vol. 248(2), pages 715-724.
    13. Kumar, Surender & Jain, Rakesh Kumar, 2019. "Carbon-sensitive meta-productivity growth and technological gap: An empirical analysis of Indian thermal power sector," Energy Economics, Elsevier, vol. 81(C), pages 104-116.
    14. Deng, Zhongqi & Jiang, Nan & Pang, Ruizhi, 2021. "Factor-analysis-based directional distance function: The case of New Zealand hospitals," Omega, Elsevier, vol. 98(C).
    15. Oh, Donghyun & Heshmati, Almas, 2009. "A Sequential Malmquist-Luenberger Productivity Index," IZA Discussion Papers 4199, Institute of Labor Economics (IZA).
    16. Juan Du & Yongrui Duan & Jinghua Xu, 2019. "The infeasible problem of Malmquist–Luenberger index and its application on China’s environmental total factor productivity," Annals of Operations Research, Springer, vol. 278(1), pages 235-253, July.
    17. Wen, Xiaojie & Yao, Shunbo & Sauer, Johannes, 2022. "Shadow prices and abatement cost of soil erosion in Shaanxi Province, China: Convex expectile regression approach," Ecological Economics, Elsevier, vol. 201(C).
    18. Surender Kumar & Rakesh Kumar Jain, 2021. "Cost of CO2 emission mitigation and its decomposition: evidence from coal-fired thermal power sector in India," Empirical Economics, Springer, vol. 61(2), pages 693-717, August.
    19. Lee, Chia-Yen & Zhou, Peng, 2015. "Directional shadow price estimation of CO2, SO2 and NOx in the United States coal power industry 1990–2010," Energy Economics, Elsevier, vol. 51(C), pages 493-502.
    20. Faria, Weslem Rodrigues & Almeida, Alexandre Nunes, 2016. "Relationship between openness to trade and deforestation: Empirical evidence from the Brazilian Amazon," Ecological Economics, Elsevier, vol. 121(C), pages 85-97.

    More about this item

    Keywords

    Environmental Economics and Policy; Production Economics;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:aaea16:235800. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/aaeaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.