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Ethanol Expansion and Indirect Land Use Change in Brazil

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  • Joaquim Bento Ferreira-Filho
  • Mark Horridge

Abstract

In this paper we analyze the Indirect Land Use Change (ILUC) effects of ethanol production expansion in Brazil through the use of an inter-regional, bottom-up, dynamic general equilibrium model calibrated with the 2005 Brazilian I-O table. A new methodology to deal with ILUC effects is developed, using a transition matrix of land uses calibrated with Agricultural Censuses data. Agriculture and land use are modeled separately in each of 15 Brazilian regions with different agricultural mix. This regional detail captures a good deal of the differences in soil, climate and history that cause particular land to be used for particular purposes. Brazilian land area data distinguish three broad types of agricultural land use, Crop, Pasture, and Plantation Forestry. Between one year and the next the model allows land to move between those categories, or for Unused land to convert to one of these three, driven initially by the transition matrix, changing land supply for agriculture between years. The transition matrix shows Markov probabilities that a particular hectare of land used in one year for some use would be in an other use next period. These probabilities are modified endogenously in the model according to the average unit rentals of each land type in each region. A simulation with ethanol expansion scenario is performed for year 2020, in which land supply is allowed to increase only in states located in the agricultural frontier. Results show that the ILUC effects of ethanol expansion are of the order of 0.14 hectare of new land coming from previously unused land for each new hectare of sugar cane. This value is higher than values found in the Brazilian literature. ILUC effects for pastures are around 0.47. Finally, regional differences in sugarcane productivity are found to be important elements in ILUC effects of sugar cane expansion.

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  • Joaquim Bento Ferreira-Filho & Mark Horridge, 2011. "Ethanol Expansion and Indirect Land Use Change in Brazil," Centre of Policy Studies/IMPACT Centre Working Papers g-218, Victoria University, Centre of Policy Studies/IMPACT Centre.
    • Handle: RePEc:cop:wpaper:g-218
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    Cited by:

    1. Giesecke, James A. & Madden, John R., 2013. "Regional Computable General Equilibrium Modeling," Handbook of Computable General Equilibrium Modeling, in: Peter B. Dixon & Dale Jorgenson (ed.), Handbook of Computable General Equilibrium Modeling, edition 1, volume 1, chapter 0, pages 379-475, Elsevier.
    2. Joaquim Bento de Souza Ferreira Filho & Mark Horridge, 2021. "Biome Composition in Deforestation Deterrence and GHG Emissions in Brazil," World Scientific Book Chapters, in: Peter Dixon & Joseph Francois & Dominique van der Mensbrugghe (ed.), POLICY ANALYSIS AND MODELING OF THE GLOBAL ECONOMY A Festschrift Celebrating Thomas Hertel, chapter 13, pages 419-436, World Scientific Publishing Co. Pte. Ltd..
    3. Lorenzo Capecchi & Lorenzo Nissen & Monica Modesto & Giuseppe Di Girolamo & Luciano Cavani & Lorenzo Barbanti, 2017. "Crop Factors Influencing Ethanol Production from Sorghum Juice and Bagasse," Energies, MDPI, vol. 10(7), pages 1-15, July.
    4. Andrade de Sá, Saraly & Palmer, Charles & di Falco, Salvatore, 2013. "Dynamics of indirect land-use change: Empirical evidence from Brazil," Journal of Environmental Economics and Management, Elsevier, vol. 65(3), pages 377-393.
    5. Deborah Bentivoglio & Adele Finco & Mirian Rumenos Piedade Bacchi, 2016. "Interdependencies between Biofuel, Fuel and Food Prices: The Case of the Brazilian Ethanol Market," Energies, MDPI, vol. 9(6), pages 1-16, June.
    6. Ferreira-Filho, Joaquim Bento de Souza & Horridge, Mark, 2012. "Endogenous Land Use and Supply, and Food Security in Brazil," Conference papers 332215, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    7. Marc Jim M. Mariano & James A. Giesecke & Nhi H. Tran, 2015. "The effects of domestic rice market interventions outside business-as-usual conditions for imported rice prices," Applied Economics, Taylor & Francis Journals, vol. 47(8), pages 809-832, February.
    8. Elisa Dunkelberg & Matthias Finkbeiner, 2019. "Inter-Crops-Allocation (ICA) of CO2 Emissions from Land Use Change," International Journal of Environmental Sciences & Natural Resources, Juniper Publishers Inc., vol. 18(1), pages 20-27, March.
    9. Shigeaki F. Hasegawa & Takenori Takada, 2019. "Probability of Deriving a Yearly Transition Probability Matrix for Land-Use Dynamics," Sustainability, MDPI, vol. 11(22), pages 1-11, November.
    10. Nogueira, Luiz Augusto Horta & Antonio de Souza, Luiz Gustavo & Cortez, Luís Augusto Barbosa & Leal, Manoel Regis Lima Verde, 2017. "Sustainable and Integrated Bioenergy Assessment for Latin America, Caribbean and Africa (SIByl-LACAf): The path from feasibility to acceptability," Renewable and Sustainable Energy Reviews, Elsevier, vol. 76(C), pages 292-308.
    11. Ferreira, J.B. De Souza Filho & De Faria, V. Guidotti & Guedes Pinto, L.F. & Sparovek, G., 2018. "Economic and Social Impacts of Deforestation reduction in Brazil," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277084, International Association of Agricultural Economists.
    12. Miguel Carriquiry & Amani Elobeid & Ryan Goodrich, 2016. "Comparing the trends and strength of determinants to deforestation in the Brazilian Amazon in consideration of biofuel policies in Brazil and the United States," Documentos de Trabajo (working papers) 16-12, Instituto de Economía - IECON.
    13. Miguel Carriquiry & Amani Elobeid & Jerome Dumortier & Ryan Goodrich, 2020. "Incorporating Sub‐National Brazilian Agricultural Production and Land‐Use into U.S. Biofuel Policy Evaluation," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 42(3), pages 497-523, September.
    14. Mariano, Marc Jim M. & Giesecke, James A., 2014. "The macroeconomic and food security implications of price interventions in the Philippine rice market," Economic Modelling, Elsevier, vol. 37(C), pages 350-361.
    15. Terciane Sabadini Carvalho & Edson Paulo Domingues, 2016. "Controlling Deforestation In The Brazilian Amazon: Regional Economic Impacts And Land-Use Change," Anais do XLIII Encontro Nacional de Economia [Proceedings of the 43rd Brazilian Economics Meeting] 192, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    16. Alla A. Golub & Thomas W. Hertel, 2012. "Modeling Land-Use Change Impacts Of Biofuels In The Gtap-Bio Framework," Climate Change Economics (CCE), World Scientific Publishing Co. Pte. Ltd., vol. 3(03), pages 1-30.
    17. Ferreira Filho, Joaquim Bento de Souza, 2012. "Food Security, Labor Market And Poverty Of The Bio-Economy In Brazil," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil 126158, International Association of Agricultural Economists.
    18. William Wills & Emilio Lebre La Rovere & Carolina Grottera & Giovanna Ferrazzo Naspolini & Gaëlle Le Treut & F. Ghersi & Julien Lefèvre & Carolina Burle Schmidt Dubeux, 2022. "Economic and social effectiveness of carbon pricing schemes to meet Brazilian NDC targets," Post-Print hal-03500923, HAL.
    19. Rasetti, Michele & Ferreira, Joaquim B.S., Filho & Finco, Adele & Pena-Levano, Luis M. & Zhao, Xin & Opgrand, Jeffrey, 2015. "Economic and Environmental Effects of the European Biofuel Policy," 2015 Conference, August 9-14, 2015, Milan, Italy 212489, International Association of Agricultural Economists.
    20. Jonathan Gonçalves Da Silva & Joaquim Bento De Souza Ferreira Filho, 2016. "Climate Change, Agriculture And Livestock Intensification In Brazil: The Borlaug Hypothesis," Anais do XLIII Encontro Nacional de Economia [Proceedings of the 43rd Brazilian Economics Meeting] 184, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].

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    More about this item

    Keywords

    CGE; ethanol; biofuels; land use; Brazil;
    All these keywords.

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
    • Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation; Agriculture and Environment
    • Q16 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - R&D; Agricultural Technology; Biofuels; Agricultural Extension Services

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