The Impacts of Palm Oil Expansion on Deforestation and Economic Activity in the Eastern Amazon

In recent years, the Brazilian government has designed policies to promote the palm oil industry and forest protection, limiting oil palm plantations to already degraded areas. As a consequence, oil palm crops have increased rapidly in the eastern Amazon region and contributed to a low-carbon energy transition. However, little is known about the effectiveness of these policies in avoiding oil palm-induced deforestation. This paper estimates the impact of oil palm plantations on deforestation and nightlight intensity, a proxy for less land-intensive economic activities that could contribute further to forest protection. We do so in two steps. First, we combined optical spectral bands from Landsat-8 and radar backscatter values from Sentinel-1 to produce a more accurate map of oil palm plantations with a random forest machine learning algorithm. Next, we used the maximum agro-climatically attainable palm oil yield from the Global Agro-Ecological Zoning (GAEZ) as an instrument for oil palm expansion between 2014 and 2020, and estimated the impact of the crop on deforestation and nightlights. Oil palms expanded mainly on pastures, but also contributed to deforestation. We do not find any evidence that the crop stimulates less land-intensive economic activities.