Land Use Change in Brazil: A macro-regional perspective

Andrea Cattaneo

Seminar presented at:Center for International Development

January 30, 2003

OverviewOverview

• Briefly discuss the issue of scale

• Potential issues/drivers linked to land use change in Brazil

• Entry points to discuss economy-environment links

• Compare the order of magnitude of impact on deforestation of a subset of “drivers” of land use change

Choosing the Appropriate Scale Choosing the Appropriate Scale

Key theme to modeling across scale:

The relationship between what we see and the scale at which we measure it.

Leaf Branch Tree Forest

• New properties emerge when data are aggregated: Operational scale - the scale at which a process operates

• different research questions require different scales of measurement

• In fact, many models are scale dependent

Brazil: A Multi-Regional ApproachBrazil: A Multi-Regional Approach

Issues Crisis of Brazilian Currency Subsidies & Taxes Reduction in Amazon transportation

costs Tenure Regimes Technological Innovation

Method Regional CGE model for Brazil

Producers

Product Product MarketsMarkets

Factor Factor MarketsMarkets

Institutions

FactorFactorCosts Costs

WagesWages& Rents & Rents

Demand for Demand for IntermediateIntermediate

Inputs Inputs

SalesSalesRevenues Revenues Final DemandFinal Demand

Waste SinkWaste Sink

AmenitiesAmenitiesEnergy +Energy +MaterialsMaterials

Land/WaterLand/Water

??

??

Economy-Environment LinksEconomy-Environment Links

Regional Disaggregation of ModelRegional Disaggregation of Model

Structural Model CharacteristicsStructural Model Characteristics

• Detailed representation of regional agricultural technologies: small and large farms

• Segmented capital markets

• Model allows for excess supply in factor markets

• Econometrically estimated migration functions

Structural Model… (continued)Structural Model… (continued)

• Regional trade and transportation margins

• Deforestation Sector: produces arable land

• Biophysical processes affect land use

Process/Driver Scenario Sub-cases % change in deforestation

Tenure Regimes in Amazon

Remove speculative incentives to deforest

-23%

Technological Change Innovation in

agriculture: 1985-1995

Amazon Innovation +48%

Extra-Amazon -27%

Combined effect +2%

Transportation Costs

20% reduction in costs for Amazon products

+40%

Currency Devaluation 40% Real devaluation

Capital flight +15%

Balanced Contraction

-15%

Global externality considerations

Subsidize conservationR$1.21 per carbon ton of reduced emissions

-30%

Tax deforestation tax of R$0.25 per carbon ton emitted

-43%

ScaleScale

Amazon

Inter-regional

National

International

South/SE22%

Productivity Improvements in Brazilian Agriculture (1985-1995)

Northeast24%

Legal Amazon30%

Center-West54%

Process/Driver Scenario Sub-cases % change in deforestation

Tenure Regimes in Amazon

Remove speculative incentives to deforest

-23%

Technological Change Innovation in

agriculture: 1985-1995

Amazon Innovation +48%

Extra-Amazon -27%

Combined effect +2%

Transportation Costs

20% reduction in costs for Amazon products

+40%

Currency Devaluation 40% Real devaluation

Capital flight +15%

Balanced Contraction

-15%

Global externality considerations

Subsidize conservationR$1.21 per carbon ton of reduced emissions

-30%

Tax deforestation tax of R$0.25 per carbon ton

-43%

ScaleScale

AmazonAmazon

Inter-Inter-regionalregional

NationalNational

InternationalInternational

Innovation and Agronomic Sustainability in the Amazon: stock effects vs. expectation effects

Improvements in Annuals

-40

-20

0

20

40

60

80

10% 20% 30% 40% 50% 60% 70%

Productivity improvement

defo

rest

atio

n ra

te (%

cha

nge)

Improvements in Livestock

-40

-20

0

20

40

60

80

10% 20% 30% 40% 50% 60% 70%

Productivity improvementde

fore

stat

ion

rate

(% c

hang

e)

Sustainability improvements: annuals or livestock? annuals decrease deforestation, livestock increases

deforestationProductivity improvements increase deforestation

Increasing sustainability Increasing

sustainability

Strengths of the “macro” approach…Strengths of the “macro” approach…

• The structure of the model allows for multiple land use The structure of the model allows for multiple land use change mechanismschange mechanisms

• A lot of structural information is readily available:A lot of structural information is readily available:

economic accounting constraints economic accounting constraints

factor intensitiesfactor intensities

Survey data: ag census, production, household, labor statisticsSurvey data: ag census, production, household, labor statistics

• The economic structure can be linked to environmental The economic structure can be linked to environmental processesprocesses

… … and the inevitable weaknesses and the inevitable weaknesses

• Uncertainty about parameters: rarely estimated Uncertainty about parameters: rarely estimated econometricallyeconometrically

• Lack of spatial detail is a drawback if environmental Lack of spatial detail is a drawback if environmental variables are heterogeneous over spacevariables are heterogeneous over space

• Requires a lot of effort to build a good model: no easy Requires a lot of effort to build a good model: no easy off-the-shelf answers to difficult questions. off-the-shelf answers to difficult questions.