Biofuels offer one approach for reducing carbon emissions. However, the necessary agricultural expansion may endanger tropical forests. I use a dynamic model of land use to disentangle the roles of acreage and yields in the supply of sugarcane ethanol in Brazil. The model is estimated using remote sensing (satellite) information of sugarcane activities. Estimates imply that, at the margin, 92% of new ethanol comes from increases in area and only 8% from increases in yield. Direct deforestation accounts for 19% of area expansion at the margin in the long run. I further assess carbon emissions and deforestation implications from ethanol policies.

This paper estimates the Brazilian Amazon’s carbon-efficient forest cover—i.e. when farmers internalize the social cost of carbon. We propose a dynamic discrete choice land-use model and estimate it using a panel of land use and carbon stock of 5.7 billion pixels between 2008 and 2017. The business-as-usual scenario implies an inefficient release of 42 billion tons of CO2 in the long run, resulting from the deforestation of an area twice the size of France. A carbon tax that makes farmers internalize the social cost of carbon would implement the efficient allocation and generate welfare gains exceeding 1.6 trillion dollars. Responses from a carbon tax are highly convex: a carbon tax of only $10/ton would preserve 95% of the efficient carbon stock. An excise tax on cattle ranching, a second-best policy, achieves at most 87% of the first-best welfare gains.

Although an auction of drilling rights is often cited as an example of common values, formal evidence has been limited by the problem of auction-level unobserved heterogeneity. We develop an empirical approach for first-price sealed-bid auctions with affiliated values, unobserved heterogeneity, and endogenous bidder entry. We show that important features of the model are nonparametrically identified and apply a semiparametric estimation approach to data from US offshore oil and gas lease auctions. We find that common values, affiliated private information, and unobserved heterogeneity are all present. Failing to account for unobserved heterogeneity obscures the evidence of common values. We examine implications of our estimates for the interaction between affiliation, the winner’s curse, the auction rules, and the number of bidders in determining the aggressiveness of bidding and seller revenue.