Review of Economic Studies Vol. 93 No. 1 2026
Efficient Conservation of the Brazilian Amazon: Estimates from a Dynamic Model
Abstract
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.
- DOI
- 10.1093/restud/rdaf031
- Volume
- 93
- Issue
- 1
- Pages
- 72-105
- Language
- en
- Sources
- openalex crossref