Efficient Conservation of the Brazilian Amazon: Estimates from a Dynamic Model

Rafael Araujo, Francisco Costa and Marcelo Sant’Anna

The Review of Economic Studies, 2026, vol. 93, issue 1, 72-105

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.

Keywords: Deforestation; Carbon emission; Amazon; Dynamic discrete choice model (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:oup:restud:v:93:y:2026:i:1:p:72-105.

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