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Price incentives and unmonitored deforestation: Evidence from Indonesian palm oil mills

Valentin Guye () and Sebastian Kraus
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Valentin Guye: INRAE et Mercator Research Institute for Global Commons and Climate Change Berlin (MCC)
Sebastian Kraus: MCC

No 2021.11, Working Papers from FAERE - French Association of Environmental and Resource Economists

Abstract: We create a novel, spatially explicit microeconomic panel of Indonesian palm oil mills, to provide the first estimates of deforestation price elasticities based on observations of the actual prices paid at mill gates. To identify the price elasticity, we spatially model how deforestation in upstream plantations is exposed to downstream, conditionally exogenous, shocks on mill-gate prices. We provide the first evidence that deforestation for smallholder plantations, and illegal deforestation, are price elastic. This implies that a price instrument can disincentivize deforestation where it is most difficult to monitor, and contain leakages from conservation regulations.

Keywords: Deforestation; price elasticity; oil palm; Indonesia (search for similar items in EconPapers)
JEL-codes: Q5 (search for similar items in EconPapers)
Pages: 75 pages
Date: 2021-07
New Economics Papers: this item is included in nep-agr, nep-dev, nep-env and nep-sea
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