International trade and deforestation: the political economy behind Brazilian land-intensive exports

Abstract

Trade is directly related to deforestation and land use patterns. As an inducer of large economic activity and of the intensive use of factors related to deforestation and land, trade is often associated with higher CO2 emissions, pollution, deforestation, and other negative environmental outcomes.

The dissertation first analyzes the impact of stricter European Union import rules in the context of the European Union–Mercosur Free Trade Agreement, using an adapted quantitative spatial model that makes land and structure use endogenous. In scenarios where trade in land-intensive sectors faces higher charges, land use in Brazil typically increases in the outer states of the Legal Amazon.

The dissertation then uses a game-theoretic model to analyze the dynamics between countries’ preferences for trade tariffs and deforestation levels for country pairs. The results indicate that free trade with zero deforestation is neither an optimal nor an attainable social solution. The model also shows a free-riding incentive: a country more concerned with deforestation bears a larger share of the effort than the less concerned country.

The dissertation concludes that cooperation and multilateral action are required to address deforestation, and that market access can serve as a mechanism to induce stronger efforts by countries with large forest territories, such as Brazil.