Agricultural Economics Department
Date of this Version
2019
Citation
Silva, F. de F., R.K. Perrin, and L.E. Fulginiti. 2019. “The opportunity cost of preserving the Brazilian Amazon forest.” Agricultural Economics, 50(2): 219- 227. https://doi.org/10.1111/agec.12478
Abstract
We estimate the trade-off between forest preservation and agricultural production for the Legal Amazon region, using census and deforestation
data for municipalities in 2006.We use a directional distance function to represent the production possibility frontier, and then calculate the shadow
price of reducing deforestation in terms of agricultural income foregone. Results indicate that, on average, to preserve 1 ha of forest, $797 in annual
agricultural GDP must be foregone. Using a discount rate of 10% and average forest carbon density of 132 tons per hectare, these results imply an
average shadow price of $16 per ton of CO2 permanently sequestered.