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The opportunity cost of preserving the Brazilian Amazon forest
Author(s) -
Silva Felipe de Figueiredo,
Perrin Richard K.,
Fulginiti Lilyan E.
Publication year - 2019
Publication title -
agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.29
H-Index - 82
eISSN - 1574-0862
pISSN - 0169-5150
DOI - 10.1111/agec.12478
Subject(s) - amazon rainforest , deforestation (computer science) , hectare , shadow price , production (economics) , frontier , agriculture , economics , agricultural economics , opportunity cost , shadow (psychology) , agricultural productivity , natural resource economics , agroforestry , geography , environmental science , mathematics , ecology , psychology , mathematical optimization , macroeconomics , archaeology , neoclassical economics , computer science , programming language , psychotherapist , biology
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 CO 2 permanently sequestered.