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Brazilian ethanol, food prices, and deforestation the Amazon

Abstract

An important debate on the consequences of the expansion of the Brazilian ethanol economy has been conducted inside the country and abroad, given the strategic importance of the Brazilian ethanol to the future of the world energy matrix. In this context, the project we propose here will conduct an econometric analysis of a time series data set for the Brazilian exports of ethanol, sugar, beef and soybeans in order to investigate the nexus between the expansion of the Brazilian ethanol economy, food prices and deforestation in the Brazilian Amazon region. The analysis we propose is based on a reduced form model of the relationships between the economic variables of interest. The advantage of this approach lies on the relatively smaller set of assumptions on the channels connecting ethanol, food prices and deforestation. Thus, this type of analysis sacrifices a more detailed understanding of the economic relationships of interest, in order to increase precision in the estimation of the causal relationship between economic stimuli and responses. Hence, the analysis proposed here complements and informs the more detailed structural approach explored in computable general equilibrium models dedicated to studying environmental economics in Brazil and developed at FEA/USP with great success. (AU)