Study shows that zero deforestation is economically feasible in Brazil

Impacts on the GDP and wages would be minor, offset through an uptick in cattle-ranching intensification rates

If all legal and illegal deforestation – and the resulting expansion of the agricultural frontier – were to cease immediately in Brazil, on both government-owned and privately-held land, there would be a minimal impact on the nation’s economy.  This would mean a drop of only 0.62% in its accumulated GDP between 2016 and 2030, equivalent to R$ 46 billion over fifteen years, or R$ 3.1 billion a year.  This is the main finding of the study entitled What is the Impact of Zero Deforestation in Brazil? (Qual o Impacto do desmatamento zero no Brasil?), conceptualized and coordinated by the Instituto Escolhas and implemented through a partnership with researchers at the Forestry and Agriculture Stewardship and Certification Institute (Imaflora) and the Luiz de Queiroz Agricultural College, University of São Paulo (Esalq-USP).  This study was published  in October 2017.

According to the Executive Director of the Instituto Escolhas, this impact on the GDP is far less than the amounts invested by the Brazilian State in several areas rated as high priority: “Just the subsidies underwriting the Harvest Financing Plan (Plano Safra) reached some R$ 10 billion in 2017.  Moreover, this amount could be offset through a slight increase in the annual cattle-ranching intensification rate.  It must also be borne in mind that not curbing deforestation also has a heavy impact on the GDP, which was not taken into account for this study.  This means that not acting now to curtail deforestation may cost even more,” he said.

In addition to eliminating all deforestation immediately and absolutely  (ZDAbs), the study simulated the impacts for two other scenarios.  In one of them (ZD2), illegal deforestation on government-owned land is abolished completely by 2030, and only privately-held wilderness areas in Amazonia and the Cerrado savannas would be cleared during this period as permitted by law, when suitable for farming and ranching activities. For this scenario, the accumulated impact on the GDP is less than 0.22% through to 2030.

The third scenario (ZD3) differs from its predecessors through assuming that legal deforestation of privately-held land in Amazonia and the Cerrado savannas would follow the current trend, regardless of suitability for agriculture.  This scenario is the closest to Brazil’s commitment under the United Nations Framework Convention on Climate Change (UNFCCC), but is even more restrictive, as it includes the end of illegal deforestation not only in Amazonia, but also in the Cerrado savannas.  In this case, the accumulated impact on Brazil’s GDP is less than 0.03% through to 2030.

In order to bring deforestation down to zero, this study started out from the principle that doing away with deforestation means  ending  the expansion of the agricultural frontier  in order to open up grazing lands.  However, farmlands and reforestation projects (eucalyptus and pine plantations or commercial forests) would continue to expand at the mean rate noted between 2011 and 2015, but only on grazing lands, which would begin to shrink.

According to the study, bringing deforestation to an end tends to trigger a dip in the foreign exchange rate that would benefit agricultural exports (soybeans, coffee and forest products) as well as heavily-imported commodities (mainly wheat) whose output could burgeon in Brazil.  On the other hand, these simulations show a drop in wages for all three scenarios, undermined by shrinking economic activity, expressed through a lower GDP.  Although very small (down by 0.08% to 1.13%), less skilled workers (such as those employed in the farming and ranching sector) would  tend to see deeper cuts in real wages.

For all three scenarios, States on the agricultural frontier would post heavier GDP losses than the more industrialized South and Southeast regions.  The States most severely affected would be Rondônia (0.59% in ZD3 to 3.07% in ZDAbs), Acre (0.54% to 4.53%), Pará (0.23% to 2.05%) and Mato Grosso (0.14% to 3.17%)

The main findings of the study are available in the Executive Summary.