Ethanol expansion and indirect land use change in Brazil

• Published in: Land use policy 2014-01, Vol.36, p.595-604
• Main Authors: Ferreira Filho, Joaquim Bento de Souza, Horridge, Mark
• Format: Article
• Language: English
• Subjects: Agriculture; Animal, plant and microbial ecology; Applied ecology; Biological and medical sciences; Biomass energy; Brazil; CGE; Climate; Conservation, protection and management of environment and wildlife; Ethanol; Forestry; Fundamental and applied biological sciences. Psychology; History; Indirect land use; Land; Land utilization; Law; Plantations; Production; Productivity; Sugar cane
• ISSN: 0264-8377; 1873-5754
• DOI: 10.1016/j.landusepol.2013.10.015

•We develop a transition matrix approach to model the indirect land use (ILUC) effects of ethanol expansion in Brazil.•Each extra hectare of sugar cane uses up 0.47ha of pasture but only 0.14ha of forest.•Hence policies limiting deforestation are unlikely to prevent greater ethanol production.•Differences in regional sugar cane productivity are important for ILUC effects. In this paper we analyze the indirect land use change (ILUC) effects of ethanol production expansion in Brazil through the use of an inter-regional, bottom-up, dynamic general equilibrium model calibrated with the 2005 Brazilian I-O table. A new methodology to deal with ILUC effects is developed, using a transition matrix of land uses calibrated with Agricultural Censuses data. Agriculture and land use are modeled separately in each of 15 Brazilian regions with different agricultural mix. This regional detail captures a good deal of the differences in soil, climate and history that cause particular land to be used for particular purposes. Brazilian land area data distinguish three broad types of agricultural land use, Crop, Pasture, and Plantation Forestry. Between one year and the next the model allows land to move between those categories, or for unused land to convert to one of these three, driven initially by the transition matrix, changing land supply for agriculture between years. The transition matrix shows Markov probabilities that a particular hectare of land used in one year for some use would be in another use next period. These probabilities are modified endogenously in the model according to the average unit rentals of each land type in each region. We ask whether biofuel expansion is consistent with new laws, limiting forest clearing in Brazil. A simulation with ethanol expansion scenario is performed for year 2020, in which land supply is allowed to increase only in states located on the agricultural frontier. Results suggest that each new hectare of sugar cane requires only 0.14ha of new land, with another 0.47ha converted from pasture use. Hence policies limiting deforestation are unlikely to prevent greater ethanol production. Finally, regional differences in sugarcane productivity are found to be important elements in ILUC effects of sugar cane expansion.