Carbon Prices and Forest Preservation Over Space and Time in the Brazilian Amazon

Deforestation for cattle ranching in the Brazilian Amazon emits carbon, and reforesta-tion absorbs carbon. The social productivities for these alternative activities vary across locations. We analyze a spatial/dynamic model of efficient land allocation to establish a benchmark for policies. We treat cattle prices as stochastic and location-specific produc-tivities as uncertain when assessing the consequences of imposing alternative prices of carbon emissions. Modest carbon price increases would incentivize Brazil to choose poli-cies that capture a significant amount of greenhouse gases in the next 30 years. Our anal-ysis pinpoints tropical forest management as an important contributor to climate change mitigation.