Deforestation slowdown in the Brazilian Amazon: prices or policies?

This paper investigates the contribution of agricultural output prices and policies to the reduction in Amazon deforestation in the 2000s. Based on a panel of Amazon municipalities from 2002 through 2009, we first show that deforestation responded to agricultural output prices. After controlling for price effects, we find that conservation policies implemented beginning in 2004 and 2008 significantly contributed to the curbing of deforestation. Counterfactual simulations suggest that conservation policies avoided approximately 73,000 km(2) of deforestation, or 56 per cent of total forest clearings that would have occurred from 2005 through 2009 had the policies adopted beginning in 2004 and 2008 not been introduced. This is equivalent to an avoided loss of 2.7 billion tonnes of stored carbon dioxide.