Implications of global ethanol expansion on Brazilian regional land use

Abstract

A spatially disaggregated model of Brazilian agriculture is used to assess the implications of global biofuel expansion on Brazilian land use at the regional level. After establishing a baseline, two scenarios are investigated. First, an exogenous increase in the global demand for biofuel is introduced into the model, and the impact is analyzed in terms of land use change and commodity price changes, given baseline assumptions on potential land expansion. Second, the same exogenous biofuel demand shock is implemented with a different responsiveness in area expansion to price signals in Brazil, reflecting varying plausible assumptions on land availability for agricultural expansion. The motivation for this second scenario is derived from the existing uncertainties regarding land availability for agricultural expansion and the extent of future enforcement of land use policies in Brazil. We find that most of the global increase in ethanol consumption (other than in the United States) is supplied by Brazilian production expansion, in particular, from the Southeast region of the country. Interestingly, total sugarcane area expansion in Brazil is higher than the increase in overall area used for agriculture. This implies that part of the sugarcane expansion occurs in previously utilized agricultural areas (other crops and pasture) that are not replaced. This suggests that some intensification in land use results from sugarcane expansion. Halving land expansion elasticities in the second scenario results in a lower expansion of area used for agricultural activities. Intensification of beef production allows a higher proportion of the sugarcane expansion to occur in pasture areas. While tending to move upward, commodity prices remain virtually unchanged relative to those of the first scenario. Larger changes in commodity prices can be expected when the scope of intensification is exhausted.