Commodity Booms and The Environment

Abstract

This paper studies how production responses from agricultural commodity booms affect greenhouse gas emissions, the primary cause of climate change. We show that Brazilian localities more exposed to booms substantially increase deforestation and agricultural fires, leading to higher emissions. The effects are significantly larger in Brazil’s Amazon. Commodity booms also induce production responses toward lower emissions, such as higher output per area. Taking into account higher- and lower-emission production responses, localities present an increase in net emissions. Moreover, our findings highlight that positive economic shocks may have unintended consequences, as high-exposed localities present lower compliance with an emission curbing policy.