Home Investing Reducing Deforestation by Aligning Private Incentives

Reducing Deforestation by Aligning Private Incentives

by

Jeffrey Miron

Brazil has struggled historically to prevent its cattle industry from contributing to deforestation.

One study, however, considers a new approach: Conduct Adjustment Agreements (TACs), under which cattle-buying plants are

forgiven for past violations but could be penalized for future livestock purchases from illegally deforested areas. … [B]efore TACs were introduced … slaughterhouse openings significantly reduced the area of natural forest … [because] ranchers increased their pastureland … through deforestation. 

But when

an existing slaughterhouse signed a TAC, new slaughterhouse openings … did not result in additional forest loss or severe pasture degradation. Instead, ranchers increased the number of cattle on existing pastureland and earned a price premium for their production. Slaughterhouses that signed TACs … monitored ranchers more closely to avoid purchasing cattle from illegally deforested areas. 

All in all, 

[t]hese factors may have led ranchers to increase the productivity of existing pasture by improving management instead of expanding pastureland.

Cross-posted from Substack.

Related Posts