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Biofuels and Land Use Change: Sugarcane and Soybean Acreage Response in Brazil

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Scientists and economists are increasingly worried that biofuels production is leading to land use changes in the form of competition with food crops or loss of natural ecosystems. I estimate acreage conversion in response to shocks in sugarcane (a biofuels feedstock) and soybean (thought to be affected by United States corn ethanol production) prices in Brazil at a national and regional level. Using county-level data from 1973 to 2005, I consider a dynamic panel data model of input demand for agricultural land, conditioning on price changes of other commodities. The short-run crop-price elasticity of sugarcane acreage in Brazil is estimated to be approximately zero, whereas the elasticity of soybean acreage is 0.9 when both spot and futures prices change. The regional estimates for soybeans show considerable variation, and are highest in areas of ecological importance, such as the cerrado. Sugarcane estimates are more homogeneous. These results should be taken into account in impact assessments of biofuels.

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Correspondence to Catherine Hausman.

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Authors thank Maximilian Auffhammer, Peter Berck, and Joshua Hausman for their invaluable help. I also thank Avery Cohn, Ethan Ligon, Gordon Rausser, Alex Solis, Sofia Villas-Boas, Lunyu Xie, and Carlos Young for excellent comments. This work was carried out under the support of the Energy Biosciences Institute. All opinions are my own and do not represent those of the Energy Biosciences Institute. All errors are Authors.

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Hausman, C. Biofuels and Land Use Change: Sugarcane and Soybean Acreage Response in Brazil. Environ Resource Econ 51, 163–187 (2012).

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