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GTAP Resource #7181

"The European Union deforestation-free policy and the potential impacts on the Brazilian economy: the soy supply chain case"
by Stam, Heloiza and Joaquim Bento Ferreira-Filho

The EU approved a law for deforestation-free supply chains. This paper explores the implications of this policy on the Brazilian soy supply chains, analyzing perspectives from industry and environmental groups. The objective is to estimate the economic impact of the European Union Deforestation-Free Regulation (EUDR), utilizing a multiregional CGE model to analyze variations across Brazilian regions and land-use changes. Without EUDR’s risk classification countries list disclosed, three possible scenarios are simulated. Scenario 1 (1AMZN) increases costs just in the regions in the Amazon biome, Scenario 2 (2AMZCER) includes the Cerrado biome, and Scenario 3 (3ALL) increases for all regions exporting to the EU. The goal is to highlight EUDR's impact on Brazilian economic growth under different risk classifications. The results showed a multifaceted impact on the Brazilian economy and emissions. Key findings include a potential reduction in deforestation, aligning with the regulation's objectives, but with a minor negative impact on national GDP and currency devaluation. Middle-class households may face reduced consumption capacity due to wage reductions, raising concerns about their overall quality of life. The shift towards alternative crops like coffee, corn, orange, rice, and wheat partially offsets soybean reductions. Regionally, the impact varies, with Mato Grosso and Rondonia expected to be most negatively affected aggravating regional economic inequality. While emissions decrease in most regions, some like Mato Grosso, Rondonia, MaToPi, and ParaAP may see an increase due to pasture emissions. Economic downturns are predicted for MaToPi and Bahia, areas with increased agricultural production and substantial forest land. The impact increases progressively from 1AMZN, to 2AMZCER, with similar values between 2AMZCER and 3ALL, suggesting the Cerrado inclusion mirrors national high-risk classification.

Resource Details (Export Citation) GTAP Keywords
Category: 2024 Conference Paper
Status: Not published
By/In: Presented during the 27th Annual Conference on Global Economic Analysis (Fort Collins, Colorado, USA)
Date: 2024
Created: Stam, H. (4/11/2024)
Updated: Stam, H. (5/29/2024)
Visits: 66
- Environmental policies
- Trade and the environment
- Supply chains
- Dynamic modeling
- European Union
- South America

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