Forthcoming Paper in the American Economic Review (AER) Papers and Proceedings: “Emission Prices, Biomass, and Biodiversity in Tropical Forests”
Abstract:
We investigate how external emission prices influence robustly optimal reforestation in the Brazilian Amazon and its biodiversity impacts. Extending the findings of Assunção et al. (2023), we revisit their spatial-dynamic model of land allocation under uncertainty. Their analysis reveals that financial transfers of $25 per ton of CO2e can shift the Amazon from emitting 17 gigatons of CO2e to capturing 18 gigatons over 30 years. Our study expands this work by integrating scientific insights to evaluate biodiversity outcomes, highlighting the broader ecological benefits of emission pricing as a mechanism for achieving both carbon sequestration and biodiversity conservation.
Forthcoming in the American Economic Review (AER) Papers and Proceedings
Acknowledgments:
Hansen: University of Chicago (email: lhansen@uchicago.edu); Scheinkman: Columbia University (email: js3317@columbia.edu). We thank Pengyu Chen and Patricio Hernandez Senosian for their valuable research assistance throughout this project. We are also grateful to Zhaoyang Xu for assistance in the final stages of manuscript preparation and to Diana Petrova for her excellent editorial comments and suggestions on the paper. This project was partially supported by the Haddad Fund for Economics Research at the Becker Friedman Institute for Economics at the University of Chicago.