Ethanol Expansion and Indirect Land Use Change in Brazil - further results

Sep 8, 2026

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The paper analyzes indirect land use change (ILUC) effects arising from ethanol production expansion in Brazil using a calibrated inter-regional, bottom-up dynamic general equilibrium model based on the 2005 Brazilian input-output table. A transition-matrix methodology is developed from agricultural census data to move land among crop, pasture, plantation forestry, and unused categories across 15 regions. Simulations for 2020 show ILUC impacts on the order of 0.14 hectares of new land per added hectare of sugar cane and about 0.47 for pastures, with regional productivity differences shaping results.

LanguageEnglish

CategoryResearch & Report

FormatPDF

Pages22

Reading Time55 min

AccessFree to download

Abstract

Introduction

Sugarcane and ethanol expansion and land use in Brazil

Ethanol Expansion and Indirect Land Use Change in Brazil: further results. Abstract In this paper we analyze the Indirect Land Use Change (ILUC) effects of ethanol production expansion in Brazil through the use of an inter-regional, bottom-up, dynamic general equilibrium model calibrated with the 2005 Brazilian I-O table. A new methodology to deal with ILUC effects is developed, using a transition matrix of land uses calibrated with Agricultural Censuses data. Agriculture and land use are modeled separately in each of 15 Brazilian regions with different agricultural mix. This regional detail captures a good deal of the differences in soil, climate and history that cause particular land to be used for particular purposes. Brazilian land area data distinguish three broad types of agricultural land use, Crop, Pasture, and Plantation Forestry. Between one year and the next the model allows land to move between those categories, or for Unused land to convert to one of these three, driven initially by the transition matrix, changing land supply for agriculture between years. The transition matrix shows Markov probabilities that a particular hectare of land used in one year for some use would be in another use next period. These probabilities are modified endogenously in the model according to the average unit rentals of each land type in each region. A simulation with ethanol expansion scenario is performed for year 2020, in which land supply is allowed to increase only in states located on the agricultural frontier. Results show that the ILUC effects of ethanol expansion are of the order of 0.14 hectare of new land coming from previously unused land for each new hectare of sugar cane. This value is higher than values found in the Brazilian literature. ILUC effects for pastures are around 0.47. Regional differences in sugarcane productivity are found to be important elements in ILUC effects of sugar cane expansion. From a distributional point of view, in the absence of a compensatory technological change, the increase in land supply decreases the price of food in Brazil, pointing to a positive effect on welfare for the poorest, which comes in contrast with the environmental gains that would arise from the fall in deforestation. And, finally, the shadow value of deforestation in this context is found to amount to 0.16% of GDP accumulated in year 2020. JEL classification: C68, D58, E47, Q15, Q16 2 Ethanol Expansion and Indirect Land Use Change in Brazil: further results. Joaquim Bento de Souza Ferreira Filho 1 and Mark Horridge2 1 Introduction The worldwide expansion of biofuels production has raised concerns about its impact on food security and food supply, due to competition for agricultural land. Researchers have linked this competition to recent hikes in food prices. In Brazil the issue is also highly controversial. Brazil is the world leader in ethanol production, initiating in the early 1970s a program which led to the development by local automobile companies of flex-fuel engines. Presently, around half of all Brazilian cars (and nearly all new cars) use these hybrid engines, which can run with any mixture of pure ethanol and gasohol (around 80% gasoline and 20% ethanol) . In 2010 cars used nearly equal volumes of gasoline and ethanol (although diesel, used mainly by commercial vehicles, accounted for nearly 50% of transport energy use)3. Although the production and use of ethanol in Brazil has increased greatly in the last decade, Bacha (2009) points out that no food scarcity has arisen. On the contrary, the per capita production of fruits, agricultural raw materials, food and beverages has increased in the period (Bacha, 2009) . This phenomenon was accompanied by strong productivity increases in agriculture, as well as an increase in land use. As is well known, Brazil still has a vast stock of land which could be converted to agricultural uses. Land clearing for agriculture is a complex and mu

FAQs

What modeling approach is used to estimate ILUC effects in Brazil?

The study uses an inter-regional, bottom-up dynamic general equilibrium model calibrated with the 2005 Brazilian input-output table.

How does the paper represent changes in land use over time?

It models agriculture and land use separately across 15 regions, using a land-use transition matrix based on agricultural censuses, with Markov probabilities adjusted endogenously by regional rental rates.

What are the main numerical findings for ILUC from ethanol expansion in 2020?

For each new hectare of sugar cane, ILUC is about 0.14 hectares of land coming from previously unused land, while ILUC effects for pastures are around 0.47.

Sep 8, 2026

Upload by Xiajie