This paper examines the impact of changes in agricultural land use on deforestation at the local level in the Tapajós Basin in the Brazilian Amazon. It uses exogenous variation in crop-to-beef relative prices to investigate the effects of pasture-to-cropland conversion on deforestation. The findings indicate that increases in crop-to-beef relative prices increase the rate of pasture-to-cropland conversion and reduce the rate of deforestation. The magnitude of the effects implies that land conversion reduced deforestation at the local level by 5,300 square kilometers from 2002 to 2012. This reduction is the equivalent of almost 15 per cent of the total deforestation observed in the region during this period. These results are consistent with a land use model in which cattle ranching and crop cultivation have different input-intensities and there is imperfect mobility of productive factors between municipalities. This model highlights the fact that changes in relative prices affect deforestation through its effect on input prices.

Deforestation results from the trade-off between benefits from forest conservation and economic profits associated with land development. However, as net gains are often uncertain, irreversible land development may later be regretted. To better inform conservation policies, we use a real options framework to model irreversible forest conversion under uncertain conservation benefits and determine the associated optimal long-run average rate of deforestation. We then analyze the impact of the demand for agricultural products on the rate of deforestation in the Brazilian Amazon. In a scenario analysis for the nine states of the Brazilian Amazon, we calculate: (i) the expected time for exhaustion of the current forest stock; and (ii) the potential forest coverage for the next 20, 100 and 200 years. Our results suggest that if forest benefits grow over time at a sufficiently high speed, they may significantly slow down deforestation. In contrast, the higher their volatility, the faster deforestation proceeds.

Sense of ownership is often advocated as an argument for local participation within the epistemic development and nature conservation communities. Stakeholder participation in initiating, designing or implementing institutions is claimed to establish a sense of ownership among the stakeholders and subsequently improve the intended outcomes of the given institution. Theoretical and empirical justifications of the hypothesis remain scarce. A better understanding of the effects of local participation can motivate more extensive and stronger participation of local stakeholders and improve institutional performance. This paper applies theories from psychology and behavioral economics to sense of ownership. The empirical investigation is a framed field experiment in the context of tropical forest conservation and payments for environmental services in Tanzania. The results lend little support to the hypothesis in this context. The participation treatment in the experiment is weak, and a possible explanation is that sense of ownership is sensitive to the participation form.

This paper investigates the benefits of international cooperation under uncertainty about global warming through a stochastic dynamic game. We analyze the benefits of cooperation both for the case of symmetric and asymmetric players. It is shown that the players’ combined expected payoffs decrease as climate uncertainty becomes larger, whether or not they cooperate. However, the benefits from cooperation increase with climate uncertainty. In other words, it is more important to cooperate when facing higher uncertainty. At the same time, more transfers will be needed to ensure stable cooperation among asymmetric players.

The impact of oil governance on the extraction path of non-renewable resources is theoretically ambiguous. By employing field-level data in the South East Asia region, we utilize a change in the institutional design of oil governance in Indonesia to determine its impact on oil and gas extraction paths. From the empirical results, we infer that the move to create a separate regulatory agency and make the national oil company a purely business entity led to a reduction in the extraction path of oil, the size of which varies for different sizes of resource stock. This finding reiterates the importance of strengthening ownership rights for non-renewable resources to avoid over-extraction and facilitate more sustainable economic outcomes.

Coal has fueled China's rapid growth in recent decades, but it also severely pollutes the air and causes many health issues. The magnitude of the health damage caused by air pollution depends on the location of emission sources. In this paper, we look into the spatial distribution of coal-fired power plants, which are the major emission sources in China, and investigate the determining factors behind the distribution. We find that the driving factors are economic development and expansion of electricity grid coverage; the latter factor plays a key role in provinces that are less developed but have abundant coal resources. This suggests a way to reduce health damages caused by air pollution without harming the economy: attracting coal-fired plants to less populated areas by developing trans-province electricity trade and grid coverage.