Impacts of commodity prices and governance on the expansion of tropical agricultural frontiers

Abstract

Deforestation in the tropics remains a significant global challenge linked to carbon emissions and biodiversity loss. Agriculture, forestry, wildfires, and urbanization have been repeatedly identified as main drivers of tropical deforestation. Understanding the underlying mechanisms behind these direct causes is crucial to navigate the multiple tradeoffs between competing forest uses, such as food and biomass production (SDG 2), climate action (SDG 13), and life on land (SDG 15). This paper develops and implements a global-scale empirical approach to quantify two key factors affecting land use decisions at tropical forest frontiers: agricultural commodity prices and national governance. It relies on data covering the period 2004–2015 from multiple public sources, aggregated to countries and agro-ecological zones. Our analysis confirms the persistent influence of commodity prices on agricultural land expansion, especially in forest-abundant regions. Economic and environmental governance quality co-determines processes of expansion and contraction of agricultural land in the tropics, yet at much smaller magnitudes than other drivers. We derive land supply elasticities for direct use in standard economic impact assessment models and demonstrate that our results make a difference in a Computable General Equilibrium framework.