Regional Development and Greenhouse Gases Emission: the case of the Amazon Region

Transcription

1 Regonal Development and Greenhouse Gases Emsson: the case of the Amazon Regon Dense Imor (Department of Economcs, FEA - Unversty of São Paulo) Joaqum José Martns Gulhoto (Department of Economcs, FEA - Unversty of São Paulo; REAL, Unversty of Illnos; and CNPq Scholar) Letíca Scretas Davd (Department of Economcs, FEA - Unversty of São Paulo) Leopoldo Mllan Guterre (Department of Economcs, FEA - Unversty of São Paulo) Cao Wasman (Department of Economcs, FEA - Unversty of São Paulo) Abstract The purpose of ths work s to verfy the exstence of possble tradeoffs between polces drect to reduce the emssons of greenhouse gases (GHGs) wth the ones drect to foster the development of the Brazlan Amazon Regon, consderng ts economc relatons wth the rest of the country and the nternatonal markets. In order to acheve ths goal, ths paper uses an nterregonal nput-output (I-O) model, estmated for the Brazlan economy for the year of The I-O model s used to make a comparson between the economcal and the envronmental relevance of each sector n the Amazon regon and the rest of Brazl. Ths study consders the greenhouse gases emssons not only from the economc actvtes by tself, but, also for the more mportant factor of the land-use changes. Ths s a fact of most mportance, gven that n 2005, about 60% of the Brazlan GHGs emssons were due to the land-use change n ts dfferent bomes. Moreover, n the Brazlan Amazon regon, especally n the last decades, the deforestaton was lnked manly to economc factors than to polces conducted by the government. The results show that the sectors wth the greatest mportance n terms of emssons are cattle and soybean producton. Also, they are also the most promnent for the regon's economc development. Ths poses a dlemma that needs to be faced not only by Brazl, but also by the developed natons, as the burden of the reducton n the greenhouse gases emsson n the Brazlan Amazon regon cannot be only put on the poor populaton of the regon! Resumo O objetvo do presente trabalho é verfcar a exstênca de possíves mpasses entre polítcas que vsem à redução das emssões de gases do efeto estufa e outras que objetvem o desenvolvmento da Regão Amazônca, consderando suas relações econômcas com o resto do país e com os mercados nternaconas. De modo a atngr esse propósto, o artgo emprega um modelo de nsumo-produto nterregonal, estmado para a economa braslera referente ao ano de O modelo é empregado para se realzar uma comparação entre as relevâncas econômcas e ambentas de cada setor da regão Amazônca e do resto do Brasl. O estudo consdera os gases do efeto estufa decorrentes não somente das atvdades econômcas por s só, mas também da mudança de uso da terra. Trata-se de um ponto de grande mportânca, uma vez que em 2005 aproxmadamente 60% das emssões brasleras de gases do efeto estufa foram devdas à mudança de uso da terra em seus dversos bomas. Ademas, tem-se que na Amazôna, especalmente nas últmas décadas, o desmatamento esteve relaconado mas a fatores econômcos do que a polítcas governamentas. Os resultados mostram que os setores mas mportantes em termos de emssões são os de gado bovno e de soja, os quas também se mostram proemnentes para o desenvolvmento econômco da regão. Impõe-se, assm, um dlema que deve ser enfrentado não apenas pelo Brasl, mas também pelos países desenvolvdos, uma vez que o ônus da redução das emssões de gases do efeto estufa não pode ser mposto apenas à população carente da regão. Key Words: Amazon Regon, Greenhouse Gases, Input-Output, Regonal Development, Productve Structure Palavras-chave: Regão Amazônca, Gases do Efeto Estufa, Insumo-Produto, Desenvolvmento Regonal, Estrutura Produtva Área ANPEC: Área 9 Economa Regonal e Urbana JEL: R12, R15, Q54

2 2 Regonal Development and Greenhouse Gases Emsson: the case of the Amazon Regon 1. Introducton The phenomenon of global warmng, caused by the emsson of greenhouse gases (GHGs), s an ssue of great concern nowadays. Much of the hgh nterest n the emsson of GHGs s related to the gravty of ths ssue. Accordng to Ncholas Stern, the clmatc change s an externalty whch, due to ts possble consequences and, manly, ts potental severty, s the bggest market falure that ever exsted. (STERN, 2008, p. xv). Consderng the large number of consequences of ths effect and ts gravty, the poston of Brazl, especally of the Brazlan Ran forest (the area where major part of the natonal emssons occurs, as ths work wll menton later) cannot be gnored. Accordng to the World Resources Insttute (WRI), n 2005 the country was responsble for a sgnfcant porton of the global emssons: 6.47% of GHGs emsson n the world took place n Brazl that year. The followng table shows ths stuaton relatvely to the global bggest emtters. Table 1 Percentage of CO2eq emsson per country, GWP-100, 2005 Orgn Percentage of Global emssons, 2005 Chna 16.36% U.S % European Unon 12.08% Brazl 6.47% Indonesa 4.63% Russa 4.58% Inda 4.25% Japan 3.17% Germany 2.27% Canada 1.83% Source: World Resources Insttute (2010) However, the Brazlan pattern of emssons s strctly dfferent of the global pattern. It can be seen n the followng fgure, whch presents the patterns of CO2eq emssons across the globe and n Brazl. Fgure 1 Global pattern (left) and Brazlan pattern (rght) of emssons of CO2eq, GWP-100, 2005 Source: World Resources Insttute (2010) and Mnstry of Scence and Technology (2010) Comparng these two patterns, t s possble to notce two outstandng dfferences. The frst dfference refers to the weght of emssons that are caused by the use and producton of energy. Whle these actvtes are the major responsble for anthropogenc emssons of GHGs n the world, n Brazl they have a rather secondary role. Ths s related to the fact that Brazl s a country where energy s

3 consdered clean, whch, n theory, would gve to the country advantages n a scheme for global moblzaton to reduce GHGs emssons (CONEJERO; FARINA, 2003, p. 3). The second dfference refers to the mportance of emssons brought by land-use changes. The largest part (58%) of Brazlan emssons s caused by ths actvty, whch conssts bascally of deforestaton. In global terms, deforestaton s less ntensvely but stll relevant for GHGs emssons: land-use change s responsble for 12% of emssons n the world as a whole. It s needed to consder that 20% of global emssons caused by land-use changes are consequence of deforestaton n Brazlan lands, concentrated n the Ran Forest (STERN, 2008, p. 196). That s a fact that cannot be gnored n the analyss of the global warmng phenomenon. Thus, the deforestaton of the Amazon forest n Brazl s drectly responsble for more than 2% of all emssons n the world, gvng t a poston of consderable mportance n a scenaro of fghtng global warmng. Therefore, the goal of the present work s to dentfy the possble benefts and losses of a polcy amed to reduce emssons of GHGs n the Amazon forest. For ths purpose, t uses the nput-output methodology, n order to dentfy whch sectors are the most responsble for these emssons, n addton to ther mportance n the economy n terms of producton, employment and ncome. Another mportant pont concerns the components of fnal demand that account for the GHGs emssons n the economy. Partcularly, nternatonal trade s an mportant factor n shapng the economc structure and, consequently, n affectng ts GHGs emssons (MACHADO et al, 2001). Therefore, the present work wll evaluate how responsble are the exports of each regon for the emssons of each one of them. Such partcpaton should be taken nto account when we try to pont out untl whch extent Brazl should bear the costs of reducng deforestaton and, consequently, GHGs emssons n the Amazon Regon. Another mportant pont to be analyzed relates to the expanson of cultvaton of nputs for bofuel producton. Bofuels are a source of renewable and cleaner energy, beng mentoned by many, ncludng the Brazlan government tself, as one of the solutons to reduce GHGs emssons. However, there are ndcatons that the expanson of ts cultvaton n Brazl could not reduce GHGs emssons, snce the areas where ther nputs (bascally, sugarcane and soybean) are planted would nvade part of the land n the Amazon regon, so that emssons reduced by the use of bofuels produced would then be compensated by the new ssues brought by deforestaton caused by the expanson of planted area (LAPOLA et al, 2006, p. 1). The paper s composed by fve sectons, as follows: secton 2 presents a panorama of the Amazon regon and ts deforestaton n the Brazlan economy; secton 3 ntroduces the theoretcal background of the nput-output model and the ndcators appled n the analyss; secton 4 ncludes the results of the study; secton 5 presents some concludng remarks. 2. Panorama of the Amazon regon n the Brazlan context Ths secton presents some basc contextualzaton of the Amazon regon n the Brazlan scenaro, stressng the relatonshp between deforestaton and economc growth n ths regon. In the present work, one wll consder t as composed by the Brazlan states of Acre, Amapá, Amazonas, Pará, Rondôna, Rorama, Tocantns, Mato Grosso and Maranhão. Its area accounts for 61% of Brazl, but comprses just over 12% of the natonal populaton. The 1990 s changed the character of the process of deforestaton of the Amazon regon. Snce there were changes n legslaton, n development polces, n law enforcement and n the publc sectors atttude towards the deforestaton problem, several publc organzatons began to crtcze the predctve models of deforestaton, argung that they were based on a prevous realty, and that therefore they dd not take nto account such progress. However, the change n the governmental posture towards ths ssue seems to not have caused sgnfcantly changes n the actual panorama. One can pont out two reasons for ths phenomenon. The frst one conssts of the cultvaton of grans, especally soybeans, n the Amazon regon. It was only after the 1980 s that ths cultvaton moved n drecton of the North regon of Brazl, occupyng also part of the Central-West regon of the country. Most part of ths expanson s due to the advances of transport nfrastructure n the regon (VERA-DIAZ et al, 2009, pp. 3-4). Ths movement was not only a 3

4 result of the need of lands. There was an extensve search, wth a promnent role of Embrapa, n order to mprove soybean crops, so that t could be cultvated n other regons. Today, the state of Mato Grosso s the largest producer of soybeans n Brazl, llustratng how ths cultvaton can threaten the Amazon forest. Although t s not known whether the growth of the area used n gran producton n the early 2000s occuped areas already cleared for cattle ranchng or new deforestaton was requred, data for the year 2003 shows that 23% of Amazon deforestaton n Mato Grosso was drectly related to gran producton. It also ndcates that the weght of ths actvty n deforestaton s growng steadly; an ncrease n prces of gran n the nternatonal market may ntensfy ths process (MORTON et al, 2006, p ). One may also ndcate the cattle actvty as the man cause of the deforestaton phenomenon n recent years n the Amazon regon. Accordng to some authors, the grans expanson has rather a secondary role n the deforestaton. One ndcator of ths s the fact that for every hectare cleared for gran producton, sx are for the cattle. Even wth the growth of gran producton n the regon ths panorama perssts (KAIMOWITZ et al, 2004, p. 2). In economc terms, the Amazon regon presented an ncrease of ts mportance for Brazl n recent years, and nowadays t accounts for almost a tenth of the natonal GDP. It s also worth notng that the regon has a larger share of rural areas than the natonal average: accordng to the Brazlan Insttute of Appled Economc Research (IPEA), between 1970 and 2000 the proporton of the natonal populaton resdng n the Amazon regon ncreased from 8% to 12%, whle the regonal partcpaton n the rural populaton of Brazl ncreased from nearly 11% to 20%. Ths s reflected n the fact that the agrcultural sector has a greater relatve mportance to the economy of the Amazon regon than for the Brazlan economy. Despte the mentoned ncrease of mportance of the Amazon regon for the Brazlan economy, however, ths regon s laggng behnd the average of the Brazlan economc development ndcators. Through years, one can see better results for ndcators of demographc, educaton, development and domcle aspects, but the ndcators of the Amazon regon are stll sgnfcant lower than the ones for the country as a whole. 1 Moreover, despte these advances, there was an ncrease n ncome dstrbuton nequalty n the regon. Illustratng ths fact, IPEA ndcates that between 1981 and 2008 the average Gn ndex ncreased from 0.49 to 0.52 n the states of the Amazon regon, whle n country as a whole ths ndex decreased from 0.58 to In other words, the progress of the Amazon has been accompaned by deteroraton n the dstrbuton of ncome, although n the last decade ths has begun to change. It s mportant to pont out that possbly ths process of slght mprovement n the Amazon regon could not have occurred, or have occurred n a less ntense way, wthout the establshment of the actvtes that caused deforestaton. Ths ssue s partcularly relevant when t s dscussed forms of reducng emssons from ths practce. The role of such economc actvtes, f they are n fact crucal for the wellbeng of local people, nvolve a possble tradeoff between reducng emssons and mantenance of the development process n the regon. 3. Theoretcal Background The nput-output model developed by Leontef (1951) shows the flows of goods and servces among the sectors and agents of the economy for a gven year. The nter-ndustres flows are determned by economc as well as technologcal factors and can be expressed through a system of smultaneous equatons (Mller and Blar, 2009). In matrx terms the nter-ndustres flows n the economy can be represented by 4 1 Some data from IPEA are able to llustrate ths pont: - Average lfe expectancy, 1970 and 2000: 50.2 and 64.9 n the Amazon regon, 51.3 and 67.7 n Brazl; - Infant mortalty per 1000 lve brths, 1970 and 200: and 43.9 n the Amazon regon, and 34.1 n Brazl; - Adult llteracy (%), 1991 and 2000: 37.5 and 25.2 n the Amazon regon, 31.2 and 21.8 n Brazl; - Tap water avalablty (% of the households), 1991 and 2000: 21.7 and 36.4 n the Amazon regon, 53.3 and 68.7 n Brazl; - Electrcty avalablty (% of the households), 1991 and 2000: 44.6 and 69.2 n the Amazon regon, 69.4 and 86.6 n Brazl; - Human Development Index, 1970 and 2000: 0.32 and 0.66 n the Amazon regon, 0.36 and 0.7 n Brazl.

5 AX Y X (1) where: X s a vector (n x 1) and t contans the value of total producton by sector; Y s also a vector (n x 1) and t contans the fnal demand values; and A s a (n x n) matrx whch contans the producton techncal coeffcent In the model above, the fnal demand vector s usually consdered exogenous to the system; thus, the total producton vector s determned only by the fnal demand vector, whch s gven by: Y BX (2) B I A 1 (3) where: B, the Leontef nverse, s a (n x n) matrx of drect and ndrect coeffcents, n whch the element b j shows the total amount of producton that s requred from sector to produce one unt of fnal demand of sector j. From equaton (3) one can estmate the output multplers of type (I), whch shows the drect and ndrect effects for a gven sector (Mller and Blar 2009),.e., the total amount of producton generated n the economy to produce one unt of fnal demand of the gven sector, and s gven by: n P j b j 1 where: P j s the output multpler of sector j. One can also estmate, for each sector n the economy, the total amount of employment, value added, emssons, etc, that s generated drectly and ndrectly n the economy to produce one unt of fnal demand of the gven sector. In order to do so, one needs to calculate the drect coeffcent of the varable of nterest: where: V v (5) X v s the drect coeffcent of the varable of nterest of sector ; V s the total of the varable of nterest correspondng to sector (for example, total employment of sector ); and X s the value of total producton of sector. Then, the total mpact, drect and ndrect, on the varable of nterest wll be gven by: j n GV b 1 j v where: GVj s the generator of the varable of nterest correspondng to sector j, whch represents the total mpact, drect and ndrect, on the varable of nterest gven a new fnal demand of one monetary unt n sector j. Based on the Leontef system other ndcators can be estmated and used to better understand the economc relatons and the productve structure of a gven economy. In ths way, ths paper makes use of backward and forward lnkages to understand the productve structure of the Brazlan economy. These ndcators are descrbed and defned n the followng sectons The Hrschman-Rasmussen Approach The work of Rasmussen (1956) and Hrschman (1958) led to the development of ndces of lnkage that have now become part of the generally accepted procedures for dentfyng key sectors n the * economy. Beng b j a typcal element of the Leontef nverse matrx, B ; B the average value of all elements of B, and B j assocated typcal column sums, then the backward lnkage ndex can be defned (4) (6) 5

6 as follows: U [ B / n]/ B j j * Defnng F as the matrx of row coeffcents derved from the matrx of ntermedate consumpton, G as the Ghosh matrx gven by G I F 1 * (Mller and Blar, 2009), G as the average of all elements of G, and G * as beng the sum of a typcal row of G, the forward lnkages can be defned as: U * G* n G (8) The Hrschman-Rasmussen ndces of lnkages measure the mportance of a sector n the economy n terms of buyer (backward) or suppler (forward) of nputs. The Pure lnkage approach presented below s smlar to the Hrschman-Rasmussen, however t also takes nto consderaton the total producton value of each sector n the economy,.e., the sze of the sector. The sectors ndcated as the most mportant nsde the economy, usng the Pure lnkage, n general are sectors wth a great nteracton among the other sectors and wth a sgnfcant level of producton. In general the Hrschman-Rasmussen are concerned manly wth the techncal coeffcents, whle the pure lnkage also take nto consderaton the mportance of the values suppled and demanded by each economc sector The Pure Lnkage Approach As presented by Gulhoto, Sons and Hewngs (2005) the pure lnkage approach can be used to measure the mportance of the sectors n terms of producton generaton n the economy. Consder a two-regon nput-output system represented by the followng block matrx, A, of drect nputs: A jj A jr A jj A jr 0 0 A A j Ar Arj Arr Arj A (9) 0 0 rr where A jj and A rr are the quadrate matrces of drect nputs wthn the frst and second regon and A jr and A rj are the rectangular matrces showng the drect nputs purchased by the second regon and vce versa. From (7), one can generate the followng expresson: 1 B jj B jr Δ jj 0 Δ j 0 I B I A Brj Brr 0 Δ rr 0 Δ r Arj Δ where: 1 I A j r jj rr jr r I j I A jj 1 rr 1 I j Ajr r Arj I A A 1 j rj j jr From equaton (8) t s possble to reveal the process of producton n an economy as well as derve the Pure Backward Lnkage (PBL) and the Pure Forward Lnkage (PFL),.e., PBL = r A rj j Y j (11) PFL = j A jr r Y r (12) where the PBL wll gve the pure mpact on the rest of the economy of the value of the total producton n regon,.e., the mpact that s free from a) the demand nputs that regon j makes from regon j, and b) the feedbacks from the rest of the economy to regon j and vce-versa. The PFL wll gve the pure mpact on regon j of the total producton n the rest of the economy. Other advantage of the Pure lnkages n relaton to the Hrschman-Rasmussen lnkages s that t s possble to get the Pure Total lnkage n the economy (PTL) by addng the PBL and the PFL, gven that ths ndex are measured n current values,.e., PTL = PBL + PFL (13) A Δ (7) (10) 6

7 To facltate a comparatve analyss of the pure lnkages wth the Hrschman-Rasmussen lnkages one can do a normalzaton of the pure lnkages. Ths normalzaton s done by dvdng the pure lnkage n each sector by the average value of the pure lnkage for the whole economy, n such a way that the pure lnkages normalzed are gven by the followng equatons for the backward (PBLN), forward (PFLN) and total (PTLN) lnkages: n PBLN PBL PBL n (14) PFLN PTLN PFL PTL 1 n 1 n 1 PFL PTL 3.3. Interregonal model: Amazon and the other Brazlan regons n n The nterregonal model was obtaned accordng to the methodology presented n Gulhoto and Sesso Flho (2005a) and the Brazlan natonal table was estmated accordng to the methodology of Gulhoto et al (2010). The defnton of the two regons, Amazon (AMZ) and rest of Brazl (RBR), was based n the states that compose each of them. On the other hand, the sectoral defnton was determned so that the relatonshp wth GHGs emssons would be explct. The fnal system s composed by 24 sectors Brazlan greenhouse gas emssons The data source for emssons was the second Brazlan Inventory of Anthropogenc Emssons and Removals of Greenhouse Gases, elaborated by the Mnstry of Scence and Technology and publshed n the late In general terms, the Inventory classfes the emssons n those resultng from use of energy, ndustral processes, land-use change, agrculture and waste management. In the present paper, one wll analyze the emssons of the GHGs Carbon Doxde (CO2), Methane (CH4) and Ntrous Oxde (N2O). 2 In order to aggregate the mentoned emssons and also those of Perfluorocarbons (PFCs) and Sulfur hexafluorde (SF6) n unts of CO2 equvalent, two alternatve metrc wll be utlzed: the 100 years Global Warmng Potental (GWP) and the 100 years Global Temperature Potental (GTP). The Brazlan Mnstry of Scence and Technology argues that the GWP (based on the relatve mportance of GHGs n relaton to CO2 n the producton of a certan amount of energy per unt area) does not farly represent an approprate relatve contrbuton of dfferent GHGs to clmate change. The use of GWP, then, would provde nadequate mtgaton polces. Moreover, ts use would greatly and mstakenly emphasze the mportance of GHGs wth short perod of permanence n the atmosphere, especally CH4. Thus, the Brazlan Mnstry presents the GTP as a more approprate metrc to measure the effects of dfferent gases on clmate change, despte the greater uncertanty n ts calculaton due to the requrement of consderng the senstvty of the clmate system (Mnstry of Scence and Technology, 2010). An mportant pont s that emssons from the resdental subsector, that s, famles, were dscarded, snce the focus of the work s those resultng from economc actvtes. Among the emssons from the resdental subsector, there are those produced by passenger cars, responsble for approxmately 2.2% of the Brazlan CO2 emssons n Another mportant pont s that the sectoral aggregaton provded by the Inventory s dfferent from that adopted by ths work, wth dfferent numbers, aggregaton and sorts of sectors. Emssons, therefore, had to be dstrbuted among the sectors of our nput-output model. Specal attenton was needed 2 The frst caveat s that emssons are related to the year 2005, whle our nput-output data refer to It s reasonable to assume that n ths span of tme there were not sgnfcant changes n the economy structure and the pattern and magntude of emssons. However, n future developments of the work, both data sets wll be harmonzed. (15) (16) 7

8 for the emssons resultng from land-use change, snce, as prevously ndcated, t s responsble for almost 60% of GHGs emssons n Brazl 3. The methodology for the sectoral allocaton can be found n Imor et al (2011). 4. Results The present secton ams to present and descrbe the results obtaned by employng the methodology prevously descrbed. However, before that, there s a bref assessment of the productve structure of the two regons through the assessment of the sectoral partcpaton n producton and employment, as well as the share of exports n the composton of total producton for each sector. Then, the multplers mentoned above wll be presented and dscussed, beng followed by the analyss of key sectors of each regon accordng to the HR lnkages and Pure lnkages. After that, the effects of new demands on GHGs emssons wll be presented Productve Structure The present secton wll hghlght the most mportant aspects concernng the productve structure of the Amazon regon. A more complete analyss, encompassng the 24 sectors of the nput-output tables and the rest of Brazl, can be found n Imor et al (2011). A relevant aspect n determnng the mportance of each sector n regonal level s ts contrbuton to the total producton. In the case of the Amazon regon, the man sectors relatvely to the producton value are: Other Servces, Publc Admnstraton, Food Products, Wholesale and Retal Trade, and Electrcal and Electronc Equpment. The actvtes of agrculture and lvestock as a whole also have a consderable role for the regonal producton, havng contrbuted wth approxmately 14% of the total producton value n Regardng the regonal dstrbuton, the Amazon regon s responsble for near 8% of the natonal producton value. Ths regon stands out prncpally for ts producton value of the Soybean sector t accounted for almost one thrd of the Brazlan producton n The Cattle sector of the regon s also very mportant to the natonal producton. Besdes ths, the producton of the Electrcal and Electronc Equpment sector s outstandng n the Amazon Regon, due to the Manaus Free Trade Zone. The same analyss can be appled to the number of employed persons n each sector. In the Amazon regon, the Other Servces, Wholesale and Retal Trade and Publc Admnstraton sectors play a crucal role n populaton employment, as well as on the queston of producton value. However, consderng the actvtes of agrculture and lvestock as a whole, t s the man employer sector n the regon, absorbng almost 40% of the total number of employed persons n the regon. It s also worth notng that the Cattle sector alone accounts for more than 12% of the regonal jobs. Among the sectors n the Amazon regon, the Cattle sector s the one that presents the largest partcpaton n the sectoral total employment. More than 30% of employed persons n the Brazlan Cattle sector are located n the Amazon regon. Ths fact hghlghts the probably poor effcency of the sector n the regon: ts partcpaton n employment s consderably hgher than n the total sectoral producton value. However, the opposte statement can be made n relaton to the Soybean and Electrcal and Electronc Equpment sectors, whch present hgher partcpaton n sectoral producton value than n employment. Concernng the value added of the economy, generally speakng, n both regons of our model, the partcpaton of most of agrcultural and servces sectors s lower n the total regonal value added than n ts producton value. In the Amazon regon, the Other Servces, Publc Admnstraton, and Wholesale 8 3 Emssons related to land-use change are largely caused about by deforestaton n Brazl. In the Amazon bome, 97% of the emssons n the perod were due to the converson of forests n agrcultural land (Mnstry of Scence and technology, 2010). One should pont that, for the year 2005, only data relatve to total lqud emsson due to land-use change s avalable. Because of ths, the present work underestmates the emssons resultng from land-use change, snce the carbon capture resultng from the mantenance of forests was computed n the lqud emssons, whch were allocated to the dfferent productve sectors.

9 and Retal Trade sectors stand out, presentng hgh partcpaton n the regonal total value added. Regardng the regonal partcpaton n the total value added of each sector, the Amazon regon once agan stands out wth ts agrculture, especally the Soybean and Cattle sectors. At last, an mportant queston to be dscussed s the role of the external sector. The economc structure of the Amazon regon dsplays actvtes whch are consderably dependent of the external sector as demander of ther producton. The followng sectors should be noted n ths sense: Prmary Metal Industry and Fabrcated Metal Products, Mnng, Textles, Textle Products and Footwear, Soybean, Wood, Furnture and Paper Products. These sectors have n common the fact that they are qute mportant for the producton value n the regon and they are ntensve n natural resources. Other sectors of the Amazon regon whch producton depends mportantly on the exports are: Machnery and Equpment, Refned Petroleum Products, Other Chemcal Products and Pharmaceutcals, and Food Products. Nevertheless, one must make a note of cauton about the Cattle sector. Part of ts producton s dedcated to the Food Products sector, whch, as noted, exports more than 14% of ts producton. It s reasonable to assume that some of these sales are comng from cattle rased n the Amazon area and that ths apples to the Food Products sector both of Amazon regon and the rest of Brazl. The relevance of the dependence on exports s closely related to the actons to mtgate GHGs emssons. One ssue to be addressed by polcy makers would be how to handle the ssue n order to acheve the goal of reducng emssons. The source of the demand whch leads to such emssons s a very mportant pont n ths queston Generaton of output and employment Ths subsecton shall evaluate output multplers, besdes the effects of new fnal demands on employment and on value added. It s worth mentonng that the values presented here consder the drect, ndrect and ncome effects of these ndcators, and therefore, ths analyss s nterested n the total values Output multplers The output multplers, prevously descrbed n ths work, ndcate how many unts of output value are created n the economy as a whole gven an ncrease n fnal demand for each sector. One nterestng pont of the nterregonal approach s the decomposton of these effects for each regon. Such results are presented n the followng fgure. Fgure 2 Output multplers of the Amazon regon and the rest of Brazl 9

10 As t can be seen, n general terms there are no major dscrepances n the absolute values of the creaton of producton across sectors n both regons. The average level of multpler effects n the rest of Brazl s hgher than n Amazon regon and, n both regons, the sectors wth the hghest multplers are Cattle (number 3) and Food Products (number 16). Concernng the output multplers, the major dfference between the two regons s seen n the spllover effects. The ncrease of producton proportoned by fnal demand of sectors of the Amazon s dvded, on average, almost equally between the regons, affectng Amazon tself and the rest of the country. On the other hand, the effects of the ncrease of the fnal demand of the rest of Brazl area occur manly n tself, wth few repercussons for the Amazon regon. Ths ndcates that demand shocks n Amazon regon may have sgnfcant mpacts on ts own product, but shocks elsewhere n the country have no major effects on the regon. If there was a polcy of ncreasng demand for stmulatng the economy n the regon, therefore, the targets should be sectors of the Amazon regon tself, although there are expressve spllover effects of ths ncrease for the rest of the country (see Gulhoto and Sesso Flho, 2005b, 2005c) Effects on employment Regardng employment, the scenaro s qute dfferent from that of producton, prevously treated. The results are presented n the followng fgure. Fgure 3 Effects on employment of new fnal demands of sectors n the Amazon regon and n the rest of Brazl 10 Dfferently of what was notced n the case of producton multplers, there are sgnfcant dscrepances across the employment effects that each sector provdes. There s, however, a general trend that most the jobs created by a sector reman n ther own area of orgn, although ths s slghtly more pronounced n the rest of Brazl than n the Amazon. In both regons, the most mportant sector n terms of generaton of employment gven by new fnal demands s Sugarcane (number 1), followed by Cattle (number 3) and Other Actvtes of Agrculture and Lvestock (number 4). Therefore, mpacts n the fnal demand of agrcultural sectors cause large effects n the employment of the economy, especally n the Amazon regon. Ths heterogenety of the agrcultural sectors hghlghts the queston of labor productvty n the Brazlan agrculture, whch certanly deserves a more n-depth analyss, as t strongly vares across sectors and regons n the country. Whle some crops and lvestocks n some regons are characterzed by ntensve utlzaton of factors and nvestments n technologcal developments, as s generally the case of

11 the Soybean sector, large portons of the Brazlan agrcultural producers face less favorable condtons whch lead to poor labor productvty (see Gulhoto et al., 2007) Effects on value added The results found for the generaton of value added gven by new fnal demands are more smlar to the ones found for producton value than those found for employment, as can be seen n the followng fgure. The mportance of analyzng ths effect can be explaned by the nterest dedcated to the GDP growth. Fgure 4 Effects on value added of new fnal demands of sectors n the Amazon regon and n the rest of Brazl 11 In both regons, the effects of the sectors for creaton of value added s smlar, although here t can be seen more oscllatons than n the case of producton value. The most promnent sectors n both regons are Sugarcane (number 1), Cattle (number 3) and Publc Admnstraton (number 24). However, there s a marked dfference between the regons: the ncrease n value added provded by mpacts n the fnal demand of sectors n Amazon s dvded between tself and the rest of the country, whle the ncrease n value added provded by sectors elsewhere n the country focuses prmarly on tself, wthout sgnfcant repercussons for the Amazon regon Determnaton of key sectors As prevously mentoned, the determnaton of key sectors of the economy takes place by means of the use of lnkages ndces. The present secton wll analyze the lnkages provded by the GHS methodology. For the results of the Hrschman-Rasmussen ndces of lnkages, see Imor et al (2011) Results of GHS ndces The already mentoned GHS lnkages are dfferent from the HR lnkages, snce they take nto account the magntude of flows between sectors. The results of these lnkages are presented n the table below. For the Amazon regon, consderng the magntude of the economc flows, on the demand sde (backward lnkages), the man sectors are Food Products and Publc Admnstraton, followed by the Electrcal and Electronc Equpment, and Constructon sectors. On the supply sde (forward lnkages), the

12 prncpal sectors are, especally, Other Servces, and Wholesale and Retal Trade. Consderng both spheres (total GHS lnkages), one can consder as key sectors those of Food Products, Wholesale and Retal Trade, Other Servces, and Publc Admnstraton. The frst and last sectors mentoned receved ths ratng due to ther qute hgh demand power. The opposte occurs wth the other two, although the dscrepancy between ts supply and demand powers s not as great as n the case of the other par of sectors. Table 2 GHS Lnkages for the sectors of the Amazon regon and the rest of Brazl Sectors AMZ RBR Backward Forward Total Backward Forward Total Sugarcane Soybean Cattle Other actvtes of Agrc. and Lvestock Mnng Nonmetallc Mneral Products Prmary Metal and Fab. Metal Prod Machnery and Equpment Electrcal and Electronc Equpments Transportaton Equpment Wood. Furnture and Paper Products Ethanol Fuel Refned Petroleum Products Other Chem. Prod. and Pharmaceutcals Textles. Textles Products and Footwear Food Products Mscellaneous Manufacturng Electrcty Gas. Water and Waste Servces Constructon Wholesale and Retal Trade Transportaton Other Servces Publc Admnstraton For the rest of Brazl, the results obtaned accordng to the GHS methodology are also qute dfferent from those verfed before. Relevant sectors n terms of demand are Food Products, Other Servces, and Publc Admnstraton. In terms of supply, the Other Servces, Wholesale and Retal Trade, and Other Chemcal Products and Pharmaceutcals present more mportance. Consderng both spheres, the key sectors would be Food Products, Other Servces and Publc Admnstraton. Comparng the two regons, some mportant dfferences stand out. One of them s that the Soybean and the Cattle sectors present greater relevance n the Amazon regon than n the rest of Brazl, as dsplayed by ts hgher GHS ndces, both on demand and supply sde. Ths s also the case of the Publc Admnstraton. As one can nfer from ts GHS backward lnkages, the sectors of Electrcal and Electronc Equpment, and Food Products, on ther turn, have a more expressve role as demanders of nputs n the Amazon regon than n the rest of the country. On the other hand, the Other Servces sector presents a much hgher GHS forward lnkage n the Amazon regon, what ndcates ts crucal role as suppler n the regonal economy. It s nterestng to pont out that all the sectors mentoned n the present paragraph have hgher total GHS ndces n the Amazon regon than n the rest of Brazl. 12

13 Relatonshp wth GHGs emssons Accordng to the procedure prevously descrbed, the emssons of GHGs by the Brazlan productve sectors n 2005 are presented n the followng table, by regon of our nterregonal nput-output model (n thousand tons). A frst mportant pont to note s that CO2 emssons from Amazon are substantally hgher than those of the rest of Brazl: n 2005, about 63% of the lqud anthropogenc emssons of CO2 were concentrated n ths regon. From t, approxmately 98% were due to agrcultural actvtes n the regon more specfcally, they are results from land-use change n the bome. In 2005, stood out the expanson of pasture of cattle n the Amazon, whch was exclusvely responsble for about 36% of Brazlan lqud emssons of CO2. The expanson of agrcultural area occuped by soybean was also a major source of CO2 emssons, both n the Amazon regon and n other regons of the country. In total, the land-use change due to the expanson of soybean crops accounted for one thrd of the Brazlan CO2 emssons n In Amazon, t was responsble for almost 30% of the regonal lqud emssons of CO2. One should also emphasze the CO2 emssons due to the expanson of sugarcane crops n other Brazlan regons. In the rest of Brazl, t s also relevant to ndcate the mportance of the CO2 emssons correspondng to the Transportaton and the Prmary Metals and Fabrcated Metal Products sectors. In the former, the CO2 emssons are due to the utlzaton of desel, gasolne and natural gas n the Brazlan system of road freght transport. Regardng the metallurgc actvtes, one needs to notce how they are energy ntensve n the Brazlan productve structure. Besdes ths, a large amount of ts CO2 emssons are due ndustral processes for the producton of steel and alumnum. Concernng the CH4 emssons, almost two thrds of t n Brazl are due to Enterc fermentaton n cattle. In ths way, the CH4 emssons of the Amazon regon wll rse as ts areas of pasture expand. Furthermore, land-use change was responsble for about 17% of the Brazlan emssons of ths gas n Waste management, n ts turn, was responsble for 10% of the total CH4 emssons n the country. Brazlan N2O emssons are due manly to agrcultural land. Anmals kept on pasture and ndrect emssons from cattle responded for more than 60% of N2O emssons n Brazl, n Land-use change, soybean resduals and burnng of sugarcane waste were responsble for great part of the remanng emssons of ths gas. Under both metrcs for aggregaton of the GHGs emssons that were consdered n the present work GWP-100 and GTP-100 the role of the Amazon regon stands out. However, under the GTP-100 metrc, whch assgns less weght to CH4 and N2O n the global warmng process, the partcpaton of the Amazon regon n the total of CO2eq emssons n Brazl ncreases from 54% (under the GWP-100 metrc) to 58%, snce ths regon prncpally outstands n the emssons of CO2.

14 Table 3 GHGs emssons per sector, Amazon and rest of Brazl, year 2005 (n thousand tons) CO2 CH4 N2O CO2eq - GWP-100 CO2eq - GTP-100 AMZ RBR AMZ RBR AMZ RBR AMZ RBR AMZ RBR 1 Sugarcane Soybean Cattle Other actvtes of Agrculture and Lvestock Mnng Nonmetallc Mneral Products Prmary Metal and Fabrcated Metal Prod Machnery and Equpment Electrcal and Electronc Equpments Transportaton Equpment Wood, Furnture and Paper Products Ethanol Fuel Refned Petroleum Products Other Chemcal Prod. and Pharmaceutcals Textles, Textles Products and Footwear Food Products Mscellaneous Manufacturng Electrcty Gas, Water and Waste Servces Constructon Wholesale and Retal Trade Transportaton Other Servces Publc Admnstraton Total

15 The results of the effects on GHGs emssons of new fnal demands n the Amazon regon and n the rest of Brazl are presented n the followng fgure. The fgures ntend to emphasze the spllover effects of emssons resultng from productve actvtes n both regons of our nput-output model. Fgure 5 Effects on CO2 emssons of new fnal demands of sectors n the Amazon regon and n the rest of Brazl 15 As could be expected from the data presented n Table 9, n the Amazon regon there s a clear promnence of the generaton of CO2 by new fnal demands of the Cattle sector (number 3), whch has a mnmum spllover effect to the rest of Brazl. Gven a one thousand reas (of 2004) mpact n ts fnal demand, the Amazon Cattle sector wll cause the ncrease of the CO2 emssons of the Brazlan economy n nearly 68 thousand tons. 94% of ths effect s drect, beng manly a consequence of the land-use change n the Amazon regon. The analyss of the CO2 emssons caused by new fnal demands of the Soybean sector (number 2) s qute smlar. Moreover, the Food Products sector (number 16) also features a hgh effect n CO2 emssons. In ths case, however, the ndrect effect prevals. Ths can be expected because of the fact that t s a sector whch demands large quanttes of nputs from the agrcultural sectors. In the rest of Brazl, the CO2 emssons caused by new demands of the Food Products sector (number 16) stand out by ts large spllover effect to the Amazon regon. The effects on CO2 emssons correspondng to new fnal demands of agrcultural sectors are also outstandng. Although lower than that of the Amazon regon, the effects on CO2 emssons correspondng to the Soybean sector (number 2) s the largest one, as Fgure 11 presents: for one thousand reas mpact n ts fnal demand, the Soybean sector wll cause an ncrease of about 10 thousand tons of CO2 emssons. The Sugarcane sector (number 1) also presents a hgh CO2 effect, as well ts derved ndustry, the Ethanol Fuel sector (number 12). Ths fact hghlghts the pont that, even though the CO2 emssons resultng from the utlzaton of ethanol n passenger cars 4 are not accounted n the Brazlan Inventory of Anthropogenc Emssons and Removals of Greenhouse Gases and the ethanol dstlleres are consdered self-suffcent n energy terms (the utlzaton of sugarcane bagasse as fuel for generatng electrcty n the dstlleres s wdespread n Brazl), the fnal demand for ethanol fuel ndeed causes sgnfcant emssons of CO2. However, an mportant aspect has to be consdered: the sugarcane crops absorb CO2 durng ther growth, possbly ncludng not only the emsson from ethanol utlzaton, but also that due to land-use change. Ths s a pont that can be ndcated for the land-use change emssons n general and that clams for further studes. The Second Brazlan Inventory consderers the removal of GHGs emssons by crops n 2005, 4 Accordng to the Mnstry of Scence and Technology (2010), n 2005, approxmately 55% of the lcensed passenger cars n Brazl were fueled exclusvely by ethanol or could use ths fuel n combnaton wth gasolne (flex fuel technology).

16 but does not consder ts temporal dmenson, what leads us to overlook the fact that the agrcultural plants may remove the emssons caused by the preparaton of ther land. Thereby, further studes are needed n order to analyze how much the agrcultural crops and cultvated grassland can neutralze the land-use change emssons n Brazl. Fgure 6 Effects on CH4 emssons of new fnal demands of sectors n the Amazon regon and n the rest of Brazl 16 As could be expected by the nature of CH4, the effects on these emssons caused by new fnal demands are especally hgh n the Cattle sector (number 3) of both consdered regons. Partcularly n the Amazon regon, for one thousand reas mpact n ts fnal demand, the Cattle sector wll cause an ncrease of near 0.48 thousand tons of CH4 emssons. The Food Producs (number 16) and Gas, Water and Waste Servces (number 19) because of waste management actvtes also present hgh CH4 emssons effects n Brazl as a whole. Fgure 7 Effects on N2O emssons of new fnal demands of sectors n the Amazon regon and n the rest of Brazl Also n the case of effects of new fnal demands on N2O emssons, the Cattle sector (number 3)

17 stands out n both regons of our nput-output model. In the Amazon regon, gven a one thousand reas (of 2004) mpact n ts fnal demand, the Cattle sector wll cause the ncrease of the N2O emssons of the Brazlan economy n approxmately 10 tons. Fgure 8 Effects on CO2eq of new fnal demands of sectors n the Amazon regon and n the rest of Brazl GWP Fgure 9 Effects on CO2eq of new fnal demands of sectors n the Amazon regon and n the rest of Brazl GTP-100 Fgures 8 and 9 present results of the effects of new fnal demands on CO2eq emssons under GWP-100 and GTP-100 metrcs for the Amazon regon. In both cases, the effect correspondng to the Cattle sector (number 3) s largely outstandng notably under the GWP metrc, whch, as mentoned before, gves a hgher weght to the emssons of CH4. Fnally, these results for the rest of Brazl are also presented n Fgures 8 and 9. Under both metrcs, the effects of agrcultural actvtes stand out, especally that of the Soybean sector (number 2). However, under the GWP metrc, the effect of the Cattle sector (number 3) almost equals that of soybean producton. Summarzng the prevous results, one can note that, n the Amazon regon, the sector wth the

18 hghest output and value added effects s also the one wth most outstandng GHGs emssons caused by new fnal demands: the Cattle sector, responsble for 3.4% of product value and 12.4% of employment n the regon. Other sectors that have an mportant role n regonal dynamcs are Publc Admnstraton, Other Servces, Food Products and Sugarcane. The latter two also have potental to have strong role n the generaton of GHGs. Ths ndcates a possble tradeoff between development polces for the regon and envronmental preservaton: some of the sectors wth the greatest effects on the regonal economy are also those that most affect the envronment through GHGs emssons Contrbuton to GHGs emssons by fnal demand component In the analyss of the GHGs emssons, t s relevant to consder whch components of the fnal demand of each regon are more responsble for them, drectly and ndrectly. The followng table presents the contrbuton of each fnal demand component of our nput-output model to the total CO2eq emssons of the Amazon regon and the rest of Brazl, both under the GWP-100 and GTP-100 metrcs. Table 4 Contrbuton to CO2eq emssons by fnal demand component of each regon, GWP-100 and GTP-100 Fnal demand components GWP-100 GTP-100 Source regon AMZ RBR Components AMZ RBR AMZ RBR Exports 16.98% 0.78% 16.60% 0.78% Government and non-proft organzatons 0.48% 0.21% 0.50% 0.20% Households 16.12% 3.25% 16.28% 3.41% Gross fxed captal formaton and changes n nventores 19.83% 1.03% 19.82% 0.95% Exports 6.29% 30.75% 6.27% 28.27% Government and non-proft organzatons 1.38% 3.84% 1.38% 3.83% Households 30.01% 50.68% 30.09% 52.43% Gross fxed captal formaton and changes n nventores 8.91% 9.46% 9.06% 10.14% Total % % % % Concernng the GHGs emssons of the Amazon regon, under both metrcs, the fnal demand component wth greater contrbuton s the household consumpton from the rest of Brazl 30% of the CO2eq emssons n the Amazon regon are due to productve processes aroused by the fnal demand of households n other regons of the country. More specfcally, near 13% of the emssons n the Amazon regon are due to the household consumpton of the Food Products sectors n the rest of Brazl. The second largest contrbuton corresponds to the gross fxed captal formaton and changes n nventores n the Amazon regon, especally those of the Cattle sector. However, consderng the exports of both regons n the model, the table 4 ndcates that the external sector s responsble for more than 23% of the emssons of the Amazon regon. One should partcularly ndcate that the exports of the Soybean sector of the own regon contrbute wth more than 10% of the regonal CO2eq emssons. Moreover, the exports of Food Products sectors of both regons are drectly and ndrectly responsble for approxmately 9% of the emssons n the Amazon regon, especally due to ts utlzaton of Amazon agrcultural nputs. Regardng the rest of Brazl, a frst mportant and dstngushng aspect s that the fnal demand of the sectors of the Amazon regon s responsble for slghtly more than 5% of ts CO2eq emsson, under both metrcs. Other mportant pont s that more than 50% of the emssons n the rest of Brazl are due to ts household consumpton. Also n ths regon, the domestc demand of the Food Products sector has a major role rasng the GHGs emssons, beng responsble for more than 22% of them n the rest of Brazl. Besdes ths, the external sector contrbutes to the CO2eq emssons here even more than n the Amazon regon. Approxmately 30% of these emssons can be attrbuted to exports. Under the GWP-100 metrc, both exports of the Soybean and the Food Products sectors are responsble for about 9% of the emsson n the regon, whle under the GTP-100 metrc the contrbuton of the exports of the Soybean sector rases 18