Do market and government interventions affect greenhouse gas emissions?
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In 2006, the most important representatives of the Brazilian soy industry signed a moratorium, committing not to purchase soybeans planted in deforested areas in the Amazon Biome after July 2006. Furthermore, to stop clearing forests, the Brazilian government made the provision of rural credit in the Amazon region subject to stricter requirements in 2008. This paper studies how these two interventions affect greenhouse gas emissions, the primary cause of climate change. Using a panel of municipalities and a difference-indifferences strategy, we show that the two events substantially reduced deforestation, fires, pasture coverage area, and herd cattle size, leading to lower emissions. The outcomes point to a limitation in access to rural credit, one of Brazil’s primary support mechanisms for agricultural production, as the possible mechanism underlying these effects. In addition, we found positive externalities in the form of lower greenhouse gas emissions in municipalities not affected by interventions but which are close to the Amazon Biome border.