Power plants and deforestation: recent evidence from the Amazon

Abstract

This paper estimates the impacts of the construction of the new HPPs built in the Brazilian Amazon between 2003 and 2011 on local deforestation patterns. We assemble a comprehensive geo-referenced dataset combining dams’ locations and characteristics with remote sensing data. We use the synthetic control method to identify the causal impact of the construction of each HPP on forest cover around the HPP site. We find that building plants does not always stimulate deforestation. While some HPP projects stimulate deforestation, others help to avoid it. Overall, we can attribute 14% of the observed deforestation in areas within 50 kilometers around the HPPs to the construction process.