Environmental Issues

This chapter discusses critical issues surrounding the economics of the environment in Brazil. A general framework for analyzing the state of the environment in a developing country is first presented and is used as a departure point for the study of the recent Brazilian case. High marginal utility of consumption, high marginal cost of abatement, imperfect representation of citizens by politicians, and market failures are put forth as candidate explanations for poor environmental quality and low willingness to pay for environmental improvements in developing countries, even when large gains to health and income could result. These arguments are applicable in several contexts in Brazil, but not universally. The chapter presents a critical and selective literature review on key topics including deforestation in the Amazon region, aspects of ethanol production and consumption, and climate change.