Lack of Ambition, Not Leakage, is What Can Make Brazil’s Soybean Supply-Chain Zero Deforestation Commitments Ineffective

Abstract

Corporate voluntary commitments to reduce deforestation offer an important opportunity to conserve tropical forests. Yet, the effectiveness of these commitments is difficult to evaluate. Deforestation is a global phenomenon mediated by market forces; efforts to reduce deforestation in one region may be offset by the displacement (leakage) of agricultural production to other regions. The leakage of production from regions with zero-deforestation (ZD) commitments to other places with less stringent environmental regulations is a major threat to supply-chain ZD commitments. This paper explores the role of leakage in offsetting the potential benefits of ZD commitments implemented in Brazil’s soybean supply changes. Existing assessments of zero-deforestation commitments include some measure of localized within- or cross-biome leakage in their analysis, but to best of our knowledge, the cross-border leakage associated with Brazil soybean supply-chain ZD commitments remains unexplored. In this paper we fill this gap by considering the extent to which the potential deforestation benefits of soybean ZD commitments in Brazil can be offset by displacing production elsewhere in the world, either within or outside Brazil. We pay special attention to Bolivia, Argentina, and Paraguay (the BAP region). A main finding is that due to the overlapping spatial footprint of the traders serving both the EU and China’s market, EU supply-side restrictions are as effective as if these were enforced by China. We also explore an scenario in which the EU applies a unilateral import tariff on all the soybeans sourced from Brazil. Demand-based boycotts and import bans into the EU are increasingly discussed as potential instruments to exert pressure on Brazil’s soybean supply chain. We contrast the land use outcomes of ZD supply-side commitment with the effects of the EU imposing demand-side import tariffs (of 25%, 50% and 75%) on soybeans originated in Brazil.