Road Building and Environmental Preservation in Amazonia: Turning an Environmental
Liability into an Environmental Asset
James Randall Kahn a,b *
Alexandre Rivas b,a
Renata Mourao b
a Washington and Lee University
b Universidade Federal do Amazonas
Corresponding author:
James R. Kahn
Environmental Studies Program
Science AG-15
Washington and Lee University
Lexington, VA 24450
kahnj@wlu.edu
(540)-458-8036
Key words: deforestation, environmental preservation, economic incentives,
environmental enforcement
Abstract:
One of the most contentious developmental issues surrounding the Brazilian Amazon is
the federal government's proposal to dramatically augment its transportation system, with
a particular emphasis on a network of new highways connecting remote areas of the
Amazon to the existing highway network and major cities such as Manaus and Porto
Velho. Opponents of the plan cite past studies that link the presence of roads to increased
deforestation and argue that the plan will lead to dramatically increased deforestation.
The federal government believes that the development of transportation infrastructure
will increase economic activity and the quality of life and that the impact on deforestation
will be much less than predicted because of changes in environmental law and
enforcement mechanisms since the period of time upon which the deforestation studies
are based. Our paper argues that there is no gain to be realized by trying to answer the
question of whether, ceteris paribus, more road-building causes more deforestation. The
appropriate question to ask is, how can policy be changed to reduce the deforestation
potential of an expanded road system, both in terms of limiting activities that lead to
deforestation and in terms of encouraging sustainable uses of forest resources? Our paper
answers this question with a particular emphasis on the development of economic
incentives to limit activities and consequences of activities that might be associated with
road building. In particular, we outline a plan that utilizes the revenues associated with
road use to create a more effective and more independent environmental enforcement
agency.
1
Introduction:
Over the last decade, a tremendous controversy has developed as outlined in the pages of
Science and other outlets (Laurance et al, 2004, Laurance et al 2001, Carvalho et al 2004)
concerning the development of the transportation system of the Legal Amazon of Brazil.
Avança Brasil and more recent plans have called for the development of a greatly
expanded system of roads and waterways to spur the economic development of the
interior sections of the Amazon. This has caused great consternation among many who
are concerned about the Amazon, because of the historical connection between the
existence of roads and the level of deforestation. However, the causes of deforestation
arise from a complex set of human activities, economic incentives and government
policies. Although we do not discount the potential impact of roads on deforestation, we
believe that it is counterproductive to focus the discussion on the hypothesis that more
roads will cause more deforestation, with the corresponding conclusion that road
construction should cease. Rather, we prefer to focus the discussion on how the quality of
life of rainforest inhabitants can be improved, while limiting the potential deforestation
associated with this economic and social gain. Part of this process is an overall
orientation towards sustainable development, and part of this process is controlling
deforestation associated with the building of roads and with other activities. A solitary
focus on the prohibition or restriction of new roads will not prevent deforestation, as
commercial products such as soy beans and timber can be transported on existing roads
and waterways. In the absence of these activities, small scale farmers could cause
commensurate levels of deforestation. More importantly, it is highly unlikely that the
transportation improvements will be cancelled as they are associated with large potential
2
economic benefits. Consequentially, we focus on the development of policy to minimize
the deforestation associated with road building and with other activities that may or may
not be related to the existence of an augmented transportation system. Most importantly,
we show how an augmented road system can be turned into a source of revenue that can
be used to finance a more efficient and more independent environmental enforcement
agency, neutralizing not only the threat of deforestation associated with new roads, but
reducing the threat of deforestation from other pressures. In short, we suggest a method
for turning a potential source of deforestation into a source of environmental
preservation.
The organization of our chapter proceeds as follows. Section 2 discusses the
benefits of an augmented system of roads, with a focus on providing the market
infrastructure for sustainably produced products, particularly non-timber forest products.
Section 3 examines the debate about the association of roads and deforestation, as well as
providing a discussion of other causes of deforestation. Section 4 discusses a
transportation user-fee based environmental enforcement procedure designed to prevent
the predicted negative environmental consequences of road building. Section 5 discusses
improved environmental policies for reducing the environmental impact of timbering and
soy bean production. Section 6 summarizes our discussion and makes discusses
knowledge gaps that must be rectified before such as system can become a reality.
Section 2: The Economic and Social Benefits of an Improved Transportation System
in the Legal Amazon of Brazil
The extension of the transportation system in the Amazon region is associated
with four major types of benefits. They are
3

Reducing transportation costs for industrial agriculture and other
extractive industries such as mining and forestry.

Reducing transportation costs for sustainably produced products such as
fruits, nuts, fiber, sustainably harvested timber and products using these
materials as an input, such as cosmetics, toiletries, ice creams, frozen
juices, furniture and pharmaceutical products.

Increasing the ability of government to provide services to remote regions

Increasing the quality of life of remote communities.
The importance of the first type of benefit is fairly straightforward. Since export
crops such as soy beans and timber compete in international markets at market
determined prices, the competitiveness of these exports is primarily determined by their
cost. Since many of the areas in which these crops are produced are quite distant from
ports and associated with poor roads, transportation costs are a relatively high component
of the total cost of delivery of the product to the market. A reduction in transportation
cost increases both the market share and per unit net revenue associated with the
extractive activities.
The transportation cost issues associated with sustainably produced products are
even greater than those associated with conventional extractive commodities such as soy
beans and timber. For example, production costs are much higher for sustainably
produced timber than conventionally produced timber for a variety of reasons, including
that only a small percentage of the volume of wood (6 to 8%) can be removed from a
given plot of forest, and then the area must remain undisturbed for 30 years. This implies
a much lower amount of revenue per hectare for sustainable forestry than for other
methods. If transportation costs remain extremely high because of the lack of good
transportation infrastructure than the sustainably produced timber is at a competitive
4
disadvantage in comparison to both non-sustainably produced timber and certified timber
from more accessible areas (such as the hardwoods from temperate forests).
New types of products, such as cosmetics from rainforest fruits, foliage and seeds
face an even greater cost barrier. Since these products are new, the firms are most likely
producing at high per-unit cost, not having achieved the economies of scale that are
associated with higher production levels. Cost disadvantages imposed by inferior
transportation services make the development of markets for these types of projects even
more problematic. Improving the transportation infrastructure can dramatically improve
the profitability of these types of products and move production activities away from
destructive extractive industries, encouraging the type of "sensitive" development
advocated by Carvalho et al (2001) and others.
Another important benefit of the presence of roads is a greater ability to provide
social services in remote regions. Survey-based research in rainforest communities has
shown that community residents regard improved health and educational services as more
important than increased income opportunities1. One of the major obstacles in providing
these services is the lack of transportation infrastructure.
In addition to improved public services, rainforest communities benefit from
better transportation facilities in a number of ways. For example, if the quality of roads
exceeds a minimum standard, bus routes will be established along the roads. This
connects remote regions with larger cities, allowing rainforest dwellers to go to larger
cities to obtain access to services and markets. In addition, the improved transportation
lowers the cost of goods that are imported from abroad or from other parts of Brazil. In
particular, clothing, tools and household implements become dramatically cheaper with a
1
Casey. Kahn and Rivas (2005), Rivas, Kahn and Casey (2005)
5
better transportation system. Information also flows along the roads, giving remote
communities access to newspapers and other sources of information.
Section 3: Roads and Other Causes of Deforestation
Starting with the construction of the Trans-Amazon Highway and BR-164 in the
1960s and 1970s, moving through the largely unimplemented Avança Brasil in the 1990s,
the establishment of a network of improved highways has been a central feature of the
development strategy for the Legal Amazon. Improving the transportation infrastructure
in this region remains a central thrust of the development strategy of the Brazilian federal
government.
This development strategy has not been without controversy, as waves of peasant
farmers and favelistas (shanty-town dwellers) from the Northeast and South followed the
highways into the periphery states of Mato Grosso, Rondônia, Acre and Pará. These
peasant farmers clear-cut the land and burned the slash, planting field crops but quickly
destroying the productivity of the soil. Large scale agriculturalists, primarily cattle
ranchers (in the 1970s and 1980s) and soy bean farmers (primarily in the 1990s and
2000s) also followed these roads into the interior, buying cleared land from small scale
farmers, clear-cutting untouched forest and implementing their agricultural schemes.
The evidence strongly suggests that roads had an impact on the level of
deforestation. Casual observation of satellite and aerial photography shows clearing in
proximity to roads (and hidrovias), and detailed spatial statistical analysis shows a
significant and strong relationship between the amount of deforestation in an area and its
proximity to roads. For example, much of the analysis was conducted with the
municipality as the basic unit of observation. Ceteris paribus, the greater the linear
6
kilometers of roads in a jurisdiction, the greater the amount of deforestation. The 2002
study by Laurance et al is a good example of this type of study. They use GIS analysis
and multivariate regression analysis to show that population density, physical
accessibility (distance to paved roads, unpaved roads and navigable rivers) and factors
affecting land-use suitability (severity of dry-season, soil fertility, etc.) are correlated
with deforestation. An ordination analysis showed that 60% of the variation in
deforestation can be explained by variation in two ordinates. The first ordinate axis
discriminates between densely populated areas with heavy road presence and sparsely
populated areas with no roads. The second axis discriminates between wet areas with low
dry-season severity, many navigable rivers and few roads and those areas with opposing
values in these attributes.
Does this mean that implementation of plans to connect the disparate parts of the
Legal Amazon by highways will lead to more deforestation, and if it does lead to more
deforestation, how large will the increase be? In order to answer this question, it is
important to look at all the causes of deforestation, because the statistical correlation
between roads and deforestation may not be due to causation, as both increased roads and
increased deforestation may be caused by other factors. If deforestation and road building
are caused by other factors, then scaling back the creation of new roads may not reduce
future deforestation, as it would not address the underlying factors that cause
deforestation.
One of the most interesting and important more recent studies is that of Alexander
et al (2004). The most important innovation in their study is the use of census tract level
data, rather than municipality level data as seen in most studies. Since the physical unit of
7
observation is smaller, there are many more data points in the statistical analysis, by a
factor of 20. In addition, the smaller unit of observation allows better measurement of the
characteristics of the spatial unit, such as soil type, length of dry season, existing level of
deforestation, and so on. Their results indicate a correlation between roads and
deforestation, with two major qualifications. First, they find that this relationship varies
with the characteristics of the census tract. For example, the rate of deforestation in areas
that are already heavily cleared has a significantly lower association with reductions in
transportation costs. They also find that the impacts of roads is significantly lower that in
past studies, because variation in exogenous variables may increase both the amount of
roads and the amount of deforestation. López and Galinato look at both direct and
indirect causes of deforestation using panel data from Brazil and several other countries.
They find evidence that support the hypotheses of Alexander et al, indicating that
economic variables such as export policies may impact deforestation directly, roads
directly, and deforestation through roads.
Various studies stress the importance of differing sets of causal factors. For
example, many authors cite lack of clearly defined and enforceable property rights as the
primary source of deforestation (Deacon, 1994, 1995.). Caviglia and Kahn show that the
lack of knowledge about sustainable forestry alternatives is a major factor for small
farmers to choose clear cutting and planting of field crops as their (non-sustainable)
agricultural technology. Casey, Caviglia-Harris, Kahn and Rivas showed that although
property rights were a necessary condition for the choice of sustainable alternatives, the
access to information was also a necessary condition for farmers to move away from
destructive technologies towards agricultural technologies that were conserving of the
8
forest cover. Kahn and McDonald show that macroeconomic factors, particularly debt,
are important factors in deforestation.
The discussion above indicates that although roads may be a source of
deforestation, they are clearly not the only source. A look at past data suggests that an
increase in road building activity may increase the level of deforestation, but a cessation
in road building activity will not stop deforestation. As one looks at these past studies,
based primarily on data from the 1970s, 1980s and 1990s, several observations can be
made. During this period in many regions of the Legal Amazon, property rights were
more loosely defined and difficult to enforce, information on sustainable agriculture was
scarce, and both federal and state environmental laws were weak and relatively
unenforced. In fact, much of this period of analysis is in the time before the new (1988)
Brazilian Constitution more clearly specified environmental law. Since that time, federal
laws have become stricter, enforcement has improved, and many states have added even
tougher state laws. For example, the 1988 Constitution specified that a property owner
could cut no more than 50% of the forest on his land holding. More recently, the
allowable amount of forest conversion has declined to 20% of a land owner's holdings. If
all of these factors have changed, is it reasonable to assume that past relationships
between the construction of roads and the loss of forest will continue and that these past
relationships are a good predictor of the future?
We suggest that it is unproductive to waste time and energy on this debate. Rather
than debating whether, ceteris paribus, more roads leads to deforestation, we should be
asking how we can develop good policy to reduce deforestation from all sources,
9
including roads. The following section suggests how roads can be a positive factor in
preventing deforestation rather than a source of more deforestation.
Section 4: A User-fee based environmental monitoring and enforcement system
Independence of environmental protection
It is widely recognized that Brazil has strong and well-formulated environmental
law, but that it has been inadequately enforced. Inadequate enforcement has three distinct
dimensions that must be addressed for enforcement to be effective. The first dimension
revolves around the lack of resources for monitoring and enforcement. The second is
related to the lack of an adequate baseline against which to measure changes in
environmental quality and with which to enforce public property rights. The third
dimension has its origins in the lack of independence between the environmental
enforcement authorities2 and those parts of government charged with stimulating
economic growth, responding to International Monetary Fund directives and promoting
primary production activities such as agriculture, forestry and mining. All three of these
impediments to successful implementation of environmental regulations can be
ameliorated with more funding and more independence of funds, both of which can be
generated from a transportation user tax. A tax charged for the commercial (and possibly
household) use of roads has the advantage of taking a social change (the development of
more roads) and turning it from something with potential to harm the environment into
something with the potential to contribute to the effective protection of the environment,
while stimulating economic development at the same time.
2
We are not implying that the hard-working staff of IBAMA and other enforcement agencies lack integrity
or motivation. Quite the contrary, they do an amazing job given budgets and other constraints.
10
Although the exact magnitude of a potential user tax would need to be determined
through a scenario analysis, a user-tax on the order of R$10 per 100 kilometers could be
used to finance the environmental enforcement system. Although such a tax would only
have a marginal impact on the cost of transporting goods to markets, it would generate an
impressive amount of money. For example, Table 1 contains projections of the number of
commercial vehicles traversing the existing highway BR174, which goes north from
Manaus, through Boa Vista, to Caracas traverses more than 1000 km. in Brazil and has a
volume of traffic that was predicted to include 183 commercial freight trucks per day in
2006 (see Table 1). Using this volume of traffic as a lower bound example of potential
revenue, a fee of R$100 per 1000 km would then generate more than R$ 6,679,500 (US$
3,180,714) over a 1000 km stretch of highway in 2006, with higher levels as the volume
of traffic increases over time. Cars and buses could also pay a user-fee.
.
Estimated Commercial Vehicle Traffic on Highway BR174 and potential revenue
Year
Predicted daily
commercial freight traffic
2006
2007
2008
2009
2010
183
192
201
211
222
Fee (R$)
per 1000
km
100
100
100
100
100
Annual revenue from fee
on commercial trucks
6,679,500
7,008,000
7,336,500
7,701,500
8,103,000
It is important to stress that this user fee is not designed as an economic incentive with a
direct effect to modify behavior to reduce the environmental impacts of road-building. In
this sense, it is not analogous to a carbon tax. In the same vein, the fee is not designed as
a typical highway toll, with the purpose to provide for the maintenance of the road itself.
11
The toll is designed as an independent source of funding for environmental protection. As
such, the fund should be collected and administered by either the environmental agency
itself, or by a non-governmental organization (or university of national laboratory) acting
on behalf of the environmental agency. The user-fees should not be collected by the
transportation or economic development ministries, or by the highway authority, or the
money will be diverted away from environmental protection purposes. A separate toll
could be collected for the maintenance of the highway, but this would be distinct from the
environmental user fee.
Expenditure of the revenue on environmental protection:
As mentioned earlier, the user-fee does not provide a direct incentive for
environmental compliance, but it does provide the funding to ensure compliance with
other environmental regulations and policy. Several important policy areas urgently need
to be addressed.
The first of these is the problem associated with "land-grabbing." Much of the
proposed road networks traverse federal and state-owned land, where private ownership
of land and activities such as agriculture and forestry are prohibited. However, many
people are making false prior-use claims and going to the courts to establish ownership
rights. This type of activity is a major source of deforestation, as people holding false
property rights have no incentive to manage their land for the long-term, instead focusing
on activities that yield high income in the short-run and result in the destruction of the
rainforest. (see Mendelsohn) Those who make false land claims construct structures on
the land that appear to be decades old, claiming a long history of use of the land, and
12
thereby claiming the rights to it. The SIPAM system3 can be used to inventory land in the
vicinity of proposed transportation projects and note the existence or absence of humanmade structures. Such structures would have a distinct radar signature that would show
their presence even if hidden from view by the canopy. This would preempt those who
tried to create new "old" structure to establish a prior use of the land, when none actually
existed. The radar readings of the land could be plotted into a GIS system that could then
become an enforceable part of the land tenure records.
The second major problem has to do with the funding for monitoring and
enforcement of environmental law. Not only are there insufficient resources to engage in
these activities in such a large land area, but the environmental agencies are under
pressure from other government agencies whose primary mission is to support
development in general, or specific economic activities such as agriculture or mining. In
addition to increasing the funding for these monitoring and enforcement activities, a
funding mechanism should be established to ensure the independence of environmental
enforcement agencies, both at the state and federal level. Monitoring and enforcement
activities should be focused at three levels,
1. Ensuring the existing land-use and environmental regulations are
followed.
2. Preventing the illegal construction of local roads connected to the
proposed system of major highways. This type of connector road increases
the amount of land vulnerable to deforestation.
3. Solidifying land ownership records and ensuring property rights, with
particular attention to preventing the surreptitious conversion of public
land to privately owned land.
3
System for Integration and Protection of Amazonia—a satellite and radar surveillance system of the
Brazilian Amazon. See xxxx for a discussion of this system.
13
Section 5: Policies for controlling agriculture, timbering and migration
The development of an adequately funded, independent environmental agency is
necessary condition for protection of the rainforest in the face of an augmented highway
and hidrovia network. In addition, new policies must be created to generate economic
incentives for agriculture and forestry, and the problem of interstate migration
(particularly from the northeast of Brazil) must be addressed. We will illustrate this
process with forestry, and note that similar types of policies can be developed for mining
and industrial agriculture.
The ecology of sustainable forestry is now well understood.4 First and foremost,
the disturbances generated by harvesting activity must mimic natural disturbances. This
implies no clear-cutting and that all openings in the forest are small, with a high ratio of
edge of the disturbed area to surface area of the disturbed area. Also, only small amounts
of harvesting are acceptable. As Thomas Lovejoy puts it, the only types of activities from
which the rainforest can recover are "islands of development" in a "sea of forest."
These general guidelines can be translated into specific restrictions that include
the following.
1. The volume of wood removed from a sustainably harvested track should be kept
low, on the order of 6 to 8% of the volume of wood.
2. Harvesting must be spread over at least 40 different species to prevent highgrading and changing the species composition of the forest.
3. Collateral damage to non-harvested trees must be avoided.
4. Care must be taken to avoid soil damage.
5. Sufficient number of trees of each species must be left in the area to ensure
continued propagation.
4
This section is based on Kahn (2002)
14
6. After initial harvesting under these restrictive conditions, the area must be left
undisturbed for 30 years.
Kahn (2002) illustrates how economic incentives such as contractual leasing systems and
bonds can be used to ensure that the above conditions are met and the forest is left in a
condition in which the forest quickly recovers to its original state. Such as system of
incentives, combined with stricter enforcement against illegal harvesting activities can
significantly reduce the negative impacts associated with harvesting activity, eliminating
an important source of deforestation that may be associated with the construction of
roads.
As mentioned above, similar types of policies can be generated for agriculture and
mining and are discussed in Kahn and Rivas. Small scale farming associated with internal
migration requires radically different types of policies to prevent deforestation from these
sources.
Low income urban residents as well as poor rural residents from the dry Northeast
of Brazil move into the Amazon region to try to improve their quality of life. Since they
do not have the appropriate knowledge (Caviglia, Caviglia-Harris and Kahn, Casey,
Caviglia-Harris, Kahn and Rivas) to implement sustainable agriculture, their activities
result in substantial deforestation in their new local.
The easiest solution would be to bar internal migration, but mobility is a
cornerstone of democracy. Internal migration is not only constitutionally protected, but
an important element of democratic freedom. Therefore, the problem of internal
migration most be addressed in other ways, chiefly by changing incentives.
15
The best solution, but the one that is most difficult to implement is to improve the quality
of life in the regions from which the immigrants originate. This requires
acknowledgement that solutions to the environmental problems in Amazonia require
nation-wide solutions, in particular, improving educational and economic opportunities in
the areas of origin, such as the coastal cities and the interior of the North East of Brazil.
Since generating such improvements is a long-term solution, more immediate
solution to reduce internal migration and the impacts of internal migration on the
rainforest must also be found. The first step in this process is to prevent land-grabbing,
which has been discussed previously in this paper. If it is more difficult to obtain land,
the expected benefits of migration will be lower, lessening the demand to migrate. The
second step is to direct those migrants who do arrive in Amazonia onto previously
degraded land rather than having them settle in pristine forest. This is particularly true for
large land redistribution projects and movements, such as the MST (Movement for
Workers without Lands). Of course, if immigrants are directed into previously degraded
and currently unproductive land, they must be compensated for their efforts to restore the
land, provided appropriate knowledge to be successful, and helped to gain access to
markets for their eventual outputs, which could include energy crops such as castor bean
or palm oil, or could include agroforestry products such as a combination of shade grown
coffee, fruits, and eventually, sustainably produced timber. Finally, for those migrant who
somehow do become established in existing forest land, they must be educated in
sustainable agroforestry techniques, given access to markets and held to the letter of the
law in terms of the clearing of forest land.
16
Section 6: Conclusions
Although the preponderance of evidence from empirical studies suggests that the
increased presence of roads is positively correlated with deforestation, this relationship is
very complex. It is likely that the magnitude of the effect is overstated, because a set of
exogenous variables lead to increases in both the presence of roads and deforestation. In
addition, the strength and even the sign of the relationship are likely to change spatially
due to the characteristics of the land, particularly with differences related to the
productivity of the land and to the amount of deforestation that has already taken place.
Most importantly, roads are not the only cause of deforestation, nor even the most
important cause. Consequently, preventing the development of new transportation
infrastructure may not slow deforestation and the important social and economic benefits
associated with improved infrastructure would be lost. Rather than argue about whether
the deforestation damages are great or less than the social and economic benefits of the
road, we propose that the roads be used as an agent for environmental preservation.
User fees associated with the roads can be used to finance an independent
environmental authority and rectify the crucial problem associated with the lack of
revenue for monitoring and enforcing compliance with environmental law. This revenue
could be used to verify the validity of land ownership, to monitor activities that could
lead to deforestation and to enforce existing law. Policies such as performance bonds can
also be developed to create economic incentives to limit the negative impact associated
with agriculture, mining and forestry. This type of integrated economic development and
environmental preservation program has much better prospects for improving the quality
17
of life of rainforest residents and for preserving the rainforests than a narrow policy of
seeking to prevent the development of new roads.
18
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