Working Paper Series,
Norwegian University of Life Sciences, School of Economics and Business

Abstract: Despite a fall in deforestation, frequency and severity of fires in the Brazilian Amazon are rising, causing huge carbon emissions, biodiversity losses and local economic costs. The ignition sources are anthropogenic and mostly related to the accidental spread of agricultural fires. Fire risk mitigation is a coordination problem with strategic complementarities: a farmer’s benefit of mitigation depends on complementary action of other farmers.

We experimentally assess ex-ante the impact of two different policies under varying exogenous drought risk scenarios. Command and control is more effective than payments for environmental services in promoting coordination, possibly because of participants’ risk aversion (to the fine) and a local demand for justice and law enforcement. We also find evidence of a human-mediated self-reinforcing loop of drought and fires: droughts increase the exogenous component of fire risk, giving farmers less incentives to mitigate fire risk coming from their own farms.

Keywords: Brazilian Amazon; forest fires; climate change; framed field experiment; coordination games

JEL-codes: C93; Q23; Q54

36 pages, August 9, 2017

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