ABSTRACT

Tropical forests have a significant impact on rainfall patterns at a continental scale, thereby influencing water supply for energy generation of hydropower plants. I develop a method to value this ecosystem service using an econometric climate model that connects tropical deforestation with rainfall. As an application, I estimate the impact that Amazon deforestation has on the power generation capacity of the Teles Pires hydropower plant in Brazil, one of the ten largest plants in a country where hydropower is the main source of energy. In an ex-post analysis, I map the currently deforested regions in the Amazon with the highest restoration values for the hydroelectric. In an ex-ante analysis, I map the potential cost of deforesting Indigenous Territories. The results provide evidence of the importance of the ecosystem services of tropical forests to the energy sector.

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