Deforestation

Political concerns constrain the feasibility and impact of forest regulation. These political concerns are driven by the distributional impacts of regulation, which create gains for some and losses for others. In curbing deforestation, countries like Brazil and Indonesia forgo local economic gains for global climate benefits. Importantly, local agents are typically aligned in favouring continued deforestation activity, which creates jobs for local voters, generates profits for local firms, and produces tax revenue for local governments.

Political Incentives

Political incentives shape the enforcement of environmental regulation. In Indonesia, Burgess et al. (2012) highlight the role of local officials’ incentives in driving deforestation for illegal logging. Balboni et al. (2021) show that forest fires follow electoral cycles, perhaps as politicians avoid regulating during politically sensitive times. Cisneros et al. (2021) find that deforestation rises in the year before local mayoral elections and that palm oil prices amplify pre-election deforestation. More broadly, Hsiao and Kuipers (2025) document persistent inaction among politicians on environmental issues, including forest regulation.

In Brazil, Pailler (2018) shows deforestation increases in the years when mayors run for re-election. Braganca and Dahis (2022) document that forest reforms shifted political incentives, leading to larger declines in deforestation in municipalities governed by farmer politicians, and Cisneros and Kis-Katos (2024) document that randomised fiscal audits increased deforestation in election years. Araujo et al. (2024) highlight the supporting role of public scrutiny following increased media coverage of forest fires. Katovich and Moffette (2024) show that large landowners exert local political influence to weaken forest regulation.

Political incentives also affect deforestation in other settings. Harding et al. (2024) show that campaign contributions buy reductions in regulatory enforcement in Colombia. Sanford (2021) shows at a global scale that deforestation rises during competitive elections. Harstad and Mideksa (2017) demonstrate in a theoretical setting that the optimal design of conservation contracts depends on the spillover effects of conservation across local governments. If these spillovers are such that conservation in one district facilitates conservation in other districts, including through positive spillovers in enforcement, then it is more cost-efficient to establish conservation contracts with districts rather than with the central government.

Lobbying

Burgess et al. (2023) show that the gradual dismantling of environmental regulation and enforcement capacity led to the rise in deforestation in the Amazon in the 2010s. The authors highlight that a pro-conservation equilibrium is fragile to shifts in national political priorities. Costa et al. (2025) show how political interference can be used to bypass the environmental licensing of hydroelectric power plants. The implication is that first-best regulation is often politically infeasible, as issues like corruption and electoral incentives interact with the enforcement of forest regulation. Burgess et al. (2025) emphasise that first-best regulation often imposes large profit losses on producers, who may respond by lobbying against this regulation. In such settings, optimal policy might instead seek to navigate political resistance by minimising producer losses.

Dynamic Inefficiencies

One challenge with conservation policy is that the incentives to regulate may change over time. Hsiao (2025) highlights a commitment problem. After the forest has been cleared, the government has a temptation to stop taxing deforestation-related goods. The reason is that taxation cannot reduce emissions once the forest is gone and emissions have been sunk. The problem, however, is that taxation becomes ineffective if deforesters do not expect the government to uphold the tax over the long run. Harstad (2023) studies resource exploitation with dynamic political incentives, highlighting that politics further complicate the government’s ability to establish and enforce conservation policies over time. Harstad (2016) shows that similar dynamic frictions arise in a theoretical model of markets for conservation.

Future Work

The path forward involves more work on understanding political incentives and the political feasibility of regulation. Attempts to regulate encounter resistance in the form of votes for the opposition, lobbying by targeted industries, and bribes aimed at softening enforcement. Political rotation and electoral cycles create dynamic considerations that complicate long-run planning. Regulation also has important distributional implications that reshape political incentives, both nationally and locally. Conservation policy must navigate this complex political landscape.

Policy Takeaways

We highlight insights for designing politically feasible and sustainable conservation policies.

• Electoral incentives. Electoral cycles and political competition systematically undermine conservation efforts, indicating that policies should be designed to be robust to political turnover or insulated from short-term political pressures.
• Elite capture. Local political capture by economic interests is pervasive, highlighting the importance of federal oversight and external monitoring in forest governance.
• Strategic behaviour. Conservation markets face fundamental efficiency problems due to strategic behaviour, requiring careful design of payment mechanisms and contracts.
• Second-best policies. First-best environmental regulation is often politically infeasible due to concentrated local costs and diffuse global benefits, suggesting that second-best policies that minimise producer losses may be more sustainable.
• Distributional concerns. Building durable pro-conservation coalitions necessitates addressing the distributional implications of environmental policies and establishing economic incentives that align local interests with conservation objectives.

For full reference list see the end of the conclusion chapter.