Impacts of Infrastructure on the Environment: Evidence from Power Plants in the Amazon

This paper estimates the (non-mechanic, indirect) impacts of the construction of the recently built hydroelectric power plants (HPPs) in the Brazilian Amazon on local deforestation patterns. We use the synthetic control method to identify the causal impact of each HPP on forest cover on different perimeters around the construction site. We find mixed results across HPPs; while some plants stimulate forest loss, other plants have negligible effects or even indirect positive local effects by avoiding deforestation on areas ranging between 15 and 50 kilometers from the HPPs. We investigate the source of heterogeneity and suggest that political interference on the licensing processes has played an important role. Overall, the construction of the 11 plants in the Amazon was responsible for 7% of the observed deforestation in areas within 50 kilometers from the construction site.