This expansion increases land speculation and land concentration among larger-scale farmers with greater skills and capital, hence mobilizing deforesters who have capitalized on high rates of agricultural return at scale and spurring rural-urban migrations as land prices increase (Garcia et al., 2007). The magnitude of these indirect impacts of agricultural expansion on Amazon deforestation are yet unknown, in spite of attempts to model the phenomena ( _e.g._ Lapola et al. 2010; 2011; Gouvello et al. 2010). However, it is clear that high rates of return to agriculture increase the opportunity costs of conservation (Grieg-Gran 2008; Soares-Filho et al., 2010), as well as the costs of enforcement (Nepstad et al., 2009), and put more pressure on the Brazilian government to soften environmental laws, such as the bill passed to reform the Brazilian Forest Code.

Recent studies for the Brazil Low Carbon Case Study sponsored by the World Bank (Gouvello et al., 2010) developed land use predictions for Brazil with repercussions in the Amazon region. These studies, in a partial equilibrium framework based on the FAPRI model, assume that growth in demand for Brazilian agricultural products, both with increasing incomes and population domestically, and rapidly growing demand from China and elsewhere for Brazilian grains, beef and biofuels, will stimulate horizontal expansion in significant areas of the country, including parts of the Amazon biome. The spatialized estimates incorporated in this model were developed by Soares-Filho and collaborators; the SimBrasil model includes micro-regional estimates of land use change to specific crops and pastoral mixes, causing direct and indirect land-use change effects on forestlands. Carbon emissions impacts are also estimated. The model indicates that cattle ranching intensification through pasture improvement from 1.0 to 1.5 AU/ha can permit the liberation of enough new land resources for agriculture, and that further deforestation could be largely avoided. Although the low-carbon study showed that agricultural expansion can take place in Brazil without further deforestation, this may not be a win-win scenario due to the indirect impacts on deforestation of the growth in the agricultural sector, as it capitalizes deforesters and increases land prices (Soares-Filho et al., 2012a).

Further studies on the impacts of pasture expansion (Bowman et al., 2012) argue that the Bank study’s estimate of the investment needed to upgrade cattle intensity to liberate forest land from pressure (US$250 billion over 20 years) would be far too costly and could not be bankrolled by carbon markets. The alternative would be to create institutional barriers and establish more stable property rights regimes over areas of remaining forest vulnerable to conversion for pasture.

A study by Mann et al (2009) indicates that the value of foregone ecosystem services in the Amazon exceeds agricultural outputs on 61% of lands used for soybean production; which strongly indicates the non-optimality of a large share of such agricultural conversion.

There has been an intense recent proliferation of opportunity and transport cost studies, including recent works by Nepstad et al. (2009), Chomitz (2007), Young et al. (2007) and Soares-Filho et al. (2010), referring to the cost of avoided or reduced deforestation. Opportunity cost curves and maps (see Figures 3 and 4 below) tend to demonstrate a fairly low and flat cost in CO2 emissions 24 | P a g e