The European Union's Deforestation-Free Regulation (EUDR), approved in 2023 and set to take effect in December 2026, mandates plot-level traceability and physical segregation of compliant from non-compliant products in supply chains linked to deforestation. This paper assesses the economic and environmental impacts of EUDR compliance costs on Brazil's soybean supply chain. Using a dynamic multiregional computable general equilibrium (CGE) model with integrated land-use transitions, we simulate counterfactual outcomes from 2026 to 2035 under two policy scenarios: (i) Legal Amazon–only coverage (S1-AMZN) and (ii) nationwide coverage (S2-BRA). Compliance costs are modeled as production-tax equivalents, scaled by the regional share of EU-bound soybean-equivalent exports. Results show cumulative export losses of US 85. 1 billion (S1-AMZN) and US 216. 3 billion (S2-BRA), with corresponding real GDP shortfalls of US 409. 9 billion and US 1. 167 trillion. Avoided deforestation ranges from 51, 466 to 105, 899 ha, though leakage effects emerge under S1-AMZN. Estimated abatement costs are US 133–207 per ton of CO₂e, while forgone GDP per hectare of avoided deforestation ranges from US 58, 630 to US 171, 652. These findings suggest that clearing the EU's soy supply chain of deforestation alone delivers limited environmental benefits at high economic cost, underscoring the need to complement trade-based measures with robust domestic land-use governance and enforcement policies. • EUDR lowers Brazil's GDP slightly and deepens regional income disparities • Soy export losses drive land and labor shifts toward corn, cotton, and other crops • Welfare gains for the poorest and richest, losses for middle incomes • Modest avoided deforestation at high economic cost • National versus Amazon-only enforcement yields similar macro but less leakage
Stam et al. (Mon,) studied this question.