Land-based climate policy, land prices, and the green transition trilemma: Evidence from Bolivia

Land-based climate policies in forest-rich developing economies are often assessed separately, overlooking how land scarcity, land prices, and macroeconomic constraints shape feasibility. This paper examines the macro-financial challenges of sustainable agriculture and forest conservation in Bolivia, where deforestation is high and fiscal and external constraints bind. We develop a dynamic version of the Exposure to Structural Transformation in an Ecologic-Economic Model (D-ESTEEM) to jointly analyse Bolivia's Nationally Determined Contribution (NDC) policies for forest conservation and agricultural productivity. The locally calibrated, environmentally extended input-output model combines continuous-time monetary system dynamics, endogenous land prices, and demand-led adjustments in a small open economy. Forest conservation reduces environmental pressures but raises land prices, weakening the competitiveness of land-intensive activities and worsening fiscal and balance-of-payments pressures. Agricultural productivity measures ease land pressures and support output but rely on imported inputs, reinforcing external dependence. Overall, the NDCs improve economic activity and environmental outcomes while worsening fiscal and trade imbalances. Fiscal consolidation and exchange-rate adjustment mitigate some imbalances but entail inflationary pressures or lower output and employment. Environmental gains may therefore come at the cost of macroeconomic fragility. The paper shows how conservation-induced land scarcity and land price dynamics interact with fiscal and balance-of-payments constraints to determine the feasibility of land-based transitions in resource-dependent economies.