Abstract
Climate negotiators want developed countries to pay farmers in tropical countries such as Indonesia to stop burning down rainforests. Two years ago, this might have offered a real opportunity for farmers in Europe and the United States. At that time, expansion of cropland in tropical countries undermined world market prices and increased government payments that support farm income. In these past two years, however, biofuel subsidies have complicated this picture, as Europe and the United States already enhance farm prices by subsidizing biofuel production from rapeseed oil and from corn. As a result of these subsidies, world prices of oil crops, including palm oil, are increasing to levels that create a major barrier to any effort to protect the forests.
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