No. 998: Narco-Deforestation: The Environmental Effects of Coca Cultivation
Giulia Tozzi School of Economics & Finance, Queen Mary University London
August 3, 2026
Abstract
This paper explores the environmental consequences of illegal drug production, specifically focusing on the impact of coca prices and cultivation on tree cover density in Peru. Using satellite imagery and granular data on the economic value of coca cultivation, I show that fluctuations in coca profitability significantly drive deforestation in the Peruvian Amazon. My findings show that the 40% increase in coca prices observed during the study period led to an estimated loss of 6,450 km2 of tree cover—roughly eight times the land area of New York City. Additionally, I provide suggestive evidence of a technological revolution—marked by the widespread use of agrochemicals—that has expanded the coca cultivation frontier to remote areas of the Amazon, transforming it into a diffuse source of environmental degradation. This shift has enabled illegal coca farming in previously unsuitable strategic locations. The technological advancements, increasing productivity of forest-derived land uses, presented Narcos with fresh economic opportunities for environmental crimes.
J.E.L classification codes: O13, Q01, Q02, Q12, Q15, Q23, Q50, Q55, K42
Keywords: Tropical Deforestation, Illegal Markets, Amazon Forest, Coca, Latin America