Asymmetric Adjustment and Structural Change in the China–Brazil Soybean–Emissions Nexus

This study re-examines the relationship between Chinese soybean demand and Brazil’s land-use CO₂ emissions within a dynamic trade–environment system. While the dominant narrative links rising external demand to environmental degradation, existing empirical studies largely rely on static or reduced-form approaches that do not distinguish between short-run correlations and long-run equilibrium relationships, nor account for structural change. As a result, current evidence remains inconclusive regarding the persistence, direction, and adjustment dynamics of this nexus. To address this gap, the study integrates cointegration analysis, a Vector Error Correction Model (VECM), structural break testing, and Local Projections within a unified empirical framework, using annual data from 1990 to 2024. This approach allows the joint identification of long-run equilibrium relationships, asymmetric adjustment mechanisms, and policy-induced structural change. The results indicate the presence of a stable long-run equilibrium linking Chinese soybean imports, Brazilian land-use emissions, agricultural land, and global soybean prices. The estimated long-run relationship reveals a negative or weak conditional association between demand and emissions, consistent with system-level adjustments shaped by institutional constraints rather than a direct causal effect. Short-run dynamics are strongly asymmetric: Chinese imports adjust to restore equilibrium, while emissions behave as weakly exogenous. Structural break tests identify a regime shift around the 2006 Soy Moratorium, primarily affecting demand dynamics. Forecast error variance decomposition shows that demand shocks explain only a small share of emissions variability, while Local Projection estimates provide no robust evidence of short-run effects. Overall, the findings highlight that trade–environment interactions are governed by long-run system dynamics and domestic structural factors, with important implications for supply-chain governance and demand-side environmental policies.