Reservoir construction and deforestation

This study investigates the impact of reservoir construction on surrounding deforestation. We construct a unique panel dataset at the reservoir level across China for 2005, 2010, and 2015. By adopting instruments that combine information of geographical features and projected reservoir numbers, our two-stage least squares (2SLS) estimates of the difference-in-differences (DID) model reveal that the construction of an average reservoir accelerates the decline in the Normalized Difference Vegetation Index (NDVI) by 0.095 (12.94% of the sample mean) within its 5 km buffer zone in the first five years post-construction, indicating an exacerbation in deforestation. We further find that the construction of smaller reservoirs leads to more severe deforestation, where a reduction of one square kilometer in reservoir area results in an additional decrease in NDVI by 0.001. Our findings highlight the urgency for policymakers to thoroughly evaluate the effects of reservoir construction on forests and devise appropriate conservation strategies when making investment decisions. © 2026 Elsevier Ltd.