Energy policy implications of carbon pricing scenarios for the Brazilian NDC implementation

Carolina Grottera (1) , Giovanna Ferrazzo Naspolini (1) , Emilio Lèbre La Rovere (1) , Daniel Neves Schmitz Gonçalves (1) , Tainan de Farias Nogueira (1) , Otto Hebeda (1) , Carolina Burle Schmidt Dubeux (1) , George Vasconcelos Goes (1) , Marcelo Melo Ramalho Moreira (2) , Gabriela Mota da Cruz (2) , Claudio Joaquim Martagão Gesteira (1) , William Wills (1) , Gabriel Malta Castro (1) , Márcio de Almeida d'Agosto (1) , Gaëlle Le Treut (3, 1) , Sergio Henrique Ferreira da Cunha (1) , Julien Lefèvre (3)

1 UERJ - Universidade do Estado do Rio de Janeiro [Rio de Janeiro]
2 Agroicone
3 CIRED - Centre International de Recherche sur l'Environnement et le Développement

This study assesses the expansion of the Brazilian energy system across three GHG emissions pathways simulating the achievement of the Brazilian Nationally Determined Contribution. In the Reference scenario, the NDC is achieved through command-and-control policies. We then compare this pathway to an Emissions Pricing Scenario (EPS), which simulates a carbon pricing scheme. The Sensitive Fuels Exemption Scenario (SFE) is similar to the latter, but gasoline, diesel and liquefied petroleum gas are exempted from pricing, strengthening political buy-in to the mechanism. An integrated modelling approach combines bottom-up models representing energy demand and supply and a macroeconomic framework to ensure consistency across them. The adoption of carbon pricing schemes enables the use of a large potential of offsets (from the restoration of native vegetation) at a limited cost. This allows meeting NDC targets with bounded use of expensive mitigation actions comprised in command-and-control tools in the reference scenario. This study shows that a carbon pricing policy can increase the effectiveness of meeting climate commitments in Brazil, reducing GDP losses against business-as-usual trends. However, the mechanism’s scope and sectoral coverage are key to ensure that decarbonisation is pursued in all economic sectors and in line with climate targets beyond the NDC horizon.

Keywords: Brazil; Emission scenarios; Climate mitigation; Carbon pricing; Energy supply and demand; Energy mix; Energy modelling; Brazil

Domains: Humanities and Social Sciences; Economics and Finance

Carolina Grottera, Giovanna Ferrazzo Naspolini, Emilio Lèbre La Rovere, Daniel Neves Schmitz Gonçalves, Tainan de Farias Nogueira, et al.. Energy policy implications of carbon pricing scenarios for the Brazilian NDC implementation. Energy Policy, 2022, 160, pp.112664. ⟨10.1016/j.enpol.2021.112664⟩. ⟨hal-03791419⟩