Abstract
After COP 21, with the adoption of the Paris Agreement in December 2015, the outlook for carbon pricing policies has been widened. While the agreement does not directly establish a global carbon pricing, the provisions accounted for in Article 6 have the potential to increase international cooperation in favor of greenhouse gas (GHG) mitigation through market mechanisms. The Brazilian Nationally Determined Contribution (NDC) considers the use of such mechanisms, though the configuration of the Brazilian climate policy does not specify the economic instruments for carbon pricing. When examining the recent evolution of GHG emissions in Brazil, the already achieved reduction in deforestation sheds light on the need to address GHG mitigation in other sectors, such as industry. Therefore, this paper analyzes the impacts of carbon pricing on the Brazilian industry in terms of sectorial value added (VA), emissions intensity, international trade exposure, and the risk of carbon leakage. Results indicate that, considering a price of carbon of US$10/tCO2, the cost of reducing emissions from 35% to 45% (same range of the Brazilian NDC) could represent an impact of 0.3% to 3.7% on sectorial VA. However, results for emissions intensity and international trade reveal medium to high carbon leakage risks for all analyzed industrial sectors.
Highlights
Climate change is one of the greatest economic and political challenges faced by the world economies today [1]
There is a strong debate about alternative policies and instruments that can be used to put a price on carbon and signal to economic agents a development path based on low carbon emissions [10,11]
These indicators were built from the primary data from public institutions, such as the Ministry of Mines and Energy (MME); Ministry of Science, Technology and Innovation (MCTI); Ministry of Finance (MF); Ministry of Development, Industry and Commerce (MDIC); the Brazilian Institute of Geography and Statistics (IBGE); the National Development Bank (BNDES); and National Industry Confederation (CNI), among others [13,55,56,57,58,59,60,61,62,63]
Summary
Climate change is one of the greatest economic and political challenges faced by the world economies today [1]. Impacts of climate change have increasingly been gaining a central role in political, economic, social, and environmental discussions, as countries, by signaling the transition to a low carbon development model, are looking for solutions and mechanisms to reduce emissions of greenhouse gases (GHG) that are technically and economically feasible [5]. There is a strong debate about alternative policies and instruments that can be used to put a price on carbon and signal to economic agents a development path based on low carbon emissions [10,11]. Policy makers have at their disposal command-and-control measures and market-based instruments. The latter includes the commercialization of GHG emissions permits (emissions trading schemes—ETS)
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