Strategic sectors for greenhouse gas mitigation investment: assessment based upon the Brazil’s input-output matrix

Abstract

Climate change is one of the biggest challenges facing the international community. The year 2017 was one of the three warmest on record and the world continues to experience extreme weather conditions. An effective mobilization of resources earmarked for key economic sectors is an important component of a strategy of any country to comply with greenhouse gases (GHG) emission reduction targets, especially Brazil, that is a top GHG emitter. This paper aims to identify these strategic economic sectors for investment to mitigate GHG emissions in Brazil. In order to do so, we estimate emission-demand elasticities of productive sectors, obtained from the Brazil’s Input-Output Matrix (IOM). In consequence, we identify those sectors with greater pollution impacts on the economy and then deserve higher priority for investment as well as mitigation policies. The paper also describes the flows and sources of climate investment and suggests that to ensure efficient outcomes policy makers should consider the role played by each different production sector. The results show the relevance of paying particular attention to the country’s productive structure and the pollution pressure it generates. From this approach, we identified that forest sector is still a key investment destination for mitigation of GHG emissions. Agriculture, transportation, and industrial sectors are also relevant to investment allocation. Confronting the results with literature and with the availability of funds, we ratified that forest and agriculture are strategic sectors for Brazil, and the sectoral approaches, classified as strong multilateralism policy architecture, are fundamental to achieve climate targets.