Economic and social effectiveness of carbon pricing schemes to meet Brazilian NDC targets

Abstract

Curbing down GHG emissions while preserving economic growth is themain challenge that developing and developed countries are facing tomeet the Paris Agreement commitments. Brazil's NDC target is to reduceeconomy-wide absolute levels of GHG emissions by 37% in 2025 and43% in 2030, compared to 2005 emissions.In this paper, we compare command-and-control and carbon pricingpolicies to induce the Brazilian economy to meet its NDC targets. Ourpaper focuses on analysing synergies and trade-offs in macroeconomicand social development, focusing on economic growth and incomedistribution, while reducing GHG emissions. By integrating a series ofsectorial models and a computable general equilibrium model (CGE), wedevelop and run different policy scenarios which simulate differentcarbon pricing schemes in Brazil. Our analysis shows that NDCimplementation in Brazil under carbon pricing policies allows the countryto meet its targets and improve economic and social indicators comparedto a command-and-control policy. With about the same GHG emissionsup to 2030, important macroeconomic and social co-benefits can beachieved under a carbon pricing policy in Brazil, allowing for reducingwelfare losses against business-as-usual trends