https://orcid.org/0000-0002-7069-4031
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ABSTRACT
As an instrument supporting the realization of EU climate neutrality targets by 2050 and encouraging decarbonization outside its borders, the current proposed Carbon Border Adjustment Mechanism (CBAM) is facing opposition from some countries. Focusing on Brazil, this paper evaluates the impacts of the CBAM on the Brazilian economy through a comprehensive analysis of various scenarios based on the potential EU implementation of the CBAM and Brazil’s climate scenarios. Results obtained in this research alleviate concerns of detrimental and competitiveness losses from Brazilian industries. Rather, the implementation of the EU CBAM improves the trade balance of Brazil’s Energy-Intensive Industries (EII). The relatively low CO2 contents of Brazilian EII are elemental to this result, while contributions of carbon-free technologies in electricity generation are also critical factors in maximizing this trade surplus. Other consequential factors affecting these results are the contributions of CO2 removal from Brazil’s forestry of land used, and homogeneity of CBAM-imposed products.
Acknowledgements
The content of this paper does not necessarily reflect the opinions of the European Commission or the Swiss Confederation, and the responsibility for it lies solely with its authors. We warmly thank GTAP 26th and EAERE 28th Annual Conference participants for discussions and feedback. We thank three anonymous reviewers and editor-in-chief for their thoughtful review and invaluable assistance refining the manuscript.
Disclosure statement
No potential conflict of interest was reported by the author(s).
Notes
1 Authors’ estimation based on GTAP 10 Database, in line with the preceding work documented in Perdana and Vielle (Citation2022).
2 Indicators are based on Eicke et al. (Citation2021), in which country’s exposure indicates the significance of trade with the EU for the national economy. It is estimated by total EII export relative to overall export to the EU vulnerability risk reflects the diversification of exports and is estimated by comparing of EIIs exported to the EU on the overall country’s export worldwide.
3 We also compute scope 1 by integrating other greenhouse gases (CH4, N2O and F-gases), which represent a small share of the EII’s emissions (less than 10%) and do not change the hierarchy between countries.