Costs of reducing GHG emissions in Brazil

Abstract

During the 2009 Conference of the Parties meeting in Copenhagen, the Brazilian government announced voluntary targets to reduce GHG emissions, with the targets being reconfirmed in Cancun (2010) and in Durban (2011). An estimate is presented of the economic impact of alternative policies to achieve such targets, including actions to cut emissions from deforestation and agricultural production. A dynamic-recursive general equilibrium model of the world economy is used. The main results show that deforestation emissions in Brazil can be reduced at very low costs, but the cost of cutting emissions from agriculture and energy use may lead to a 2.3% drop in gross domestic product by 2020 if sector-specific carbon taxes are applied. Such costs may be reduced to 1.5% under a carbon trading scheme. The negative impact of carbon taxes on agricultural production indirectly reduces deforestation rates; therefore, directly cutting emissions from deforestation is the most cost-effective option since it does not adversely affect agricultural production, which continues to expand into low-yield, underutilized pastures and secondary forest areas.

Keywords:

• Brazil
• climate policies
• deforestation
• general equilibrium

Acknowledgements

We acknowledge the anonymous reviewers for the valuable suggestions.

Funding

This research was supported in part by the National Council for Scientific and Technological Development (CNPq) of Brazil. The MIT Emissions Prediction and Policy Analysis (EPPA) model used in this study is supported by a consortium of government, industry, and foundation sponsors of the MIT Joint Program on the Science and Policy of Global Change. For a list see: http://globalchange.mit.edu/sponsors/all.

Supplemental data

Supplemental information for this article can be accessed in the online version [http://dx.doi.org/10.1080/09593330.2013.835655].

Notes

1. More details about the deforestation process in Brazil and some literature about its drivers can be found in the Supplemental data.

2. See the Supplemental data for more information about the EPPA model and its representation of land-use changes.

3. Kindermann et al. (2008) has found similar low-carbon costs to reduce deforestation in Latin America, where emissions could be reduced by between 1.6 GtCO₂ and 4.3 GtCO₂ per year under a $20/ton of CO₂. See Supplemental data for more information.

4. Further details about the agricultural sector in Brazil and its capacity to intensify output can be found in the Supplementary data.