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Economic implications of reducing carbon emissions from energy use and industrial processes in Brazil

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  • Chen, Y.-H. Henry
  • Timilsina, Govinda R.

Abstract

The overall impacts on the Brazilian economy of reducing CO2 emissions from energy use and industrial processes can be assessed using a recursive dynamic general equilibrium model and a hypothetical carbon tax. The study projects that in 2040 under a business-as-usual scenario, CO2 emissions from energy use and industrial processes would be almost three times as high as in 2010 and would account for more than half of total national CO2 emissions. Current policy aims to reduce deforestation by 70 percent by 2017 and emissions intensity of the overall economy by 36-39 percent by 2020. If policy is implemented as planned and continued to 2040, CO2 emissions from energy use and industrial processes would not have to be cut until 2035 as reductions of emissions through controlling deforestation would be enough to meet emission targets. The study also finds evidence that supports the double dividend hypothesis: using revenue from a hypothetical carbon tax to finance a cut in labor income tax significantly lowers the gross domestic product impacts of the carbon tax. Using carbon tax revenue to subsidize wind power can effectively increase the output of wind power in the country, although the impact of the tax on gross domestic product would be somewhat increased.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 6135.

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Date of creation: 01 Jul 2012
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Handle: RePEc:wbk:wbrwps:6135

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Keywords: Climate Change Mitigation and Green House Gases; Climate Change Economics; Energy Production and Transportation; Energy and Environment; Environment and Energy Efficiency;

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  1. Mas-Colell, Andreu & Whinston, Michael D. & Green, Jerry R., 1995. "Microeconomic Theory," OUP Catalogue, Oxford University Press, number 9780195102680.
  2. Sebastian Rausch & Gilbert E. Metcalf & John M. Reilly & Sergey Paltsev, 2010. "Distributional Implications of Alternative U.S. Greenhouse Gas Control Measures," NBER Working Papers 16053, National Bureau of Economic Research, Inc.
  3. Henry Chen, Y.-H. & Reilly, John M. & Paltsev, Sergey, 2011. "The prospects for coal-to-liquid conversion: A general equilibrium analysis," Energy Policy, Elsevier, vol. 39(9), pages 4713-4725, September.
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  6. Parry, Ian & Bento, Antonio, 2000. "Estimating the Welfare Effect of Congestion Taxes: The Critical Importance of Other Distortions within the Transport System," Discussion Papers dp-00-51, Resources For the Future.
  7. Guilhoto, J. J. M. & Sesso Filho, U. A., 2005. "Estimação da Matriz Insumo-Produto a Partir De Dados Preliminares das Contas Nacionais
    [Estimation of input-output matrix using preliminary data from national accounts]
    ," MPRA Paper 38212, University Library of Munich, Germany.
  8. Welsch, Heinz, 1998. "Coal subsidization and nuclear phase-out in a general equilibrium model for Germany," Energy Economics, Elsevier, vol. 20(2), pages 203-222, April.
  9. Jan van Heerden & Reyer Gerlagh & James Blignaut & Mark Horridge & Sebastiaan Hess & Ramos Mabugu & Margaret Mabugu, 2006. "Searching for Triple Dividends in South Africa: Fighting CO2 Pollution and Poverty while Promoting Growth," The Energy Journal, International Association for Energy Economics, vol. 0(Number 2), pages 113-142.
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