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Impacts of Carbon Pricing on Brazilian Industry: Domestic Vulnerability and International Trade Exposure

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  • Luan Santos

    (Energy Planning Program, Graduate School of Engineering, Federal University of Rio de Janeiro, Centro de Tecnologia, Bloco C, Sala 211, Cidade Universitária, Ilha do Fundão, 21941-972 Rio de Janeiro, Brazil
    Industrial Engineering, Federal University of Rio de Janeiro, Avenida Aluizio da Silva Gomes, 50, Novo Cavaleiros, Macaé, 27930-560 Macaé, Brazil)

  • Rafael Garaffa

    (Energy Planning Program, Graduate School of Engineering, Federal University of Rio de Janeiro, Centro de Tecnologia, Bloco C, Sala 211, Cidade Universitária, Ilha do Fundão, 21941-972 Rio de Janeiro, Brazil)

  • André F. P. Lucena

    (Energy Planning Program, Graduate School of Engineering, Federal University of Rio de Janeiro, Centro de Tecnologia, Bloco C, Sala 211, Cidade Universitária, Ilha do Fundão, 21941-972 Rio de Janeiro, Brazil)

  • Alexandre Szklo

    (Energy Planning Program, Graduate School of Engineering, Federal University of Rio de Janeiro, Centro de Tecnologia, Bloco C, Sala 211, Cidade Universitária, Ilha do Fundão, 21941-972 Rio de Janeiro, Brazil)

Abstract

After COP 21, with the adoption of the Paris Agreement in December 2015, the outlook for carbon pricing policies has been widened. While the agreement does not directly establish a global carbon pricing, the provisions accounted for in Article 6 have the potential to increase international cooperation in favor of greenhouse gas (GHG) mitigation through market mechanisms. The Brazilian Nationally Determined Contribution (NDC) considers the use of such mechanisms, though the configuration of the Brazilian climate policy does not specify the economic instruments for carbon pricing. When examining the recent evolution of GHG emissions in Brazil, the already achieved reduction in deforestation sheds light on the need to address GHG mitigation in other sectors, such as industry. Therefore, this paper analyzes the impacts of carbon pricing on the Brazilian industry in terms of sectorial value added (VA), emissions intensity, international trade exposure, and the risk of carbon leakage. Results indicate that, considering a price of carbon of US$10/tCO 2 , the cost of reducing emissions from 35% to 45% (same range of the Brazilian NDC) could represent an impact of 0.3% to 3.7% on sectorial VA. However, results for emissions intensity and international trade reveal medium to high carbon leakage risks for all analyzed industrial sectors.

Suggested Citation

  • Luan Santos & Rafael Garaffa & André F. P. Lucena & Alexandre Szklo, 2018. "Impacts of Carbon Pricing on Brazilian Industry: Domestic Vulnerability and International Trade Exposure," Sustainability, MDPI, vol. 10(7), pages 1-19, July.
    • Handle: RePEc:gam:jsusta:v:10:y:2018:i:7:p:2390-:d:157042
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