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

William Wills, Emilio Lebre La Rovere, Carolina Grottera, Giovanna Ferrazzo Naspolini, Gaëlle Le Treut, F. Ghersi (), Julien Lefèvre () and Carolina Burle Schmidt Dubeux
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William Wills: UFRJ - Universidade Federal do Rio de Janeiro [Brasil] = Federal University of Rio de Janeiro [Brazil] = Université fédérale de Rio de Janeiro [Brésil]
Emilio Lebre La Rovere: UFRJ - Universidade Federal do Rio de Janeiro [Brasil] = Federal University of Rio de Janeiro [Brazil] = Université fédérale de Rio de Janeiro [Brésil]
Carolina Grottera: UFRJ - Universidade Federal do Rio de Janeiro [Brasil] = Federal University of Rio de Janeiro [Brazil] = Université fédérale de Rio de Janeiro [Brésil]
Giovanna Ferrazzo Naspolini: UFRJ - Universidade Federal do Rio de Janeiro [Brasil] = Federal University of Rio de Janeiro [Brazil] = Université fédérale de Rio de Janeiro [Brésil]
Gaëlle Le Treut: CIRED - Centre International de Recherche sur l'Environnement et le Développement - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - EHESS - École des hautes études en sciences sociales - AgroParisTech - ENPC - École nationale des ponts et chaussées - Université Paris-Saclay - CNRS - Centre National de la Recherche Scientifique
F. Ghersi: CIRED - Centre International de Recherche sur l'Environnement et le Développement - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - EHESS - École des hautes études en sciences sociales - AgroParisTech - ENPC - École nationale des ponts et chaussées - Université Paris-Saclay - CNRS - Centre National de la Recherche Scientifique
Julien Lefèvre: CIRED - Centre International de Recherche sur l'Environnement et le Développement - Cirad - Centre de Coopération Internationale en Recherche Agronomique pour le Développement - EHESS - École des hautes études en sciences sociales - AgroParisTech - ENPC - École nationale des ponts et chaussées - Université Paris-Saclay - CNRS - Centre National de la Recherche Scientifique
Carolina Burle Schmidt Dubeux: UFRJ - Universidade Federal do Rio de Janeiro [Brasil] = Federal University of Rio de Janeiro [Brazil] = Université fédérale de Rio de Janeiro [Brésil]

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Abstract: Curbing GHG emissions while preserving economic growth is one of the main challenges that developing countries are facing to meet the Paris Agreement commitments. Brazil's NDC target aims to reduce economy-wide absolute levels of GHG emissions by 37% in 2025 and 43% in 2030, compared to 2005 emissions. In this paper, we compare command-and-control and carbon pricing policies to induce the Brazilian economy to meet its NDC targets. We focus on analysing synergies and trade-offs in macroeconomic and social development, captured by economic growth and income distribution while reducing GHG emissions. By integrating a series of sectoral models and a computable general equilibrium (CGE) model, we develop and run different policy scenarios that simulate a set of carbon pricing schemes in Brazil. Our analysis shows that NDC implementation in Brazil under carbon pricing policies allows the country to meet its targets and improve economic and social indicators compared to a command-and-control policy. With about the same GHG emissions up to 2030, important macroeconomic and social co-benefits can be achieved under a carbon pricing policy in Brazil, allowing for reduced welfare losses against business-as-usual trends. Key policy insights Carbon pricing policies are more cost-effective to meet NDC targets in Brazil up to 2030, resulting in higher GDP and household income, in comparison to other individual policy instruments, including command-and-control and subsidies to investments. A carbon price of about 10 USD/tCO2e, combined importantly with deforestation rates under control, would allow Brazil to meet its NDC targets. Recycling carbon pricing revenues can help soften the burden on the labour market and protect low-income households from welfare losses.

Keywords: Integrated modelling; carbon revenues; carbon pricing; Paris Agreement; mitigation scenarios; general equilibrium model (search for similar items in EconPapers)
Date: 2022
New Economics Papers: this item is included in nep-ene, nep-env, nep-his and nep-res
Note: View the original document on HAL open archive server: https://hal.science/hal-03500923v1
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Citations: View citations in EconPapers (2)

Published in Climate Policy, 2022, 22 (1), pp.48-63. ⟨10.1080/14693062.2021.1981212⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03500923

DOI: 10.1080/14693062.2021.1981212

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