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

Luan Santos (), Rafael Garaffa (), André F. P. Lucena () and Alexandre Szklo ()
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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
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

Sustainability, 2018, vol. 10, issue 7, 1-19

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.

Keywords: climate policy; carbon pricing; emissions intensity; international trade exposure; carbon leakage; industry; Brazil (search for similar items in EconPapers)
JEL-codes: Q Q0 Q2 Q3 Q5 Q56 O13 (search for similar items in EconPapers)
Date: 2018
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