Costs of Reducing Greenhouse Gas Emissions in Brazil

The Brazilian government has announced volunteer targets to reduce greenhouse gas (GHG) emissions during the 2009 COP meeting in Copenhagen. In this paper we estimate the economic impacts from alternative policies to achieve such targets, including actions to cut emissions from deforestation and agricultural production. We employ a dynamic-recursive general equilibrium model of the world economy. The main results show that deforestation emissions in Brazil can be reduced at very low costs, but the costs of cutting emissions from agricultural and energy use may reach 2.3% loss in GDP by 2020 if sector specific carbon taxes are applied. Those costs may be reduced to 1.5% under a carbon trading scheme. The negative impacts of carbon taxes on agricultural production indirectly reduce deforestation rates. However, directly cutting emissions from deforestation is the most cost-effective option, since it does not hurt agricultural production, which still expands on lower yield and underutilized pasture and secondary forest areas.

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Publication Type:
Conference Paper/ Presentation
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JEL Codes:
Q54; Q58; Q15; C68
Series Statement:
Selected Paper

 Record created 2017-04-01, last modified 2018-01-22

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