Economic Evaluation of Public Policies Aiming the Reduction of Greenhouse Gas Emissions in Brazil

In this paper a static, inter-regional and bottom-up general equilibrium model of greenhouse gas emissions in Brazil is used to analyze the impact of different types of carbon taxes on the economy. The core database is calibrated with Brazilian economic data from 1996, while the emissions module is based on the Brazilian Initial National Communication to the United Nations Convention about Global Climate Change for the 1994 reference year. The gas module in the model comprises all known sources of greenhouse gases emissions except emissions from land use change (deforestation). The simulations comprise scenarios with carbon taxes on emissions, either on fuel use or on the activity level of industries. Results show that taxing activities is more relevant for greenhouse gases emissions reductions in Brazil than just taxing fuel use, due to the importance of activity related emissions in the Brazilian emissions matrix. Livestock is found to be one of the most important emission sectors in Brazil. Carbon tax on activities, however, generates the higher increase in food prices, with negative implications for poverty alleviation. Different carbon tax schemes would also have different regional impacts inside Brazil, with taxation on fuels harming more the Southeast and Northeast regions, and taxation on activity levels affecting negatively more the South and Center west regions.