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

Curbing down GHG emissions while preserving economic growth is the main challenge that developing and developed countries are facing to meet the Paris Agreement commitments. Brazil's NDC target is 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. Our paper focuses on analysing synergies and trade-offs in macroeconomic and social development, focusing on economic growth and income distribution, while reducing GHG emissions. By integrating a series of sectorial models and a computable general equilibrium model (CGE), we develop and run different policy scenarios which simulate different 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 reducing welfare losses against business-as-usual trends.