In the Race to Net Zero, Brazil Needs Less Net and More Zero

Martin Dietrich Brauch
September 14, 2023

Ambitious and comprehensive public policies are needed to drive and regulate climate investment by the public and private sectors. Policies are also needed to ensure a just transition, in line with human rights requirements and the sustainable development goals. As Brazil seeks to play a leadership role in the global race to net zero, and given the country’s unique emissions profile, what should its climate policy package look like?

Brazil’s emissions profile and the cost-effectiveness of solutions should inform climate policy

More than 80% of global greenhouse gas emissions come from the following sectors combined: energy (including electricity, heat, and transport), industrial processes and product use (IPPU), and waste. The remaining emissions come from agriculture, forestry, and other land uses (AFOLU). But Brazil’s emissions profile is different. Energy, IPPU, and waste combined represent just one third of the country’s emissions. Instead, in Brazil the main culprit is AFOLU: deforestation accounts for roughly one third of emissions, and cattle farming and agriculture jointly account for another third. 

While Brazil’s forests and land may eventually become net sinks of carbon, they currently work as massive emitters. To start reversing the trend, the country needs to slash its AFOLU emissions. The government should employ strict controls, monitoring, and enforcement to stop illegal deforestation. It should encourage forest restoration and minimize the conversion of forests into large-scale agricultural land or pastures. Recognizing the intrinsic value of biodiversity, it should support Indigenous communities in their sustainable use of ecosystems.

When it comes to Brazil’s IPPU emissions, energy holds the largest share. Brazil often boasts about its 80% renewable electricity matrix. However, energy is not just electricity. When including transport, industry, cooking, and other important energy uses in the mix, more than half of Brazil’s energy matrix is fossil. Furthermore, as the country’s population, industry, and energy demand grow, Brazil cannot rely on its past as a hydro powerhouse. Instead, it needs to move into its solar and wind future so it can replace fossil fuels beyond electricity generation and meet the demands of an increasingly electric economy. 

According to the International Energy Agency (IEA), decarbonization enablers include energy efficiency, electrification, renewable electricity (solar, wind, geothermal, and hydropower), hydrogen, and biofuels. Decarbonization solutions exist in agriculture, industry, and other sectors as well. Brazil’s climate policy package needs to be comprehensive, taking all possible solutions into account in a way that makes sense for Brazil’s economy and society. Comparing the cost-effectiveness of solutions across sectors, policy makers can prioritize and accelerate those most economically efficient in reducing emissions.

Brazil’s policy should govern climate investment by the public sector

One side of the policy package pertains to public investment. The government needs to swiftly phase out its fossil fuel subsidies, which in 2021 were estimated at BRL 118 billion, roughly USD 24 billion. Instead, Brazil should subsidize and incentivize climate solutions, such as solar and wind energy and grids, electric mass transit and cargo transportation systems, and sustainable agriculture and forest management. 

Brazil should also increase spending on R&D—for example, through universities and the Brazilian Agricultural Research Corporation, Embrapa—to find innovative ways to reduce emissions from agriculture and cattle farming.

Besides mitigation, the country should also invest in a just transition, strengthening social safety nets and compensating those most vulnerable to climate impacts and to the disruptions of climate policy. It should upgrade and build its infrastructure for adaptation and resilience to climate impacts, which include stronger and more frequent droughts, floods, landslides, and cyclones.

Brazil’s policy should govern climate investment by the private sector

The other side of a climate policy package for Brazil pertains to private investment regulation. Command and control policies may be useful, such as energy efficiency standards across the economy and deforestation bans, with hefty and consistently enforced penalties. But economic instruments will be necessary. Brazil needs to speed up the regulation of its emissions trading system (ETS), putting a price on carbon not only on carbon-intensive industry, but on the broadest possible range of economic activities, including agriculture and cattle farming.

Companies in Brazil should also be subject to broader and stronger mandatory climate-related disclosures, including around their scope 1 and 2 emissions, and, where useful, scope 3 emissions; their science-based mitigation targets and strategies; and their adaptation and resilience plans.

Importantly, the Brazilian government and state-owned company Petrobras must stop the country’s colossal expansion of oil and gas. This expansion is inconsistent with climate action and with the role that the country wants to play in emissions reductions. It sends the wrong signal to the private sector. It is also unnecessary, according to the IEA’s pathway to net zero by 2050, which affirms that “there is no need for investment in new fossil fuel supply.” It works against the country by locking it into the declining fossil fuel economy. It is at complete odds with both the global long-term trend and the strong economic case to invest in renewable energy instead.

Finally, Brazil’s policy must drive the private sector away from the trend and trap of excessive reliance on carbon credits—especially from controversial nature-based offsetting and insetting, which bet on the potential of soils and vegetation as carbon sinks. As the updated 2023 OECD Guidelines for Multinational Enterprises on Responsible Business Conduct indicate, offsets “should not draw attention away from the need to reduce emissions and should not contribute to locking in greenhouse gas–intensive processes and infrastructure.” While offsetting is necessary as a measure of last resort to neutralize residual emissions that cannot be reduced, “we cannot offset our way out of climate change.” To play a leadership role in the race to net zero, Brazil’s policy must nudge the private sector to prioritize eliminating or reducing emissions and to limit offsetting—in other words, to seek less net and more zero.

Martin Dietrich Brauch is a Lead Researcher at the Columbia Center on Sustainable Investment (CCSI). He would like to thank Chris Albin-Lackey for his invaluable input. This piece is based on the author’s intervention at the event Strategic Dialogue on Climate Action, Biodiversity Conservation, and Sustainable Investment in Latin America, co-hosted by CCSI and partners and held at Columbia Law School on September 12, 2023.