Study of the carbon market in Brazil 3 (2015)

AUTHOR:Gusmão, Fernanda; Beserra Azevedo Carloni, Flávia Beatriz; Wills, William

DATE:July, 2015

TOPICS: Carbon Market, Emission permits, carbon leakage, benchmark, mitigation, climate change

SUMMARY: The study evaluates various schemes applied in the world for the allocation of emission permits in carbon markets: the free allocation, allocation by auction and a hybrid approach. The different schemes where analyzed under the criteria of carbon leakage, cost of transaction, benchmark, revenue use, banking and adjusting possibilities. In the case of São Paulo a lack of update date was identified as main obstacle to facilitate a more sophisticated model that would allow designing a proper allocation model. On the basis of existing data it was revealed that the risk of carbon leakage reduced in an international level, but still remained relatively high in the interstate level. This document was prepared as part of an effort by the Inter-American Development Bank (IDB) and the Stock Exchange, Commodities and Futures Exchange (BM & FBOVESPA) for the development of the carbon market in Brazil. The study was coordinated by Maria Netto, Leader Specialist in Financial Institutions, Carlos Ludena Specialist in climate change (IDB); and Guilherme Magalhães Fagundes, Environmental Products, Energy and Metals Manager (BM & FBOVESPA).