Study of the carbon markets in Brazil 2 (2015)

AUTHOR:Avzaradel Szklo, Ana Carolina; Betz, Stephanie; Burgi, Adriano; Guimarães, Julia; Mello, Augusto; Messer, Patricia; Pinheiro, Flavio; Roxo, Leticia

DATE:July, 2015

TOPICS: Carbon Market, Brazil, NDBs, industry, transport, waste management, emission reductions, mitigation, carbon assets

SUMMARY: The study sizes the potential supply and demand for carbon assets in a market in the State of São Paulo, Brazil. The market sizing was estimated in three simulations on the basis of (i) the emissions reduction targets set out in the industry and transport sector plans; (Ii) an emission reduction target of up to 50%; and (iii) a defined target according to the reduction potential through actions with negative marginal cost of abatement. For the sectors of transport and waste management as well as for the subsectors of the São Paulo industry the break-even point of each mitigation action was calculated, which served for the construction of the supply and demand curves. The analysis revealed that the design of the market and the hypothetical price of carbon assets vary significantly with the target set. The price range calculated according to the simulations varies between 5and 19 BRL / ton of CO2 and the volume of tons traded is between 32 and 128 million tCO2e. 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).