Scholarly article on topic 'Climate policy scenarios in Brazil: A multi-model comparison for energy'

Climate policy scenarios in Brazil: A multi-model comparison for energy Academic research paper on "Earth and related environmental sciences"

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Abstract of research paper on Earth and related environmental sciences, author of scientific article — André F.P. Lucena, Leon Clarke, Roberto Schaeffer, Alexandre Szklo, Pedro R.R. Rochedo, et al.

Abstract This paper assesses the effects of market-based mechanisms and carbon emission restrictions on the Brazilian energy system by comparing the results of six different energy-economic or integrated assessment models under different scenarios for carbon taxes and abatement targets up to 2050. Results show an increase over time in emissions in the baseline scenarios due, largely, to higher penetration of natural gas and coal. Climate policy scenarios, however, indicate that such a pathway can be avoided. While taxes up to 32US$/tCO2e do not significantly reduce emissions, higher taxes (from 50US$/tCO2e in 2020 to 162US$/tCO2e in 2050) induce average emission reductions around 60% when compared to the baseline. Emission constraint scenarios yield even lower reductions in most models. Emission reductions are mostly due to lower energy consumption, increased penetration of renewable energy (especially biomass and wind) and of carbon capture and storage technologies for fossil and/or biomass fuels. This paper also provides a discussion of specific issues related to mitigation alternatives in Brazil. The range of mitigation options resulting from the model runs generally falls within the limits found for specific energy sources in the country, although infrastructure investments and technology improvements are needed for the projected mitigation scenarios to achieve actual feasibility.

Academic research paper on topic "Climate policy scenarios in Brazil: A multi-model comparison for energy"


ENEECO-02995; No of Pages 11

Energy Economics xxx (2015) xxx-xxx

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Climate policy scenarios in Brazil: A multi-model comparison for energy

André F.P. Lucena a* Leon Clarke b, Roberto Schaeffer a, Alexandre Szklo a, Pedro R.R. Rochedo a, Larissa P.P. Nogueira a, Kathryn Daenzerc, Angelo Gurgeld, Alban Kitous e, Tom Koberf

a Energy Planning Program, Universidade Federal do Rio de Janeiro, Brazil

b Pacific Northwest National Laboratories, Joint Global Change Research Institute, College Park, MD, USA c Pennsylvania State University, College of Agricultural Sciences, University Park, PA USA

d Sao Paulo School of Economics, Fundaçao Getûlio Vargas (EESP/FGV), Brazil/MITJoint Program on the Science and Policy of Climate Change, USA

e European Commission, Joint Research Centre, Sevilla, Spain (The views expressed are purely those of the author and may not in any circumstances be regarded as stating an official position of the European Commission )

f Energy research Centre of the Netherlands, Policy Studies, Amsterdam, The Netherlands



Article history:

Received 1 September 2014

Received in revised form 29 September 2014

Accepted 6 February 2015

Available online xxxx

JEL classification:

Keywords: Climate policy

Low-carbon energy scenarios Mitigation alternatives Brazil

This paper assesses the effects of market-based mechanisms and carbon emission restrictions on the Brazilian energy system by comparing the results of six different energy-economic or integrated assessment models under different scenarios for carbon taxes and abatement targets up to 2050. Results show an increase over time in emissions in the baseline scenarios due, largely, to higher penetration of natural gas and coal. Climate policy scenarios, however, indicate that such a pathway can be avoided. While taxes up to 32 US$/tCO2e do not significantly reduce emissions, higher taxes (from 50 US$/tCO2e in 2020 to 162US$/tCO2e in 2050) induce average emission reductions around 60% when compared to the baseline. Emission constraint scenarios yield even lower reductions in most models. Emission reductions are mostly due to lower energy consumption, increased penetration of renewable energy (especially biomass and wind) and of carbon capture and storage technologies for fossil and/or biomass fuels. This paper also provides a discussion of specific issues related to mitigation alternatives in Brazil. The range of mitigation options resulting from the model runs generally falls within the limits found for specific energy sources in the country, although infrastructure investments and technology improvements are needed for the projected mitigation scenarios to achieve actual feasibility.

© 2015 Battelle Memorial Institute and The Authors. Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license (

1. Introduction

The increase in greenhouse gas (GHG) emissions in the recent decade has been dominated by the emerging economies, explained mainly by the growth in their economic activity (Peters et al., 2012). In the case of Brazil, emissions up to 2010 have been dominated by land-use carbon dioxide (CO2) and non-CO2 gases, pinpointing the key role played by deforestation and agriculture in the country and placing it in fourth-place when it comes to ranking national contributions to observed global warming (Matthews et al., 2014). When accounting only for CO2 emissions from fossil-fuel burning, cement production and gas flaring, however, Brazil is ranked as fifteenth (Boden et al., 2013).

* Corresponding author. E-mail addresses: (A.F.P. Lucena), (L.P.P. Nogueira).

Most of Brazil's deforestation takes place in the Brazilian Amazon, where its rate has decreased substantially in the recent years (from a 10-year deforestation average of 19,500 km2 year-1 in 2005 to 5843 km2 year-1 in 2013 - Nepstad et al., 2014). According to Aguiar et al. (2012), the reduction in deforestation rates in that biome alone leads to a drop in annual CO2 emissions from more than 1.1 billion tons of CO2 in 2004 to 298 million tons of CO2 in 2011, assuming a direct conversion of lost biomass into carbon. Should deforestation stabilize at this new level, the energy sector will, in the near future, become the main source of emissions in Brazil.

Globally, Brazil is in a favorable position when it comes to the use of renewable energy sources. In 2013, over 40% of all primary energy produced in the country came from renewable sources (EPE, 2014), a value that is relatively high compared to the world average of around 13% (1EA, 2013). Most of the renewable sources used in the country come from sugarcane products (16.1%), hydropower (12.5%) and other biomass (8.3%). Wind, solar and other renewable resources still play a

0140-9883/© 2015 Battelle Memorial Institute and The Authors. Published by Elsevier B.V. This is an open access article under the CC BY-NC-ND license (


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small role, with less than 5% of the total primary energy produced in Brazil (EPE, 2014).

However, socioeconomic development of the country will result in higher energy use that is not guaranteed to come from renewable sources. In spite of the current high share of renewables in the Brazilian energy mix, the country faces a situation where, on the one hand, it needs to increase its energy production to foster socioeconomic development, job creation and poverty alleviation. On the other hand, the country faces the near exhaustion of its environmentally feasible hydropower potential and is expected to increase fossil energy use, with the recent oil discoveries in the pre-salt1 fields and the perspectives for increased coal-fired power generation (EPE, 2013; Nogueira et al., 2014; Saraiva et al., 2014).

Different policy options are available to foster a low-carbon economy. The evaluation of market based policies, such as a carbon tax or negotiable emission permits, has been widely conducted in worldwide and regional analyses (Clarke et al., 2012; GEA, 2012; IPCC, 2014). To date no study has analyzed the effects of different carbon policies, such as taxes and/or caps, on the Brazilian energy system by running and comparing different integrated assessment models (IAM).

As part of the Latin American Modeling Project and Integrated CLimate Modelling And CAPacity building in Latin America (LAMP-CLIMACAP - van der Zwaan et al., 2015a), six teams have generated profiles of the Brazilian energy system out to 2050 under different carbon tax and abatement target regimes using different IAMs. This paper compares the models' results2 for Brazil in order to assess the possible effects of GHG mitigation strategies on the country's energy system. Based on the identification of key energy segments provided by this analysis, this paper provides a discussion of issues particularly relevant to Brazil.

This paper is organized as follows. Section 2 discusses the models and scenarios used in the study. Section 3 presents the basic assumptions and baseline results. Section 4 shows the results for climate policy scenarios. Section 5 discusses specific issues in the Brazilian energy system and relates them to climate change mitigation policies. Finally, Section 6 concludes the paper with some final remarks.

2. Participating models and scenario description

Within LAMP-CLIMACAP, six modeling teams assessed Brazil as an independent region and were, therefore, considered in this study. These groups have produced five scenarios for the Brazilian energy mix out to 2050 under different climate policy regimes. The models used in this study are: EPPA (Paltsev et al., 2005, 2013); GCAM (Calvin et al., 2011); MESSAGE-Brazil (IAEA, 2006; Lucena et al., 2010; Nogueira et al., 2014); Phoenix (Wing et al., 2011); POLES (Griffin et al., 2014; Kitous, 2010); and TIAM-ECN (Kober et al., 2014 and van der Zwaan, 2013). These models differ from each other in terms of their modeling approach (optimization or simulation), spatial resolution (national or global), sectoral scope (partial or general equilibrium), degree of foresight (myopic or perfect foresight) and representation of technological options (type, availability and costs). The models also differ in how they treat the potential for energy resources and represent technological change. A comparison of model features can be found in van der Zwaan (2015b) and Clarke et al. (in this issue).

A baseline scenario and four climate policy scenarios developed within the LAMP-CLIMACAP exercise are used in this paper and other studies within this special issue (Clarke et al.; van der Swaan et al.; Calvin et al.; van Ruijven et al.). The current climate policy in Brazil is limited to 2020 and there is not a clear picture or deep discussion in the country about a climate policy strategy beyond 2020. Considering this

1 The pre-salt oil fields are so called because of the 2000 m layer of salt above the oil. Estimated reserves in these fields range from 30 to 100 billion barrels of oil (OCD, 2009).

2 The results database of the LAMP-CLIMACAP project can be found at https://secure.

absence of discussions about possible future mitigation policy choices, testing standard mitigation instruments, such as carbon prices and emission targets, can provide useful information for climate policy making in the country, given that the model scenarios analyzed here for these instruments provide cost-effective mitigation options. Additionally, by using a standardized set of policy scenarios, it is possible to compare the effects of these policies across countries in Latin America (e.g. Clarke et al., in this issue).

The core baseline scenario is based on business-as-usual assumptions at the regional and global levels and is used as the reference for the climate policy scenarios. It does not include the Brazilian Copenhagen Pledge3 or new climate or energy policies except those implemented prior to 2010. The four climate policy scenarios are divided into two different sets: two scenarios with CO2 price paths applied to all GHGs -Low CO2 price and High CO2 price; and two others with emission reductions applied to all fossil fuel and industrial (FF&I) CO2 emissions — 20% abatement (FF&I) and 50% abatement (FF&I). The scenarios are progressively stringent in terms of mitigation efforts. Both sets of policies begin in 2020 and all other assumptions are the same as in the baseline. Table 1, shows the CO2 price paths and emission reductions assumed by the climate policy scenarios. For a more detailed description of the scenarios used in this study see van der Zwaan et al. (2015a), van Ruijven et al. (in this issue) and Clarke et al. (in this issue).

In this paper the results of the different models/scenarios are analyzed only for the industrial and energy sectors. For an analysis of land use and forestry emissions resulting from the LAMP-CLIMACAP modeling efforts see Calvin et al. (in this issue). Because the sectoral scope of the models is different - e.g. some models have endogenous land use modules - in the 20% abatement (FF&I) and 50% abatement (FF&I) emission reductions are applied to energy and industry only. Still, not all models include emissions from industrial processes. However, since these are relatively small compared to energy emissions, they do not significantly affect the model comparison (for simplicity, henceforth the term 'emissions from energy' will refer to emissions from energy and industry).

3. Basic assumptions and baseline scenarios

Model Projections are largely dependent on the basic assumptions guiding the evolution of the main drivers for energy production and consumption. Assumptions about technological development, costs, behavior, and trade, vary greatly across models (for more information on the technological specifications within the models used in the LAMP exercise, see van der Zwaan et al., in this issue). The models were not harmonized for Gross Domestic Product (GDP) and population growth, which creates a broad range of future pathways. The basic population and GDP assumptions used in each model are described in detail in van Ruijven et al. (in this issue). Some models are computable general equilibrium (CGE) models (Phoenix and EPPA) with endogenous GDP pathways that vary across the different scenarios prepared for this comparison exercise. In all other models, GDP is exogenous and is the same across scenarios.

The models generally assume that Brazil's population stabilize at different levels by 2050 (except GCAM) and, in some cases, population peaks in 2040 and then decreases. The assumptions for GDP vary greatly across models, ranging from a 2.5 to more than a 4-fold increase from 2010 to 2050. In per capita terms, the spread of GDP assumptions is also large, nearly doubling in the lower case and increasing by 3.6 times by 2050, when compared to 2010.

3 The Brazilian pledges were announced at the UNFCCC Conference of Parties in Copenhagen, 2009. These voluntary pledges set emission reduction targets of 36.1-38.9% compared to baseline emissions projected up to 2020 (Brasil, 2009). The extent to which these pledges are based on a realistic baseline is debatable (see, for example, Lucon et al., 2013; Clarke et al., this issue).


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CO2 price paths and emission reductions assumed by the climate policy scenarios.

Scenario Scenario description

Core baseline Business-as-usual scenario including climate and energy policies enacted prior to 2010

Low CO2 price A carbon tax is levied of 10 $/tCO2e in 2020, growing at 4%/year to reach 32 $/tCO2e in 2050.

High CO2 price A carbon tax is levied of 50 $/tCO2e in 2020, growing at 4%/year to reach 162 $/tCO2e in 2050.

20% abatement (FF&I) Fossil fuel and industrial CO2 emissions are reduced by 5% in 2020, linearly increasing to 20% in 2050, with regard to 2010.

50% abatement (FF&I) Fossil fuel and industrial CO2 emissions are reduced by 12.5% in 2020, linearly increasing to 50% in 2050, with regard to 2010.

The wide range in GDP and population growth, however, is not totally reflected in projected primary energy consumption since different models assume different energy efficiency improvement rates. In all models, primary energy roughly doubles from 2010 until 2050 (ranging from an increase 2.14 to 2.51 times the 2010 levels). As a result, primary energy intensity decreases in all models, from just below 2010 values to almost half of that. In per capita terms, primary energy consumption roughly doubles in all models by mid-century. The reasons for the decreasing energy intensities vary across models, but generally are related to both projected energy efficiency improvements and changes in the economic structure of the country.

The composition of the primary energy mix up to 2050 in the baseline scenario is shown in Fig. 1. Some discrepancies can be noticed in 2010, which are the result of differences in variable definitions, information sources and base year across models. For example, results for biomass in Phoenix only include primary energy that is used to generate electricity

and produce biofuels, resulting in lower levels in 2010 compared to the models which include all biomass primary energy. For power generation, models show a more homogenous composition of the fuel mix for 2010, with little differences across them. For a discussion about base year variations across models, see van Ruijven et al. (in this issue).

In the baseline scenario the share of fossil fuel increases in all models but POLES due to a large penetration of natural gas and/or coal. In absolute terms, these two energy carriers are projected to increase in all models. Models agree that oil will remain an important energy carrier in the future, but generally project it to increase at a rate below that of total primary energy. In four out of six models oil consumption increases little from 2020, despite the large, recently discovered oil reserves in the pre-salt fields.

In all models renewable energy sources increase in the baseline scenario. However, their share in total primary energy consumption is projected to decrease by 2050 given the large penetration of fossil

30 25 20 15

1800 1600 1400 g 1200 j? 1000 5 800 600 400 200

2 m uj

2010 2030

I Oil »Coal Gas ■ Nuclear ■ Hydro Biomass Solar ■ Wind

2050 Other

2010 2030 2050

I Hydro aOil ■ Coal ■ Gas ■ Nuclear Biomass Solar Wind Other

Fig. 1. Primary energy (upper panel) and electricity (lower panel) mix in the Core baseline scenario for Brazil.


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Fig. 2. Emissions from energy in all scenarios for Brazil (Core baseline range shown in all plots, CO2 price scenarios shown in upper row and emission restriction scenarios shown in lower

fuels. This result reflects the expected lower projected cost of fossil fuels relative to that of renewable energy in a scenario without any kind of climate policy. The only exception is the baseline scenario from POLES, which shows a higher penetration of renewable energy sources.

Electricity generation more than doubles by 2050 in all models in the baseline scenario, ranging from a 2.22 to a 3.18-fold increase. Per capita electricity consumption increases in all models. In terms of power generation mix, in the baseline scenario all models projects a diversification by 2050 compared to today's hydropower-based electricity mix, despite a still expected increase in hydropower. Most models see a higher share of fossil-based generation with an increase in natural gas after 2020 and an increase in coal based generation from 2030 onwards. After 2030-40, wind and solar power increase in all models (except solar in TIAM-ECN), but only in a few models do these sources reach a more relevant share by 2050. Biomass-based electricity generation increases in all models except in MESSAGE-Brazil, but does not increase beyond a 15% share of total generation. All models project a small increase in nuclear energy in the baseline.

Emissions from energy increase in all models in the baselines. Up to 2030, there is a small range across models, which broadens to 2050, when model results range from 910 to 1665 Mt CO2/year. The range of fossil fuel and industrial emissions in the baseline scenarios is shown in Fig. 3; for model specific results we refer to van Ruijven et al. (in this issue). The results for emissions and GHG mitigation options are discussed in the next section.

4. Climate policy scenarios

Emissions from energy use for all models are shown in Fig. 2 according to different mitigation scenarios vis-a-vis the baseline scenarios. As expected, the range of results across models for the cap scenarios - 20% abatement (FF&I) and 50% abatement (FF&I) - is much smaller than for the tax scenarios — Low CO2 price and High CO2 price. The difference across the cap scenarios reflects, on the one hand, differences in base year values and, on the other, differences due to trade between Latin American countries. These emission reduction scenarios impose restrictions across Latin America, thus yielding slightly different results for Brazil specifically.4 The difference between the two tax scenarios and

4 By being the only country specific model, MESSAGE-Brazil shows lower emissions than the other models, which implies that emission reduction efforts in the rest of Latin America are greater than those in Brazil.

the baseline scenarios shows evidence that a low tax does not substantially affect emissions from energy and industry in Brazil (average reduction from baseline projections around 20% by 2050). A high tax, on the other hand, induces larger emission reductions in all models to levels much below the lower boundary of the baseline scenarios (average reduction from baseline around 60% by 2050). In general, however, the tax scenarios in this exercise yield less stringent emission reductions than cap scenarios, the only exception being GCAM.

Emission reductions are induced by a combination of actions, such as reduced energy demand, decarbonization of primary energy and of electricity supply mix, carbon dioxide capture and storage (CCS) with fossil fuels as well as CCS with biomass (BioCCS). The solution found by different models in terms of the best mitigation alternatives in different climate policy scenarios is discussed below.

As mitigation efforts become more intense all models see a reduction in final energy consumption (Fig. 3). While a low tax does not have much effect on final energy consumption, in more stringent scenarios some models project reductions in energy consumption that are half of the baseline levels by 2050, which is very close to 2010 levels (EPPA and Phoenix).5 Other models see much lower reductions (e.g. MESSAGE-Brazil, GCAM and POLES at around 10% below baseline levels in very stringent scenarios). The same result applies in terms of primary energy, except for MESSAGE-Brazil. In all models, conversion efficiency from primary to final energy decreases as mitigation efforts change the primary energy mix towards less-efficient-to-use energy sources, such as biomass. In MESSAGE-Brazil, this effect is large enough to make primary energy consumption increase above baseline, even while final energy consumption decreases.

Besides reducing energy consumption, mitigation also occurs through changes in the primary energy mix of the country, which is shown in Fig. 3. In general, a low carbon tax does not affect the primary energy mix by a large extent. In the higher tax or emission restriction

5 These are CGE models, which consider the impacts of the policy on the overall economy. As so, there are four main channels leading to the decrease in energy consumption: i) GDP decreases under the carbon policies, reducing the per capita income and, as a consequence, the energy consumption relative to the baseline scenario; ii) carbon policies increase the costs of the fossil energy sources, which reduces consumption; iii) higher energy prices induce energy efficiency; and iv) as carbon policies are applied to other countries, there is a decrease in the global economic activity, reducing again the use of energy.


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Core baseline $10 CO2 price $50 CO2 price 20% abatement (FF&I) 50% abatement (FF&I)

■ Oil ■ Oil w/CCS ■ Coal ■ Coal w/CCSBGas ssGas w/CCSB Nuclear B Hydro Biomass Bio w/CCS Solar a Wind Other

Core baseline $10 CO2 price $50 CO2 price 20% abatement (FF&I) 50% abatement (FF&I)

B Oil s Oil w/CCS B Coal B Coal w/CCS a Gas 8S Gas w/CCSB Nuclear a Hydro Biomass Bio w/CCS Solar a Wind Other

Fig. 3. Primary energy mix in baseline and climate policy scenarios for Brazil.

scenarios the primary energy mix changes substantially with regard to the baseline.

As expected, a decrease in fossil fuel consumption is observed in climate policy scenarios. Coal loses importance in some models in response to the low tax but faces large reductions in all models in the other climate policy scenarios. Most of the remaining coal consumption in stringent climate policy scenarios is used with CCS technologies. Natural gas, however, remains relevant in all models and scenarios (except EPPA), in some cases with CCS. Results show that mitigation policies, such as carbon taxes or abatement targets, have some effect on oil consumption. However, results show, in general, that oil consumption does not decline much as GHG mitigation efforts increase. One reason is the rapidly increasing demand for transport services and the high costs to switch from oil products to alternative fuels, which is, in the cases of electricity and hydrogen, accompanied by considerable infrastructure investments.

In terms of renewable energy, the importance of biomass increases in all models as mitigation policies become more rigorous (except TIAM-ECN). Some models make use of negative emissions from BioCCS to achieve climate policy objectives. In some models, biomass becomes the major primary energy source in climate policy scenarios by 2050. Solar and wind increase in climate policy scenarios, but only in TIAM-ECN and POLES do they reach a relevant share by the end of the period.

Results for the mix of sources/technologies used in electricity generation in 2030 and 2050 are presented in Fig. 4. Hydropower is currently the major source of electricity generation and should remain important

within the 2050 time horizon. However, most of the power system expansion is based on other sources/technologies. The penetration of fossil fuels, which is high in the baseline scenario, greatly decreases in climate policy scenarios, being replaced by renewable energy sources and/or converted to facilities coupled with CCS. As GHG mitigation policy becomes more stringent, models see a penetration of wind, biomass and solar, though the mix of these sources varies from model to model. Nuclear energy also increases in all climate policy scenarios.

5. Implications of future pathways to the Brazilian energy industry

5.1. Fossil fuels

Although models point to a lower use of fossil fuels in climate policy scenarios, these energy sources remain relevant in the Brazilian energy mix through 2050 in all scenarios, either coupled with CCS technologies or not. Below a discussion about issues related to the use offossil fuels in Brazil is made. CCS is discussed in Subsection 5.4.

5.1.1. Coal

Under mitigation scenarios, models show that coal would become feasible when equipped with CCS. In a baseline scenario, or under low carbon taxes, expansion of primary energy consumption includes a high penetration of coal. Current projects underway in Brazil corroborate such a scenario. Brazil's current installed coal-based power plant capacity includes ten power plants totaling 2 GW which represents roughly


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a > 1200

=s 1000

1- 800

LU £= _J

LU £= O ^ £ W

8 w - 1

8 w - 1

Core baseline $10 CO2 price $50 CO2 price 20% abatement (FF&I) 50% abatement (FF&I)

I Hydro BOil ■ Coal ■ Coal w/CCS «Gas Gas w/CCS ■ Nuclear Biomass Biomass w/CCS Solar «Wind «Other

2000 1800 1600 1400

| 1200 -g

|| 1000 800 600 400 200 0

Core baseline $10 CO2 price $50 CO2 price 20% abatement (FF&I) 50% abatement (FF&I)

I Hydro BOil ■ Coal ■ Coal w/CCS ■ Gas Gas w/CCS ■ Nuclear Biomass Biomass w/CCS Solar Wind «Other

Fig. 4. Electricity mix in the baseline and in the climate policy scenarios for Brazil.

1.6% of the country's total installed capacity. This capacity is about to increase in the near future, as three new coal power plants, totaling some 1.4 GW, are currently under construction in the northeast, which will run on imported coal, mostly from Colombia (ANEEL, 2014). 1n the near future, six additional new coal power plants will be built, adding more 3.4 GW to the system (ANEEL, 2014).

Coal reserves in Brazil are located mostly in the southern region of the country. While BP (2014) estimates proven reserves (90 percent probability) of coal in Brazil of 7068 million tons, DNPM (2013), using a deterministic approach, estimates measured reserves of about 6710 million tons. However, the quality of Brazilian coal is relatively low (average 3200 kcal/kg and high ash content), leading to its use in subcritical fluidized-bed-combustion power plants with low first-law efficiencies (around 33%), which yields an estimated theoretical potential of 28 GW in new coal-based power plants running on domestic coal, with a capacity factor of 0.60 (EPE, 2007).

A greater use of domestic coal in thermal power plants has been studied by different authors (Antunes, 2009; Gavronski, 2007; Hoffmann, 2010; Ortiz, 2011). They show that, given the low quality of the Brazilian coal, all plants running on domestic coal already are, and need to be, located in the south of the country, near the mines. As such, the exploration of this potential will require new investments in transmission lines to export the excess of electricity from coal-based power expansion in the south.

High levels of penetration of coal in the Brazilian energy mix, therefore, would rely on imported coal. Brazil currently imports some

20 million tons per year mostly for the iron and steel industry (EPE, 2014). Expansion in the use of imported coal for power generation would likely take place in the northeast and southeast regions (EPE, 2007). EPE (2007) estimates that major ports are capable, without the need for additional investments, of receiving an amount of imported coal sufficient to supply 10 GW of coal-based power plants with an average capacity factor of 0.75 (around 65 TWh/year). Further analysis should evaluate the possibility of expanding this coal import capacity if values projected by some models are to become feasible.

5.1.2. Oil and gas

Although models show that oil consumption in Brazil would be affected by climate policy, it remains relevant in all scenarios and models. Brazil has offshore petroleum reserves and has recently discovered resources in the pre-salt fields. While the pre-salt offshore fields are the most relevant petroleum exploration frontier in Brazil, there are large uncertainties regarding the amount of resources and reserves in this area. Estimates of reserves in the pre-salt vary greatly. Low estimates consider 30 billion barrels (Costa and Souza-Santos, 2009; Denmark, 2009), while the more optimistic estimates reach 100 billion barrels (Denmark, 2009; Fishman, 2010; Maugeri, 2012).

Saraiva et al. (2014) applied a modified multi-Hubbert model to estimate Brazil's oil production curves according to different ultimate recoverable resource (URR) scenarios for offshore fields. Assuming a low estimate for pre-salt reserves (30 billion barrels), oil production in the country would peak in 2027 at 4.9 million barrels a day (Mb/day),


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while assuming 50 million barrels of reserves (USGS, 2000) would lead to a peak production of 5.4 Mb/day in 2034. In the latest case, the scenarios of Saraiva et al. (2014) show the possibility of sustaining an oil production at levels higher than 4 Mb/day for almost 30 years. This figure is almost twice the current petroleum production in Brazil.6

Therefore, even without considering the most optimistic estimates of reserves in the country, Brazil would become a major oil producer, provided that these resources can, in fact, become reserves and be put into production. There are many challenges related to exploration and production of oil in the Brazilian pre-salt, such as technical, economic and institutional barriers. The reserves of the pre-salt cluster are located at a depth of over 6000 m, below a salt layer of about 2000 m, and there are many challenges to extracting hydrocarbons in such conditions (PETROBRAS, 2011). Still, such high levels of production would lead the country to a position of a large oil exporter. One issue, that is relevant for Brazil, is the extent to which the country would be able to produce those reserves in a stringent mitigation scenario in which a global tax, for instance, would be applied. Country specific models (e.g. MESSAGE-Brazil) are limited in this regard since they assume that surplus oil production can be exported. Global models have the advantage of capturing global effects of a climate policy and, therefore, the possibility of restrictions in the global market for oil which could, eventually, hamper the production of oil in Brazil. The global models analyzed in this study that reported oil trade project high exports of oil up to 2050 in all scenarios, regardless of global climate policy.

The model results point to natural gas as a crucial energy source for Brazil through 2050. In most scenarios, natural gas remained a relevant energy source regardless of climate policy. Brazil has historically been a natural gas importer (e.g. from Bolivia) and in all models/scenarios the country will continue to be a net importer. Most of the country's production of natural gas is associated with oil production and this will probably continue to be the case given the large offshore oil production frontier of the pre-salt basins.

On the one hand, onshore natural gas potential production faces challenges related to the expansion of the gas transportation grid, given its high upfront costs and the monopolistic nature of the Brazilian market (Camargo et al., 2014; Mathias and Szklo, 2007). On the other hand, transporting the production of offshore pre-salt associated gas to consumer centers is costly, given the far distance from the coast (round 300 km). Additionally, associated natural gas in pre-salt basins has a high CO2 content (11 -40% on average, volume basis) requiring separation from the natural gas to allow the fuel's transportation and commercialization (avoiding clathrate formation). Therefore, CCS (including enhanced oil recovery — EOR) in pre-salt petroleum basins is needed.7 Besides costs, which are still relevant, a main issue is the carbon capture equipment footprint and the restricted area available in ultra-deep water oil platforms. Imperio et al. (2014) estimated that only one module of carbon capture membranes would fit in platforms designed for pre-salt basins in Brazil. This would not be sufficient to process all the natural gas produced. Therefore, assuming no improvement in membrane performance, natural gas reinjection will likely increase, which means that less saleable gas will be produced as it will be progressively diluted.

Finally, Brazil holds resources of unconventional gas, but the extent to which these resources will have an important role in the country's energy mix is unclear. Although the level of resources in the country is estimated to be the 10th largest in the world (245 trillion cubic feet — EIA, 2011), the level of geological knowledge of shale gas resources in Brazil is still very low, making estimates very uncertain. Nevertheless, the challenges that unconventional gas faces in Brazil are huge. Regardless of environmental restrictions and water availability (Camargo et al.,

6 According to BP (2014), only four countries currently produce more than 4 Mb/day: Saudi Arabia, Russia, United States and China.

7 In fact, this has been treated as a baseline scenario by Petrobras, the Brazilian oil company.

2014), the cash flow of shale exploration is based on regular CAPEX and OPEX expenditures given the need to constantly drill new wells (Lage et al., 2013). This constant drilling rhythm may be hindered by institutional barriers related to the lack of speed to cope with a high frequency of biding rounds, logistic barriers to transport this gas to consumer centers and the lack of capacity of the national industry to attend such a high demand for equipment and services.

5.2. Renewable energy

All models indicate that renewable energy sources will increase their role in Brazil's energy system in climate mitigation scenarios, besides the already and sustained relevant role of hydropower in the country's electricity generation. This is increasingly important for scenarios with higher carbon tax or carbon caps. Nevertheless, there remain challenges either in keeping the role of hydropower in the electricity generation or in increasing the role of wind, biomass and solar. This section addresses these issues.

5.2.1. Bioenergy

The results of the models analyzed in this study point to biomass as a major energy source in Brazil up to 2050, both in the baseline scenario and, with increasing importance, as GHG mitigation targets become more stringent. This is true in terms of primary energy and electricity generation. Therefore, modern biomass consumption in Brazil is (and would remain) mainly associated with electricity generation and production of liquid biofuels. Although charcoal is also relevant, its use is limited to the iron and steel industry.

As of today, electricity from biomass is derived mostly from combined-heat-and-power facilities fuelled with sugarcane bagasse,8 which itself is driven by ethanol demand. Thus, biomass is strictly linked to both electricity and liquid fuel markets in Brazil. Although this has some advantages, an eventual decrease in ethanol demand in the future caused by, for instance, a replacement of the current auto-fleet by electric vehicles would, on the one hand, increase electricity demand while, on the other, decrease the availability of biomass (sugarcane) for electricity generation. Models used in this study, however, did not see a large penetration of electric vehicles up to 2050.

The amount of agro-industrial residues that can be converted to electricity in Brazil is much higher than what is being currently used (MAPA, 2014). For instance, Portugal-Pereira et al. (2014) sized Brazil's bioenergy potential according to the theoretical capacity of biomass production,9 its environmental impacts, and technical-economic viability. Overall, their findings indicate that the technical potential of agricultural and agro-industrial residue conversion to electricity was nearly 141 TWh/year in 2010 (compared to the current 38 TWh10 — EPE, 2014). Nearly 88% of the total potential derives from residues of sugarcane, soybean and maize crops, as these are major cash crops in Brazil. In addition, the adoption of better thermodynamic cycles in the country's current biomass-fuelled thermal-power plants and the increasing possibility of using dedicated forestry resources to power generation (Hoffmann and Szklo, In Press) can expand the already large potential for electricity production from biomass.

In general, there are no major challenges related to direct and indirect land use changes which could undermine the models' results for electricity from biomass. However, increasing use of biomass,

8 Black liquor fuelled cogeneration plants and some small power plants based on charcoal or elephant grass can also be found in Brazil (ANEEL, 2014).

9 The theoretical capacity defines the maximum available bioenergy under biophysical and agro-ecological conditions that hold down the growth of crops and residues, such as temperature, solar radiation, rainfall, and soil properties. This theoretical potential is albeit limited by environmental constraints, as agricultural residues are important biome regulators (Portugal-Pereira et al., 2014). The authors do not include electricity generation from black liquor in the paper and pulp industry.

10 Excluding electricity generation from black liquor so as to be comparable to the values

estimated by Portugal-Pereira et al. (2014).


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particularly through dedicated forestry in specific regions of Brazil, can have negative local impacts (Hoffmann and Szklo, 1n Press). The same is valid for liquid biofuels. According to Leal et al. (2013), yield improvements and the combination first- and second-generation biofuels would allow an ethanol production of some 300 billion liters in 2030 using 22 Mha of land.11 These numbers are not a cause of concern on a national scale, but under a local perspective they could cause major impacts on traditional agriculture (Leal et al., 2013).

The extent to which the use of biomass is effective for mitigating GHG emissions, however, depends on the life cycle of such energy sources. Some models used in this study only account for direct emissions, while others have an endogenous land use model. Nevertheless, there are many uncertainties surrounding the methodologies in use today for life-cycle analysis of GHG emissions for land use change (Larson, 2006; Nassar et al., 2011). Calvin et al. (in this issue) explores this complex issue in more detail in order to evaluate whether or not land use might influence the amount of mitigation required from the energy sector.

52.2. Hydropower

Hydropower is currently the main source of electricity in Brazil (around 80%, on average, over the last ten years — EPE, 2014) and is projected to remain important over the coming decades according to the models assessed in this study. All models see, in absolute terms, some increase in hydropower generation up to 2050.

Hydropower expansion in Brazil is controversial. The inventoried remaining potential is still large, estimated at 126 GW. However, around 60% of that (including the best sites) is located in the Amazon basin and another 10% in regions with high environmental impacts elsewhere in the country (EPE, 2008). There still remain important environmental concerns and social-politic conflicts associated with the construction of dams and the consequent flooding of large areas in those regions (Bermann, 2012; Pimentel, 2012). Thus, increasing the production of hydropower in Brazil can generate pronounced local environmental and social impacts.

One implication of the potentially high environmental impacts is that the share of remaining potential to be eventually exploited will likely be based on run-of-the-river hydropower plants with smaller reservoirs so as to minimize local environmental impacts.12 These plants are most vulnerable to climate since river flow can be highly variable, especially across seasons. Reservoir storage capacity can compensate for seasonal (or even annual) variations in river flow, enabling electricity generation throughout the year and matching varying power demand. 1n the operation of the Brazilian interconnected system, thus, hydropower production based on new run-of-the-river plants would need to be increasingly complemented by other power sources. Also, global climate change can add a significant amount of uncertainty to the climate variability and, hence, to the planning and operation of hydropower (Lucena et al., 2009 and 2010).

5.2.3. Wind power

While models do not project a large penetration of wind in the baseline scenario (except POLES), wind power generation expands considerably with climate policy. However, all models show a share of wind below 20% of total generation, possibly because of operational constraints, which indicates that the contribution of this source to climate change mitigation may be limited.

Most of the high-quality wind resources are found in the north-east and south of Brazil. Distinct sources of information provide different estimates for the total onshore wind power potential in Brazil. While

11 Embrapa (2009) indicates that 65 Mha of land can be devoted for sugarcane without significant impacts on food production and on the environment.

12 This has been the case, for example, of the Belo Monte hydropower plant (11 GW) in the Brazilian Amazon, whose reservoir is now two thirds the size of the original project.

CEPEL (2001) estimated, based on 50-meter-high measurements, some 143 GW (yielding, in average, 272 TWh/year), other estimates, that assume the deployment of larger wind turbines capturing stronger wind resources at higher elevations (100-meters and higher) quote some 300 GW (Simoes, 2010), or even 350 GW (GWEC, 2011), in some regions with average annual capacity factors reaching 0.40 (Borba et al., 2012) or even 0.50 (1EA, 2013). Therefore, the wind power potential in Brazil is not a constraint for the expansion of this technology over time in the country. 1n fact, wind energy has become increasingly important recently, increasing from nearly zero in 2005 to a currently installed capacity of 3.1 GW. 1n addition to that, as of today, plants with 3.3 GW of capacity are under construction and other plants with 5.9 GW of capacity are being licensed (ANEEL, 2014).

However, large deployments of this technology still face technical and operational challenges (Borba et al., 2012). Up to a 20% limit "the integration of wind energy generally poses no insurmountable technical barriers and is economically manageable" (Wiser et al., 2011, pp. 560). Nevertheless, the degree of penetration of wind that a system can integrate depends on the characteristics of the system. Brazil has some opportunities for integrating wind and hydropower, for example in the northeast of the country due to seasonal complementarities between these two sources (Simoes, 2010). Interestingly enough, the anticipated growth in hydro-capacity in Brazil based on run-of-river projects, which are very much dependent on seasonal variations, can, in fact, with proper electric power interconnections, be balanced, at relatively low integration costs by the seasonal supply patterns of wind in the northeast of the country (1EA, 2013). However, the degree to which wind power can be actually integrated into the Brazilian grid has not yet been thoroughly assessed and the models used in this study are not capable of exploring this issue at full length, which may lead to an underestimation of the penetration of wind energy in Brazil. The models used here are focused on long-term system expansion and do not have the ability to evaluate operational strategies in detail. For that, dispatch models adapted to the particularities of the Brazilian interconnected system are needed. Furthermore, looking at the 2050 horizon, power system operation will depend on the thechnologies used in the expansion of the Brazilian system until then.

5.2.4. Solar power

Although all models assessed here see some penetration of solar energy through 2050, only POLES and T1AM-ECN see a large penetration of this technology in this time frame. Brazil has abundant global solar resources. Solar incidence in the country ranges from 1500 kWh/m2 per year to 2153 kWh/m2 per year13(SolarG1S, 2013). The region with the highest average overall daily radiation is the northeast of the country, a semi-arid region. Nevertheless, currently Brazil only has about 10 MWp of photovoltaic (PV) installed capacity (ANEEL, 2014).

Centralized solar generation participated in the national auctions for contracting new power in 2013 without success, which indicates that large-scale centralized plants are not yet cost-competitive under the current Brazilian electric power market conditions (Miranda et al., 2014). However, the potential for concentrated solar plants (CSP) is huge14 and some specific arrangements could improve feasibility in the medium to long term. For example, Malagueta et al. (2014) show that the hybridization of CSP plants can reduce the levelized cost by 30% to 50% (depending on the location) for two main reasons: increased annual production (higher capacity factors) based on the combustion of natural gas or biomass; and reduction in the solar multiples and the use

13 For comparison purposes, Germany, which is the country with the largest installed photovoltaic capacity in the world, receives about 1300 kWh/m2 peryear (SolarGIS, 2013 ).

14 Considering restrictions related to, e.g., water and land availability, the annual techni-

cal potential for CSP using parabolic trough plant potential is around 1900 TWh, while the

technical potential of solar towers with thermal storage is around 1000 TWh (Burgi, 2013).


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of fewer collectors. Also, by allowing the combination of solar and biomass residues for power generation, hybridization could help by generating income in the poor semi-arid regions in the northeast of Brazil.

In the case ofPV, although centralized generation is not yet competitive, distributed generation may be an alternative since, from the standpoint of the final consumer, electricity prices are perceived, rather than electricity generation costs (Miranda et al., 2014). Some 70% of the value of electricity tariffs in Brazil account for taxes, transmission and distribution costs (Fugimoto, 2010). By comparing costs and tariffs for roof-top installed PV in Brazil, Miranda et al. (2014) show that, from an economic point of view, around 68,000 households could justify the installation of photovoltaic arrays on their roofs. However, the implementation of large scale distributed PV generation would also depend on the development of PV services in the country.

5.3. Nuclear energy

Although not having a significant role in the scenarios analyzed, a small expansion of nuclear energy was observed in all models. Some models/scenarios only include the one nuclear plant currently under construction (Angra III), whereas extreme scenarios see a four-fold expansion in nuclear generation by 2050.

The implementation of nuclear plants in Brazil is highly controversial. Actually, there have been many debates in Brazil about the completion of Brazil's third nuclear power plant, Angra III (Cabrera-Palmer and Rothwell, 2008), while different government plans suggest an expansion that would add 6 GW up to 2030 (Eletronuclear, 2011; EPE, 2007). On one side, the country's nuclear industry emphasizes the advantages of this option (including carbon emission mitigation, but focusing more on technological development and energy security). On the other side, experts highlight the problems of cost overruns, spent nuclear fuel management (which is still an issue in other countries, Singer 2013), and inflexible operation of nuclear plants (Borba et al., 2012). For example, Carvalho and Sauer (2009) analyzed the cost overruns of the Angra III nuclear power plant, with construction lasting for more than two decades,15 and concluded that, given the country's energy resources, "the potential decision to finish construction work on Angra III simply to justify the existing sunk could prove to be a mistake". They also contested the opinion of some Brazilian policy-makers and experts that, given the Brazilian uranium reserves16 and the country's technical and industrial capability to enrich it (Cabrera-Palmer and Rothwell, 2008), nuclear plants would be also justifiable by the need to maintain the country's technological development and expertise.

5.4. CCS and BioCCS

The models identified CCS as a potential technology to decarbonize the energy sector. However, to date, there are no commercial CCS application in the power sector or in energy-intensive industries and only a handful of large-scale demonstration projects are in operation or under construction worldwide, with only one located in Brazil (Santos Basin, see Subsection 5.1.2). In 2012, a pilot plant was designed to demonstrate CO2 capture in a planned coal-fired thermal power plant in Brazil (Rochedo and Szklo, 2013a). However, this project was discontinued.

Studies performed for Brazilian coal or gas fired-thermal power plants identified that mitigation costs hover between 70 and 100 US$/tCO2, not considering the risk of being pioneer plants (Hoffmann, 2013; Hoffmann et al., 2012; Rochedo and Szklo, 2013b), which can increase the costs by more than 50% (Hoffmann and Szklo, 2011). This range

15 Angra III is planned to start operation in 2018.

16 Regardless of the debate, from a long term perspective, uranium supply is not a restriction to the expansion of nuclear energy in Brazil (EPE, 2007). According to a simple estimate, if all of Brazilian uranium reserves (309,370 tU — EPE, 2014) would be used with an efficiency of 28.5 kg U/GWh, it would be possible fuel of 22.9 GW of nuclear for 60 years.

considers capture and compression, which represent around 70-80% of the whole carbon capture system cost (Rochedo and Szklo, 2013b). Carbon transportation and storage, although are not the main cost drivers, might face a huge barrier, since carbon transportation requires an institutional arrangement to deal with social acceptability, hub planning, property rights, tariff definition and storage monitoring (Costa, 2014). Brazil already faces challenges to expand the country's natural gas grid, as mentioned above. Natural gas is a tradable fuel, while CO2 is a negative externality, for which the value is associated with carbon mitigation policies.17 Hence, it can be expected that it will be challenging to establish an institutional arrangement for the construction of CO2 pipelines in Brazil (Costa, 2014).

The CCS potential in Brazilian thermal power plants should also consider that today's expected major technological option (post-combustion capture with amines, according to Rochedo and Szklo, 2013a) requires additional water consumption and a concurrent generation of residues. Some studies performed for Brazil indicated that some regions of the country would not support the higher water demand that carbon capture systems would eventually add to existing or planned coal fired plants (Hoffmann et al., 2014; Merschmann et al., 2013).

Moreover, given the large energy penalties of carbon capture systems, CCS increases the coal consumption of a power plant. Branco et al. (2013) performed a life-cycle assessment (LCA) for a coal-fired power plant in Brazil and showed that, with CCS, a plant which captures 90% of its CO2 would have its GHG avoidance potential reduced to 72% when accounting for indirect emissions. This is the result of an increase in coal consumption and the associated CH4 emissions at the coalmining stage.18

In sum, the implementation of CCS in Brazilian thermal power plants faces considerable challenges, qualitatively equal to the ones faced globally, but intensified by the lack of major domestic technological and institutional development related to this option. However, BioCCS and even CCS in hydrogen generation plants in petroleum refineries show brighter prospects. BioCCS in ethanol distilleries presents no major technical challenges for capturing, given the higher CO2 content in the fermentation exhaust. The same is valid for hydrogen production plants with CCS. Some studies also consider the possibility of using CO2 for producing chemicals, e.g. methanol, thus avoiding the problem of carbon transportation and storage (Farias, 2014).

6. Final remarks

This study compared scenarios produced by six modeling teams with different baseline assumptions for GDP, population, energy costs and technological development. Although Brazil's current energy mix has a relatively low carbon intensity due to a high share of renewable energy, the baseline scenarios through 2050 suggest that this picture would radically change. Models project, for the baseline scenario, a 2 to 3.5-fold increase in emissions from energy in relation to 2010 as a result of a growing penetration of fossil fuels. This indicates that, without dedicated climate policies, Brazil may take a pathway distinct from that required by all countries to keep the average rise in global temperature to below 2 °C, when compared to pre-industrial levels, as indicated by the Copenhagen Accord of 2009 and the Cancun agreements in 2010 (UNEP, 2013).

Nevertheless, models show that climate policies can reverse this pathway in Brazil. High carbon taxes may induce large reductions in emissions when compared to baseline. The emission constraint scenarios, in turn, showed that emission levels below that of 2010 are technologically feasible when considering industry and energy emissions. Mitigation would be achieved by a combination of actions, such as energy demand reductions, decarbonization of primary energy and of

17 Although CO2 can have a price when used in EOR, this does not imply that there is a large market for CO2.

18 Based on a global warming potential metric with a 100-year horizon.


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electricity supply mix, fossil-fuel-based CCS and BioCCS. Also, agriculture, forestry and other land use (AFOLU) represent a largely relevant source of emissions in Brazil. Actions to reduce emissions from AFOLU can further reduce emissions in Brazil or even reduce the mitigation burden in the energy sector (see Calvin et al., in this issue). A discussion of the Brazilian energy context and resources potential indicates that the range of mitigation options resulting from the models' runs generally falls within the limits for specific energy sources in the country. However, in most cases infrastructure investments and technology improvements are needed for the projected mitigation scenarios to achieve actual feasibility.

Based on these results, a few recommendations for energy and climate policies in Brazil are made. 1nitially, setting up market-based instruments, such as those analyzed here, requires aligning domestic prices of fossil fuels to international ones, enabling fluctuations in the latter to be transferred to final consumers. This is especially true for oil products, which have a long history of price control in the country. Also, climate policy should not only be limited to market-based instruments, such as the ones analyzed in this paper. Dedicated climate policies should also focus on the opportunities and barriers for the implementation of mitigation actions in the country. For example, given that some level of mitigation in the Brazilian energy sector could be achieved by the use of technologies not yet technically and/or commercially mature (e.g. CCS and BioCCS), investments in research, development and demonstration (RD&D) are important to increase the range of options available in the future. Finally, mitigation strategies should take into account the country's energy system vulnerability to climate change impacts and seek initiatives that foster local/regional adaptability to those vulnerabilities through adaptation actions and socioeconomic development.

Long-term scenario building is subject to a large degree of uncertainty. This paper discussed some particular aspects of options that were selected by the simulations of a set of model. These models, in turn, have their own limitations in terms of the database used, how well they represent the complexities of the Brazilian energy system and their methodological framework. Furthermore, the results of the models do not account for market barriers that may hamper the implementation of mitigation options. For example, coal and nuclear are not currently adopted in large scale in Brazil and might face some political and even industrial barriers to be installed. Also, some of the mitigation actions assessed by the different models are based on technologies that are not yet fully consolidated, such as fossil-fuel-based CCS and BioCCS. 1n this regard, conducting sensitivity analysis to cover some of these uncertainties, providing, for instance, an analysis of whether stringent mitigation targets could be achieved without making use of CCS based options, is a valuable contribution of future research. Further discussion as to how the proposed carbon prices could be achieved in practice is also relevant and should be addressed in future studies. Finally, although not considered in this study, the implications of the projected high use of biomass on AFOLU emissions are discussed in Calvin et al. (in this issue).


We acknowledge the funding from US EPA and USAID, through the LAMP, and the European Union, through the CLIMACAP project (EuropeAid/131944/C/SER/Multi), for the contributions made to the several modeling teams. We would like to thank the feedback and efforts from all CLIMACAP and LAMP project partners for enabling the research results reported in this article. We acknowledge the financial support from CNPq and ANP. Finally, we especially thank Régis Rathmann, Rafael Soria, Mauro Chavez-Rodrigues, Joana Portugal-Pereira and Alexandre Koberle for their help in some stages of the LAMP-CLIMACAP exercise.


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