Brazil’s Post-Covid Green Economic Recovery

A new report from NEB discussing Brazil’s green economic recovery in the post-COVID world, titled, “New Economy for a New Era: Elements for Building a More Efficient and Resilient Economy in Brazil

Who:

Joaquim Levy – Former Brazil Finance Minister and Managing Director of the World Bank

Themes for the next decade: Cannabis, 5G, and EVs

CannabisA lot changes in 10 years, and many changes are expected by the time 2030 rolls around. Some key themes have already emerged, and we expect them to continue to impact investing decisions. At the recent Morningstar conference, several panelists joined a discussion about several major themes for the next decade, including cannabis, 5G and Read More


Caio Koch-Weser – Former World Bank Managing Director and Germany Secretary of State in Ministry of Finance

WRI

New Climate Economy (President Felipe Calderon, Ngozi Okonjo-Iweala, Paul Polman)

Summary:

Brazil’s economy was in trouble before COVID-19 hit. Now, it is expected to contract between 8% and 9.1%. How Brazil responds to recession will have enormous economic and environmental consequences for the world.

New research, from an influential partnership of Brazilian and international groups and champions, finds that a green economic recovery will allow Brazil’s economy to grow moreover the next decade than business-as- usual, starting in the first year. Newly identified benefits include:

  • A net increase of more than 2 million jobs by 2030 – four times more jobs than those already existing in the Brazil’s oil and gas industry.
  • total GDP gain of US$535 billion (R$ 2.8 trillion) by 2030 – equivalent to the annual GDP of Belgium.
  • 42% reduction in GHG emissions in 2025, compared to 2005 levels – exceeding Brazil’s current national climate commitment under the Paris Agreement.

A New Economy For A New Era: Elements For Building A More Efficient And Resilient Economy In Brazil

Today, the world is facing an unprecedented convergence of crises: The health, economic, and employment crises caused by COVID-19, as well as the ongoing crises of rampant inequality and climate change. Brazil is no exception. Even before the COVID-19 pandemic, unemployment in Brazil almost doubled between 2014 and 2018, reaching 11.8%. This year, Brazil’s economy is expected to contract between 8% and 9.1%.

As in all countries, the COVID-19 pandemic has exposed and magnified the weaknesses in Brazil’s society and economy. There is no incentive to return to the same broken economic systems as before. In addition, current deforestation rates have prompted international and domestic backlash, and could reach a tipping point that threatens the agricultural sector.

Far from being a hindrance, green growth is, in fact, a proven economic driver. Research shows this to be the case globally as well as in individual countries, including Indonesia, the United States, and, as demonstrated through this study, for Brazil. Done right, a green economic recovery can help make Brazil a fairer, stronger, safer and cleaner country.

Brazil’s Green Economic Recovery

New economic modelling, undertaken by the New Economy for Brazil initiative, finds that a green economic recovery will allow Brazil‘s economy to grow more over the next decade than the current development model, starting in the first year. While this modelling work was conducted pre-COVID, the basic results still stand. GDP growth is likely to be negative in 2020, given the economic crisis, but these new economic pathways offer Brazil a stronger and better economic recovery trajectory and employment boost than a business-as-usual recovery.

By 2030, compared to business-as-usual, a low-carbon, climate resilient economic recovery in Brazil could deliver:

  • A net increase of more than 2 million jobs –four times more jobs than those already existing in the Brazil’s oil and gas industry.
  • A total GDP gain of US$535 billion (R$ 8 trillion) – equivalent to the annual GDP of Belgium.
  • US$3.7 billion (R$ 19 billion) in additional agricultural production.
  • US$144 million (R$ 742 million) in additional tax revenues from the agricultural sector alone.
  • Restoration of 12 million hectares or more of degraded pasturelands to more productive use such as intensive grazing and natural forest.
  • A 42% reduction in greenhouse gas (GHG) emissions in 2025, compared to 2005 levels – exceeding Brazil’s current national climate commitment under the Paris Agreement.

Brazil’s low-carbon, climate resilient economic recovery could also deliver:

  • Increased access to international financing and private investment.
  • More resilient livelihoods and food security in the face of extreme climate events.
  • A reduction in air and water pollution, with benefits for the health of Brazilians as a result.

Brazil Post Covid Green Economic Recovery

Source: A New Economy for a New Era: Elements for Building a More Efficient and Resilient Economy in Brazil

These findings are the result of three scenarios explored for this study, each of which incorporates increasing degrees of intensity and penetration of economic transition measures:

  1. Business as Usual (BAU);
  2. New Economy for Brazil NEB – encompasses a series of low-carbon Such measures include increased use of hybrid, electric and gasoline vehicles, increased use of charcoal in the iron and steel industry and reducing food loss while maintaining the same level of agricultural production. All together these measures result in a decrease in cropland area and an increase in natural vegetation, through restoring degraded lands, while reducing the pace of deforestation;
  3. NEB+ is a scenario similar to NEB but whereby half of the land that would return to native vegetation in the NEB scenario is instead used for high productivity agriculture, increasing agricultural production over BAU. This scenario also leads to reduced pressure for deforestation compared with BAU.

How?

Brazil’s new green economy can be achieved through prioritizing and scaling existing best practices in infrastructure, industry and agriculture. More specifically, the economic and social benefits of Brazil’s green recovery can be achieved by:

  1. Investing in quality infrastructure: Integrated planning that protects Brazil’s natural capital can extend economic and societal resilience, especially in the face of extreme weather events, while increasing access to international investment.
    Integrating  native  vegetation  into  sanitation  infrastructure  planning  can  have  multiple benefits. Native vegetation serves as a natural filter to prevent surface flow and soil loss and delivers less turbid water to reservoirs and treatment plants. World Resources Institute Brasil (WRI  Brasil)  estimates  that  the  restoration  of  12  Mha  of  native vegetation  in  Brazil  could generate an additional annual savings of US$897,000 (R$ 4.7 million) in chemicals. Brazilian native vegetation currently promotes water prefiltration services equivalent to US$42 million (R$ 220 million) per year.
  2. Promoting new low-carbon technologies: Sustainable energy and transport, built with Brazilian expertise and technologies, are the growth sectors of the Industries can build productivity and efficiency with currently available, low-carbon investments.
    For example, the Ceará renewable energy bundling project replaced the use of illegally logged firewood as fuel for five ceramic factories with industrial and agricultural residues. As a result, it  has  generated   US$4.5  million  of  income  for  local  communities,  improved  working conditions and water availability, and avoided 1,750 ha of deforestation over ten years and 36,173 tons of CO2 per year.
    Another opportunity is electric buses. Benefits of electric buses include reductions in local pollution and related negative impacts on public health, greenhouse gas emissions and noise pollution. The production chain of this asset, including batteries, recharging stations, renewable energy generation and improvements in electricity distribution infrastructure, results in direct and indirect job creation. In addition, investment in public transport has the potential for significant economic return in terms of local development, access to opportunities, and support for vulnerable communities.
  3. Transitioning to sustainable agriculture: Measures that increase efficiency in livestock and agricultural production lead to better land use, increased production and productivity, consumer loyalty, and secure access to national and international markets. Technologies for agricultural intensification and improvement, such as no-till systems and biological nitrogen fixation, improve soil fertility and reduce uses and costs of fertilizers, pesticides, and fossil fuels used in agricultural machinery. It is estimated that these new technologies will increase crop yields between 30% and 300% and can increase incomes up to 3.5 times.
    For  example,  non-exhaustive  extraction  is  a  system  that  supports  the  collection of seeds, flowers, fruits or leaves, but does not extract the plant providing the resources. This method has increased production of açai   by 45% in the last 10 years, while the value of production increased 68%, in real terms, or R$ 1.6 billion in 2018.

Finally, finance is a cross-cutting theme among infrastructure, industry, and agriculture. The study presents evidence showing that by mainstreaming sustainable investment decisions into planning and implementation decisions, Brazil could benefit from trends in the financial markets and widen access to private finance.


About The New Economy For Brazil Initiative

The New Economy for Brazil (NEB) initiative was established to identify development policies that reduce poverty and inequality, contribute to meeting economic and sectoral goals and stimulate environmentally sustainable and inclusive economic growth.

The initiative’s inaugural report, A New Economy for a New Era: Elements for Building a More Efficient and Resilient Economy in Brazil, summarizes how a green COVID-19 recovery could deliver a stronger economy at home, and a competitive edge abroad.

The study is led by WRI Brasil and the New Climate Economy project, and implemented in partnership with specialists from several institutions, including PUC-Rio (Pontifical Catholic University of Rio de Janeiro), CPI (Climate Policy Initiative, Brazil Policy Center), Coppe- UFRJ (Alberto Luiz Coimbra Institute of Post-Graduation and Research in

Engineering, Federal University of Rio de Janeiro), Ipea (Institute of Applied Economic Research), Febraban (Brazilian Federation of Banks), and CEBDS (Brazilian Business Council for Sustainable Development).