Energy transition in Brazil: innovation, opportunities and risks

Abstract

This report summarises work performed during the past three years on innovation in the energy sector and the impact of environmental policies on trade and emissions, as part of an international programme on the Economics of Energy Innovation and System Transition (EEIST), with results from the programme in Brazil. It illustrates why (and how) the way in which policy is assessed matters for policymakers: specifically, tools that emphasise interactions between policies and an economy in constant evolution can pinpoint risks and opportunities. It draws on extensive knowledge as published in three main reports under the EEIST programme, which address (i) the theoretical underpinnings and implications for risk-opportunity analysis (ROA), from which follow (ii) ten principles for policymaking in the energy transition; and (iii) frames the modelling science around new economic modelling, with 15 case studies emerging from the interaction between modellers and policy engagement across Brazil, China and India. This report provides insights on how unique dimensions of the Brazilian landscape and financial situation give scope for effective action towards a low-carbon re-industrialisation. Written for technical and policy teams in Brazil, with particular relevance to the ministerial, development banks and energy regulators, it illustrates in particular that the dynamic nature of low-carbon re-industrialisation offers opportunity, with ROA a more useful tool than traditional (but impractical) cost-benefit analysis (CBA) to assess the green transition via empirical case studies. It supports this with four additional modelling case studies implementing the learning from this work in policy-relevant modelling. An appendix summarises the engagement strategy built upon communities of practice in Brazil, as a potential example to future science-policy interface collaboration.