Global Dialogue on Border Carbon Adjustments: The case of Brazil
This report examines the potential effects of border carbon adjustment (BCA) schemes on Brazil, drawing insights from diverse stakeholders through extensive research and countrywide dialogues. It addresses challenges such as short-term impacts on exports, economic activity, and employment, amongst others. Recommendations emphasize the importance of balancing climate action with equity through international collaboration and best practices in BCA design.
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The coming into force of the EU Carbon Border Adjustment Mechanism (CBAM) will impact exports of covered products from Brazil to the EU. Only a small share of Brazilian exports to the EU are covered by CBAM, so its effects on Brazil will be limited. However, Brazilian exports could be much more impacted by border carbon adjustments in other jurisdictions, such as the United States.
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Brazilian exporters focus on ensuring that administrative burdens and compliance costs related to the implementation of border carbon adjustments are fair and do not provide disproportionate advantage to domestic producers.
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Awareness of CBAM and other border carbon adjustment measures is the principal challenge in Brazil that could become a major obstacle as more such schemes arise.
This report is based on background research by IISD and Cindes to assess the potential impact of BCA schemes—particularly the EU Carbon Border Adjustment Mechanism (CBAM)—on Brazil, supplemented by detailed discussion in two dialogues organized within the country. The two dialogues heard the views and perspectives of stakeholders from the government, industry, think tanks and academics, civil society, finance providers, and labour. While acknowledging the need for BCAs to reach the Paris Agreement goals, these views and perspectives also outline the challenges for countries like Brazil, which include
- adverse impact on exports and thus on economic activity and employment in the short term,
- substantial cost of compliance,
- the investment needed to transform current production methods in the affected sectors.
The stakeholder discussion also led to recommendations for achieving balance between climate action and equity. One key conclusion is the need for international collaboration and use of best practices in the design of BCAs.
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