Opinion – Why? Economês in good Portuguese: What is Brazil’s role in the climate crisis?

To understand the importance of aligning climate and economic interests in Brazil, it is first necessary to remember that, in discussions on global warming and carbon emissions, we are essentially talking about externalities.

In other texts of Why? we explain what externalities are in the context of environmental economics (situations in which decisions by an individual or firm affect the collective, but whose price does not reflect the social cost to others).

Currently, the world is in a climate emergency situation that can be understood as a global consequence of various choices about externalities made in the past.

It is important to make a brief parenthesis here to remember that we can even say that this climate crisis is current (and not something that will happen in the distant future and that will be a problem for the new generations), since several effects have already started to appear in recent years, such as an increase in diseases related to air pollution, a decline in biodiversity or a higher incidence of extreme weather-related events such as droughts and floods.

An economist understands these extreme events as the result of a set of economic activities that, in the past, released greenhouse gases into the atmosphere without those responsible taking into account the negative effect of emissions, since there were no costs or penalties.

Understanding externalities is very important to think about Brazil in the climate context. Contrary to what happens with developed countries such as the United States and the member states of the European Union, most Brazilian emissions do not come from fossil fuel emissions or from the transport/energy sector. In fact, more than 80% of Brazil’s emissions over the last decade can be attributed to the land and land use change sector (such as deforestation) and agriculture.

Currently, emissions from this sector place Brazil as the fourth country in the ranking of the largest emitters of greenhouse gases. In other words, decisions by the Brazilian government about how much to deforest or how lenient to environmental preservation rules have a global impact (because we are talking about externalities, and decisions at the local level about emissions have consequences that are not restricted to geographic borders).

This explains why, in recent decades, Brazil has been so prominent in the climate debate and why so many eyes are turned here at climate conferences such as the COP (UN Conference on Climate Change).

Certainly, talking about the negative contribution of Brazilian carbon emissions to the Earth’s ecosystem is nothing new. Discussions about how to avoid a climate crisis globally have been going on for decades (they are much older than the youth of environmental activism such as Greta Thumberg). But why then did Brazil and the countries that emit so many gases do nothing in the past to avoid today’s climate emergency? Why weren’t mechanisms used more widely for these emissions to have costs/penalties, and this was incorporated into the economic calculation?

In addition to being permeated by externalities, the climate discussion is fraught with tradeoffs. Tradeoff is an expression economists use a lot, and it means the act of choosing one thing over another. We can translate as a “lose-and-win”.

Let’s imagine a representative of the Brazilian government in the past deciding between encouraging deforestation in the Amazon (and, therefore, obtaining gains from the sale of products such as wood, opening fields for agriculture and pasture, etc.) or creating laws and mechanisms to preserve it. (and thus have gains such as biodiversity, regulation of the earth’s climate, among others) as a tradeoff.

On the one hand, this representative sees clear economic benefits from deforestation. On the other hand, he might also imagine that preservation would bring benefits that, while not necessarily monetizable, are also relevant from an economic point of view.

These benefits, if ignored, could mean huge monetary costs in the future (eg, climate adaptation costs if the earth’s temperature exceeds a certain threshold as the Amazon can no longer perform its carbon sequestration role).

As the consequences of choosing economic development would not appear in the short term, it is intuitive to imagine the decisions of our fictional politician. Although extremely simplified, this case helps us understand several decisions from the past and their present climate effects.

When we talk about mitigation discussions today (that is, how to prevent the Earth’s temperature from being higher than the threshold pointed out by scientists), the externalities are still present, and so are the tradeoffs. It so happens that, currently, we see a new movement in society. Greater pressure from consumers for sustainable products, an increase in environmental activism related to climate change, a greater demand for countries and large companies to take into account their negative externalities for the climate, the creation of markets for negative externalities (such as carbon credits , which was the subject of another text published in Por Quê?).

All this generates a new social order and causes a completely different scenario between countries when it comes to thinking about these tradeoffs between preservation and development.

In Brazil itself, we already see some advances in these discussions and questions about what would be the country’s role in this new agenda. There are those who see this new order (marked by the demand for sustainability in production, for integration between climate and economy in government planning and for the provision of ecosystem services for climate mitigation) as an opportunity for economic recovery.

The Brazilian private sector demands that the government, then, bet on it now, so that it not only circumvents the current crisis, but also intensifies its actions to achieve the performance of other world economies that invest in green jobs, circular production, carbon credits and other initiatives as a way of promoting mitigation and adaptation to climate change.

The question is: what will be the role of Brazil now, in the face of the climate crisis? Will we continue as one of the largest economies in the world that emit the most, or will we give this push (or “big push”) to sustainability?