// . //  Insights //  Tackling The Brazilian Transition Challenge

Brazil has committed to reducing its greenhouse gas (GHG) emissions by 37% by 2025 and by 50% by 2030, based on 2005 levels, with the ultimate goal of achieving carbon neutrality by 2050. In recent years, the country has adopted several policies to achieve these commitments, such as the launch of nationally determined contributions (NDCs) by the Ministry of the Environment in 2015 (ratified in 2016 and updated in 2020 and 2022), the creation of the Amazon Fund in 2017 and the implementation of the National Green Growth Program in 2021. The country can become a green production hub and encourage the generation of carbon credits, due to its rich biodiversity and reforestation potential. It also holds a competitive advantage with regards to renewable power generation, and, due to its rich endowment with feedstock, infrastructure and technology, has the capacity to produce biofuels.

However, significant challenges remain and must be overcome in the coming years if Brazil is to realize this potential:

  • Immediate halt of illegal deforestation: After a successful programme to stop illegal deforestation in the first decade of this century, Brazil experienced a sharp increase in rates of deforestation in the Amazon forest, as well as in its savanna biome known as the Cerrado. In more recent years, land grabbing in public areas, illegal mining in reserves assigned to Indigenous peoples, opening of new areas for cattle-raising and crops — despite the existence already of vast areas for agricultural purposes — became well documented as the government became less active in monitoring and environmental protection initiatives. Brazil urgently needs to resume its efforts to combat illegal deforestation.
  • National and sectoral decarbonization strategies: Brazil must develop a clear strategy to decarbonize different sectors of the economy. This involves conceiving sectoral decarbonization pathways that establish specific goals and guidelines for each sector, taking into account the country’s unique features. These goals should be globally recognized and aligned with those of the Paris Agreement.
  • Financial instruments for the transition: As part of the work done for this paper, Oliver Wyman estimates that the required investment to achieve Brazil’s climate transition by 2030 amounts to approximately BRL 1 trillion ($200 billion). This number requires significant investment in transitional technologies and strategies. To attract and facilitate these investments, Brazil must establish robust financing structures, including the development of new financial instruments, such as green, social, sustainable and sustainability-linked bonds. In addition to new financial instruments, the mobilization of private funding must be accompanied by the development of a national taxonomy. The difficulty in understanding Brazilian specificities currently presents a major obstacle to realizing greater capital flows.
  • Policy support and low-carbon agriculture: Simply leaving industry to take action and adopt fit-for-purpose financing instruments will not be sufficient to address the scale of the climate challenge Brazil is facing. It requires a proactive approach by policy-makers to provide clear targets, supporting measures and certainty for industry leaders to move forward. The agricultural sector, an important and growing contributor to GDP, presents a particular challenge for Brazil and developing a low-carbon land-use model is of fundamental importance.
  • Education, skilling and support for SMEs: A lack of talent is a critical obstacle to accelerating Brazil’s transition efforts. Professionals must be educated at the secondary and higher education levels, and current employees – where appropriate – reskilled or upskilled. In addition, transition initiatives by large industry players almost always affect their supply chains, which can often incorporate small and medium-sized enterprises (SMEs). It is necessary to promote greater dialogue between large industry players and smaller enterprises on climate and sustainability in order to increase awareness and encourage and trigger concrete actions.

This report is co-authored with the World Economic Forum.