The transition to net zero by 2050 would require an average annual investment of roughly $80 billion[8], which would however be offset by the additional productivity generated, particularly in the agriculture sector. The transition to a net-zero economy, in this scenario, could contribute up to about $34 billion in GDP and create up to 3.8 million jobs[9].

The benefits of taking a step beyond: the Green Powerhouse scenario. In the Green Powerhouse scenario, all available actions are implemented to reach net zero as early as realistically possible and maximize absorption potential. This scenario highlights Brazil’s opportunity to become the only continent-sized country to achieve net zero status by 2030 and even reach net negative emissions (-1.7 GtCO2e by 2050, equivalent to about 50% of EU emissions today), with the ability to offer offsets to other countries. Key initiatives to reach these results include the restoration of 60 million hectares (Mha) of highly degraded pastureland, the accelerated adoption of EVs, and industry electrification.

Reaching the Green Powerhouse scenario by 2050 would require a carbon “enablement cost” of about USD 35/tCO2e and an average annual investment of about $165 billion through 2050, with cost offsets coming mainly from agricultural productivity. The transition is projected to contribute up to $100 billion to Brazil’s GDP[10]​ and create up to 6.4 million jobs[11], more than double versus the Net Zero scenario.

To capture this full opportunity, Brazil needs to engage in multiple complex transformations. Enabling the transition will require the creation of economic incentives and financing mechanisms, including the implementation of a compliance carbon market and associated carbon border adjustment mechanism (CBAM). These actions will enable the tracking and pricing of emissions, expedite the debate on Article 6 of the Paris Agreement and other bilateral agreements that enable adequate taxation mechanisms to both kick-start the market, and ensure the international competitiveness of green sectors. In addition, Brazil would need to develop and modernize regulations to incentivize, facilitate, and guide the transition. These would include the enactment of an effective Nationally Determined Contribution (NDC) with clear metrics, targets per sector, and capture curves; strengthened emissions tracking methodologies; a modernization of current regulations (such as the effective use of the forest code, for example), and the enactment and application of modern land ownership legislation. Brazil needs to create technical and human resources capabilities for the transition by developing curricula, such as Ph.D. programs and research scholarships and grants (e.g., like Embrapa has done for agriculture). It also needs to reskill workers affected by the transition, including those in strategic, technical, and operational roles.

Brazil’s emissions profile

Brazil is the sixth highest CO2 emitting country globally, behind China, the United States, India, Indonesia, and Russia. Nearly 50% of Brazilian gross emissions are concentrated in LULUCF, which accounts for 1.2 GtCO2e (Exhibit 3). Deforestation of the Amazon biome is the main source of emissions (34% of gross emissions) and is largely driven by illegal land grabbing. It is estimated that 94% of deforestation in the Amazon is illegal[12]. Consequently, ending illegal deforestation in Brazil will be crucial to reaching net zero.

Agriculture is the second largest sector in terms of emissions, with 0.6 GtCO2e (25% of gross emissions). Livestock enteric fermentation, which produces volatile fatty acids and gases, such as methane, a potent greenhouse gas[13], represents the largest contributor to emissions of the sector, with 0.4 GtCO2e (15% of gross emissions), with cattle raised for human consumption being the single largest contributor.

Industrial sectors in Brazil contribute 0.24 MtCO2e in process emissions[14]​ (10% of gross emissions). Considering both process and energy emissions[15], the highest emitters are iron and steel production, oil and gas (0.05 GtCO2e each), and cement (0.4 GtCO2e).

The transportation sector is the fourth largest contributor to Brazilian emissions, with 0.19 MtCO2e (8% of gross emissions). Over 90% of transportation emissions are concentrated in road transport, driven by trucks (0.09 GtCO2e) and cars (0.06 GtCO2e). These emissions result primarily from the use of fossil fuels (99% of transportation emissions). Although ethanol comprises 45% of car-related fuel consumption in Brazil, its emissions are insignificant when compared with total emissions given its biogenic circularity[16].

Overall, emissions per capita in Brazil (6.9 tCO2e per person per year) are slightly below the global average (7.5 tCO2e) and European Union levels (7.0 tCO2e). However, if LULUCF emissions (which typically vary across time) are discounted (Exhibit 4), Brazilian emissions per capita become significantly lower than the European average (4.9 versus 7.0 tCO2e per person). In fact, variations in LULUCF emissions (and more specifically, deforestation rates) are key to understanding the Brazilian emissions profile over time. Looking at historical data, a dramatic drop in emissions can be observed between 2003 and 2009 (-10% p.a.), which is likely associated with effective policies to prevent illegal deforestation. Since then, emissions have continuously increased in line with the growth in deforestation.

Meanwhile, non-LULUCF emissions have continuously increased; in the period between 2005 and 2021, they went from 0.96 to 1.21 GtCO2e (a 26% increase). More specifically, agricultural emissions went from 0.53 to 0.61 GtCO2e (a 15% increase), industry emissions went from 0.19 to 0.23 GtCO2e (a 22% increase), transport emissions went from 0.13 to 0.19 GtCO2e (a 46% increase) and power emissions have gone from 0.02 to 0.06 GtCO2e (a 175% increase). This increase could be explained by the growth of the Brazilian economy, which experienced GDP growth from $0.9 trillion to $1.6 trillion in the same period. Therefore, emissions intensity (tCO2e/USD) has halved in the period from 2.8 to 1.5 (Exhibit 5).

Decarbonization scenarios

Brazil needs to take relevant action to achieve NDC commitments towards net zero by 2050. In a status quo projection, following macro indicators and a tech-frozen scenario, Brazil's emissions would increase 24% versus 2021, leading to 2.1 GtCO2e net emissions in 2050.

Two other scenarios have been developed: Net Zero, in which Brazil achieves net zero emission by pulling the most cost-efficient levers, and Green Powerhouse, in which Brazil would pull all available levers and maximize sequestration to support global decarbonization (Exhibit 7).

Net Zero 2050

In the Net Zero 2050 scenario, measures are taken across different sectors to decarbonize the economy by 2050, prioritizing low- or no-cost actions such as reducing illegal deforestation and adopting sustainable cattle management (Exhibit 8).

Approximately 80% of the potential for reaching Net Zero by 2050 is concentrated in LULUCF (including absorptions) and agriculture. Land use change emissions represent 49% of the abatement potential, largely driven by the end of illegal deforestation, while absorptions through nature-based solutions (NBS) represent 20%, and emission reduction in agriculture is another 13% of abatement.

Green Powerhouse

In the Green Powerhouse scenario, all available actions are pursued to reach net zero as soon as possible and to maximize carbon sequestration (Exhibit 9). This scenario highlights Brazil’s potential to become the only continent-size country to reach net zero by 2030 and even achieve net negative emissions (-1.7 GtCO2e by 2050), with the ability to offer carbon sequestration to other countries. This potential could be mainly captured by achieving zero illegal deforestation by 2030, broad implementation of regenerative agriculture – for example, 28.5 Mha of ICLF[19]​ – and full potential adoption (60 Mha) in restoration initiatives by 2050.

Land-use, land-use change, and forestry

LULUCF is both Brazil’s primary source of gross emissions and its most promising way to decarbonize the country through nature-based solutions. The LULUCF sector encompasses all the activities and management practices that result in changes in carbon stocks in existing biomass and soils and the associated release and sequestration of CO2 to/from the atmosphere[20]. Brazilian GHG emissions are concentrated in LULUCF, with 1.2 GtCO2e in 2021, representing 49% of the country’s gross emissions that year. The main driver of emissions is illegal deforestation rates, especially in the Amazon biome.

Reaching the Green Powerhouse status requires a concerted effort. To reach net zero and go beyond it (reaching net emissions of -1.7 GtCO2e in 2050) LULUCF must contribute with 3.3 GtCO2e of reduction in 2050, through two main actions: deforestation avoidance (1.1 GtCO2e reduction), and reforestation of native forest and afforestation (2.1 GtCO2e absorptions).

Tackling the issues surrounding deforestation is a fundamental part of the solution. The rate at which Brazil will be able to control deforestation will dictate the pace at which the country will reach net zero. It can make use of REDD+[21]​ mechanisms to finance and avoid emissions at a cost of less than USD 7/tCO2e.

The LULUCF sector can also be a source of opportunities, when delivering NBS, such as the reforestation of native forests and afforestation. Besides a huge carbon abatement of up to 2.1 GtCO2e per year, NBS provides a series of positive externalities for society and the environment, including biodiversity protection, water security, job creation, and generation of economic value.

A rapidly developing concept, Regenerative Agriculture (RA) has a strategic role in decarbonizing land use. By combining best practices in crop management with sustainable livestock production, Regenerative Agriculture practices can have positive environmental, economic, and social impacts. Economic viability studies from EMBRAPA[22]​ show that, depending on the RA model, each USD invested can return USD 1,07-1,69 in revenue from productivity gains in crops, wood products, and livestock production.

It is relevant to consider that Brazil is home to the largest tropical rainforest in the world: the Amazon Forest covers 39% of the national territory[23]. Tropical forests are a natural carbon sink, storing an estimated 120 billion tonnes of carbon in the soil and biomass above the ground[24]. The historical development model in the Amazon[25]​ region has resulted in high deforestation rates.

First created in 1965, Brazil’s Forest Code provides a regulatory framework for protecting the native vegetation in permanent preservation areas, legal reserves, areas of restricted use, and forest exploitation areas, and addresses related issues. However, in 2021, 34% of deforestation continued to occur in protected areas in the Amazon (Exhibit 10).

Agriculture

Decarbonizing agriculture can be seen as a win-win opportunity. Despite being responsible for 25% of the country’s current gross emissions, the agriculture sector can significantly contribute to Brazil’s transition with potential to abate approximately 330 MtCO2e by 2050. By continuing to increase productivity, implementing sustainable practices and adopting less carbon intensive models of production, the sector can improve both carbon intensity and yields. This presents a unique opportunity for players to not only reduce emissions but also drive economic impact and social development.

Livestock production is responsible for the majority of agriculture emissions (75%), with enteric fermentation[29]​ as the main GHG source. It represents about 0.3 GtCO2e or an estimated 50% of agricultural and 15% of total country emissions. Considering Brazil’s cattle herd in 2021, this equals an emissions intensity of 1.5 tonnes of CO2e per head in methane alone. Other emissions come from soil management[30]​ and are related to land use practices, including animal manure deposited directly on pastures, agricultural waste decomposition, and the use of synthetic fertilizers.

The main decarbonization levers for livestock production involve upgrading cattle herd feeding practices (e.g., increase pasture quality and enhance land use) and improving the herd’s health management. For the mitigation of soil management emissions, the main decarbonization levers are related to optimizing limestone and fertilizers use. Exhibit 11 outlines the main decarbonization levers for agriculture.

Implementing sustainable agriculture practices will require additional investments for technology adoption and workforce reskilling. Considering the options available, agriculture is the sector with the highest capital expenditure needed for decarbonization, accounting for 63% of the USD 4.9 trillion needed by 2050 in the Green Powerhouse scenario.

Increasing yield productivity is the key to capturing greater benefits. As an upside of the investment needed to reduce emissions, adopting more productive livestock management models can significantly increase revenues, making feeding-related decarbonization levers value-generating mainly due to productivity gains in kilograms of body weight or liters of raw milk produced. For instance, in cattle grazing systems, recovering degraded pastures with high-quality forage could return USD 2.2 for each dollar invested, by increasing cattle density and intensifying production. Similar gains are found when investing in dairy cattle by reducing heat stress and increasing animal welfare, which can lead to an increase in milk production[31].

Enabling actions needed to accelerate the decarbonization of Brazilian agriculture.​ To capture the opportunity beyond productivity gains, other dimensions must be addressed, implemented, and scaled rapidly: extension services, carbon pricing, private-sector investments, financing, and premiums paid for agricultural products with lower carbon intensity. With these enablers in place, farmers and businesses will be attracted to invest in emissions reduction within their respective value chains (insetting[32]) and to create value at the same time. Close collaboration with partners across the value chain is a must to unlock these opportunities.

Industry

Industrial sectors – primarily the iron, steel, and cement sectors – are the third-largest emitter, representing about 10% of total Brazilian emissions. From a total of 0.23 GtCO2e emissions, iron and steel are responsible for about 40% of emissions, while cement contributes 22% of emissions. These are hard-to-abate industries that will mostly rely on three decarbonization solutions: the reduction of fossil fuel consumption by increasing low-emission alternatives such as green hydrogen and biomass; electrification; and the implementation of CCUS (Carbon Capture, Usage, and Storage) technology.

Each of the three solutions has implementation complexities worth considering. The use of green hydrogen requires the availability of renewable energy, transmission lines, and pipeline and storage infrastructure. Biomass use is restricted to locations where there is an equilibrium of at-scale availability and logistic considerations, such as the ability to use roads and railways at reasonable distances. Finally, CCUS technology is not yet mature, and will require significant investments. Its use is only available in specific areas – mostly close to oil wells on the Brazilian coast or in cluster locations (e.g., close to ethanol plants in the southeast).

Although there are currently no sector-specific announced targets, industry associations such as SNIC (National Union of the Cement Industry)and "Aço Brasil" (Brazil Steel Institute) ABHAV (Green Hydrogen and Ammonia Association), and IAB (Brazil Steel Institute) among others are publishing studies and organizing industry players to implement actions.

Currently, roughly 95% of Brazil’s iron and steel emissions come from basic oxygen furnace (BOF) plants, used in about 74% of steel production. Looking forward, most BOF plants in Brazil will reach their required refurbishment deadlines in the 2030s, which presents opportunities to either entirely convert them to the H2-DRI-EAF[33]​ route or implement CCS technologies. Additionally, other enhancements might reduce steel emissions such as the substitution of PCI with biocarbon for the iron reduction process and heat.

In the cement sector, approximately 86% of CO2 emissions primarily result from the calcination process, which in Brazil is mostly powered by petroleum coke (petcoke) and other low-cost fuels. CCUS is the main lever to decarbonize the cement industry, however, it is only applicable to about 40% of total production. Additionally, alternative fuels (e.g., biomass) will also play a key role in decarbonizing the remaining emissions.

The Net Zero 2050 scenario considers a total abatement potential of about 0.2 GtCO2e by implementing a mix of technologies across the main sectors. Of the total production in the cement sector, the scenario estimates that 60% would derive from a combination of biomass, CCS, or a combination of both. For the iron and steel sector, by 2050 it is expected to implement CCS in 30% of production and reach another 30% of production via the H2-DRI-EAF route.Moreover, there is an opportunity for Brazil to become a global player in the green metallics industry as the country’s production cost for decarbonized primary metallics (green pig iron and green HBI) is significantly more competitive than, for example, Europe, once CBAM is implemented (Exhibit 12). This would not impact the emissions profile of Brazil; however, it could accelerate the scaling of new technologies necessary for industry decarbonization.

For the Green Powerhouse scenario, there is an overall higher proportion of alternatives substituting for the incumbent production methods. The cement sector would need to increase its adoption of biomass and CCS. In the iron and steel sector, the majority of conventional BOF routes must be replaced by H2-DRI-EAF, and enhanced with CCS.

Transportation

Transportation-related emissions have been increasing with the economy’s growth. Transportation is the fourth largest emitting sector, representing about 10% of total Brazilian GHG emissions. Road vehicles account for 92% of transportation emissions, of which trucks and cars are the most significant emitters, with a combined 73% contribution share.

Sector emissions result largely from the use of petroleum-derived fuels (such as diesel, gasoline, kerosene, and oil) for road vehicles, and decarbonization options rely on two main alternatives: reducing fossil fuel consumption by enhancing energy efficiency or shifting powertrain choices away from fossil fuels.

Brazil has no specific target for EV adoption, but global trends in long-term vehicle efficiency and tighter efficiency standards for internal combustion engine (ICE) are already in place. These include the Rota 2030 program, PROCONVE ("Programa de Controle da Poluição do Ar por Veículos Automotores", or "Program for the control of air pollution by motorized vehicles") Resolutions, and RenovaBio – a public policy of annual national decarbonization targets to encourage increased biofuel addition to diesel.

Trucks are responsible for 42% of transportation sector emissions, and the road cargo fleet in Brazil will continue to grow through the coming decades (Exhibit 13). In the net zero in 2050 scenario, decarbonization comes from an increase in EV and fuel cell electric vehicle (FCEV) truck penetration (reaching 15% by 2050), primarily in the private sector. It also results from an increase in the share of biodiesel in the mandatory blend for the country (recently defined as 12%, which may reach 15% by 2026[34]).