Long-term effects of structural changes in the Brazilian electricity matrix

Abstract

The Brazilian 2015 Intended Nationally Determined Contribution proposes a reduction of 43% in its greenhouse gas emissions by 2030, compared to its 2005 emissions. In terms of the contribution of the Brazilian electrical sector to achieve this target, it commits to increase the use of renewable energy sources, other than hydroelectricity, and an efficiency gain of 10% by 2030. Considering these targets, this paper estimates the economic and CO2 emissions effects of such propositions using input-output analysis. The estimates are based on eight different future electricity matrices scenarios (2030 and 2050) developed by specialists within the Energy Scenarios Platform. On the one hand, achieving cleaner electrical production requires large investments. On the other hand, a reorganization of the sector leading to increased use of renewable energy sources produces GDP and employment growth. The results show that the net effects are positive in the medium and long run. Brazilian GDP growth may range from 0.61 to 1.24% per year by 2030 and from 0.66 to 1.26% per year by 2050, and total labor demand may reach 630 thousand new employees in 2030 and 685 thousand jobs in 2050. Regarding the reduction of CO emissions, a maximum saving of 4 million tons by 2030 and 1 million tons by 2050 is expected. Therefore, according to the scenarios analyzed, although investing in renewable electrical sources demands more investment, their operational costs are lower, such that the extra expending is more than offset. Hence, the economic benefits from such changes more than compensate the costs of investing in such efforts.