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Antonio de Paula-Oliveira2
Richard Silberglitt1
nhorner@rand.org
aoliveira@cgee.org.br
richard@rand.org
Marcelo Poppe2
Barbara Rocha2
mpoppe@cgee.org.br
bbressan@cgee.org.br
Abstract
Brazil is a leader in renewable energy, but considering policies is critical to maintaining this leadership in
light of its strong dependence on hydropower for electricity, rising energy demand from economic growth,
and need to support the aspirations of a growing middle class. The Center for Strategic Studies and
Management in Science, Technology and Innovation (CGEE) is participating in ongoing prospective
studies of technologies to increase energy efficiency and maintain high levels of renewable energy, as
well as of carbon reduction scenarios to mitigate global climate change. This paper will apply scenario
analysis techniques to evaluate the effect of policy and technology development and implementation on
total primary energy consumption, economic efficiency of energy use, and decarbonisation of the fuel mix.
Scenarios of total energy consumption versus GDP growth per unit of energy and level of decarbonisation
from the International Energy Agency and from current Brazilian studies will be compared and developed
into meta-scenarios with policy ramifications. Finally, we will discuss the use of FTA to inform and support
policy decisions using these meta-scenarios.
Keywords: Energy, meta scenarios, policy recommendations
1 Introduction
Through both fortunate geography and fortuitous policy planning, Brazil is a leader in
renewable energy, having one of the least carbon-intensive economies in the world. Brazils
energy system is unique in several ways. First, the country currently gets three-quarters of its
electricity from hydroelectricity. Second, it has made a concerted effort to introduce sugarcanebased biofuels into the transport sectorfirst in the 1970s through ethanol-fueled vehicles, and
more recently (and more successfully) through blending requirements and flex-fuel vehicles,
which now constitute 50% of the passenger fleet.
Nonetheless, change could very well be coming. Rapid demand growth could pressure the
existing electricity supply system, which is already constrained by environmental laws that
makes it more difficult to further exploit hydropower capacity. Brazil experienced widespread
blackouts in 2001 due to low rainfall totals, leading to a surge in construction of natural gas
power plants. Recent discovery of vast deepwater oil reserves off the coast could further hasten
a swing back towards fossil fuels. At the same time, recent policy has created robust growth in
wind farm capacity, which is proving to be a strong renewable resource for Brazil.
The policies Brazil enacts in the near future could have a significant effect on whether the
countrys low-carbon leadership continues. The scenarios studied here aim to provide a better
1
2
RAND Corporation - Washington Office: 1200 South Hayes Street, Arlington, Virginia 22202-5050, USA
CGEE - Ed. Parque Cidade Corporate, Torre C, 4 andar, Salas 401 A 405, Braslia-DF, CEP 70308-200, Brazil
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Figure 1: Brazil total primary energy consumption energy by source, 1970-2013. Top: consumption growth trend;
dashed line=GDP. Bottom: proportional fuel mix.
To meet this energy demand, Brazils energy sector has faced huge challenges to keep
growing its energy supply. Natural gas, oil, and derivatives account for 80% of energy supply
growth over the last ten years [1]. Nonetheless, renewable energy sources remain a strong
component in the domestic fuel mix, representing 41% of its total in 2013 (down from ~60% in
1970).4 This puts Brazil as one of the least carbon-intensive economies in the world, with a 1.55
tCO2/toe emissions factor versus the 2.37 tCO2/toe world average [1].
The 1988 Brazilian Constitution, enacted after two decades under a military regime,
placed natural resources, including hydraulic energy potential and mineral deposits, under
federal control and defined mandatory bidding processes for concessionaires to gain the right to
4
It should be noted that nearly half of Brazils 1970 energy consumption came from firewood and charcoal, which,
though renewable resources, can have large land-use consequences and is not carbon-neutral if replanting does not
occur. Nowadays only around 10% comes from wood, mostly based on fast-growth forest cultures.
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explore and exploit them, but this bidding process was not implemented until 1995. Seven years
later, the new government elected in 2002 revised the process. Federal control of the energy
sector has allowed Brazil to dictate its energy development. However, the resulting series of
changing legislation and new institutional organizations, while somewhat necessary to respond
to changing events, have created uncertainties for energy market players and investors.
Three main foci of Brazils energy policy have allowed it to maintain this decarbonized
footprint: biomass, hydropower, and energy efficiency. ProAlcool, a national program to increase
the use of sugarcane bioethanol in the national energy supply, was created in 1975 after the first
oil shock. The mandatory use of up to 25% of bioethanol (E25) in the gasoline-bioethanol blend
was a key factor for its market development, and a response to the rising prices of oil. Nowadays
over 90% of the new cars manufactured in Brazil are flex fuel (running indifferently with both E25
or E100) and bioethanol and bio-power from sugarcane accounts for 17% of the country`s
primary energy supply [1].
The increasing proportion of non-renewable supply over the 2000sparticularly from
natural gasis explained both by the lack of favourable meteorological conditions and by
barriers to hydropower expansion. A draught contributed to low reservoir levels and widespread
blackouts in 2001, which prompted construction of gas plants as a hedge against this risk in the
future [2]. Furthermore, about 70% of Brazils hydropower potential is located in the Amazon
region [3], where strict environmental legislation limits exploitation. Nonetheless, the IEA
estimates a further 67 GW of hydropower capacity is available outside of environmentally
sensitive areas and notes that run-of-river plants, rather than dams, may mitigate some
concerns (though such plants have different performance characteristics) [2].
The creation of PROINFA, an incentive program for new renewables in 2002, has
strengthened the development of competitive small hydro, bio-power, photovoltaic, and
principallywind power plants. Brazils next energy bonanza may in fact be wind; though winds
are seasonal, some wind farms regularly record extremely high capacity factors well in excess of
50% [2], [4]. The countrys installed wind capacity increased by 84% last year [4].
Regarding energy efficiency, two national programs were created: PROCEL5 for electricity
in 1985, and CONPET6 for oil and gas in 1991. The establishment of voluntary labelling (in
1986) and awards (in 1993) programs for appliances and equipment was followed by mandatory
minimum performance standards in 2001. Financial resources were provided, mainly by the
utilities, through the energy efficiency obligation introduced in 1998. The main policies
discussed above are summarized in Table 1.
Table 1: Principal Brazilian programs and legislations created since the 1970.
Year
Policy
Focus
1975
Decree 76.593
ProAlcool
Promotion of sugarcane
bioethanol
1980s
Petrobras &
Research Centers
R&D efforts
Impacts and
Consequences
Bioethanol 20% of fuel
mix; Sugarcane 17% of
energy matrix
Self-sufficiency in oil
A Brazilian program for energy conservation created to promote the efficient use of electricity and to reduce costs
and sectorial expenditures for electricity.
6
A Brazilian program created in 1991 by Presidential Decree to promote the development of an anti-wasteful culture
in the use of non-renewable natural resources.
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1988
New Federal
Constitution
1993
Law 8.631
1995/6
1996
1997
1997
1998
Law 9.478
Law 9.648
Mandatory bidding
processes for natural
energy resources
Tariffs fixation for the
power sector
Normative for
Concessions and
Permissions
Foundation of ANEEL
Electricity Regulatory
Agency
Foundation of ANP Oil ,
Gas and Biofuels
Regulatory Agency
Foundation of CNPE National Council for
Energy Policy
Free market for buying
and selling electricity
2002
Law 10.438
PROINFA promotion of
small hydro, biomass, and
wind
2004
Law 10.847
Appropriation of natural
resources by the federal
government
Transparency and costbased prices
Private and public
utilities under public
service regime
Fair rules for both
concessionary and
consumers
Expansion of the fuel
sector and reliability of
products
Inter-ministerial
coordination
Power sector
development and
consolidation
Lower prices: wind US$
55/MWh
Professionalization of
energy sectors planning
3 Methodology
To gain insight into the performance of the Brazilian energy system, we adopt a set of
metrics previously used to analyze the energy sectors of the United States and various countries
in Southeast Asia [5], [6]. First, we examine energy efficiency, the gross domestic product (GDP)
per unit of total primary energy consumption (TPEC), measured in 2013 US dollars per tonne oil
equivalent (toe).
We also look at emissions performance. We define carbonization, C, to be the ratio of
actual carbon emissions from the energy sector to the counterfactual carbon emissions if all
energy use was based on coal:
actual carbon emissions
!! !! !!! !! !!! !!
!! !
where tp, tg, and tc are the emissions factors for petroleum, natural gas, and coal, respectively, in
megatonnes carbon per megatonne oil equivalent (Mt-C/Mtoe), and Ep, Eg, and Ec are the total
primary energy from those same three fuel sources. E in the denominator is the total primary
energy use for the country; note that this term includes primary energy from all sources,
including renewables. Thus, this metric implicitly treats important Brazilian renewable sources
such as hydroelectric and biomass as having an emission factor of zero. This treatment follows
the convention of the Intergovernmental Panel on Climate Change (IPCC) in assuming that,
between harvesting and regrowth, annual crops have no net carbon emissions [7]. If biomass
crops result in land-use changes, then this assumption will not hold.
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A country that consumed only energy from coal would have a carbonization of 1.0. We
then define decarbonisation as the inverse of C; therefore, countries with greener energy
systems will have higher decarbonisation (1/C) ratios. The final metric is carbon efficiency, or
GDP per tonne of carbon emitted.
We plot each of these metrics against total primary energy consumption for both historic
trends as well as various future scenarios to (1) get an idea of how productivity changes as
energy use changes and (2) understand if changes in energy consumption lead to changes in
GHG performance.
4 Scenario Definitions
In this analysis, we plot two policy scenarios specific to Brazil against three general energy
scenarios published by the IEA [8], which we describe briefly in this section.
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4.1.2
2014
NON-RENEWABLE ENERGY
Petroleum and oil products
Natural gas
2020
%
38.60
%
42.20
2030
2040
%
42.3
41.7
2050
%
39.4
11.70
9.90
10.3
10.8
11.2
6.40
4.60
4.5
4.4
4.1
Uranium (U308)
1.30
13.60
16.70
18.1
20.1
23.1
8.60
6.60
5.4
4.7
4.5
15.40
17.70
16.8
15.8
15.2
4.50
2.30
2.6
2.5
2.5
311.98
353.00
460.00
549.00
605.00
RENEWABLE ENERGY
Hydroelectric and electricity
Firewood and charcoal
Sugar cane products
Others
TOTAL (MTOE)
These results reflect the growing penetration of natural gas in the Brazilian fuel mix,
displacing the consumption of petroleum in industry and households (fuel oil and LPG, mainly).
The drop in the share of oil is also due to the penetration of biofuels in the transport sector,
particularly ethanol in individual transport vehicles. Firewood and charcoal also decline, resulting
from the substitution of coal in the steel industry and substitution of LPG and natural gas in the
residential sector. Other energy sources contributed marginally in the long run.
In terms of transport, the scenario includes ethanol-gasoline blend mandates of 18-25%
ethanol and voluntary fuel efficiency labelling for passenger light-duty vehicles. The mandatory
blend of biodiesel will also increase from the present day level of 5%.
With these projections in mind, the new policies scenario expects a 36% reduction in GHG
emissions compared with business-as-usual by 2020. The policy drivers for this reduction
include further implementation of the measures in the National Plan for Energy Efficiency, such
as the Brazilian Labelling Programme, the Energy Conservation Program, and the Energy
Efficiency Program, under which the utilities must spend >0.5% of their total revenue in energy
efficiency and >0.5% in R&D.
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The IEA published three similar scenarios corresponding to global temperature increases
of 6C, 4C, and 2C with a time horizon of 2050 in Energy Technology Perspectives report [8].
We refer to these as the ETP-6, ETP-4, and ETP-2, and they are broadly consistent with the
WEO current policies, new policies, and 450 scenarios, respectively [8]. For this analysis, we
use the ETP scenarios with the longer time horizon.
These scenarios report primary energy use by fuel type in five-year increments for various
countries and regions of interest. The main differences among the scenarios are the rate of
energy use increase (through efficiency gains) and CO2 emissions rates (through
decarbonisation). Though it is conceivable for GDP growth among different energy scenarios,
the ETP and WEO scenarios assume the same GDP growth in each case.
We use the ETP scenarios to compare Brazils possible future energy systems with those
of other countries.
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other countries (e.g., the U.S., China, and South Africa) are more dependent on flattening or
even decreasing energy consumption.
How realistic are such gains? The declining energy usage for some countries shown in the
ETP-2 scenario seems to be extremely optimisticparticularly with respect to declining energy
useso we benchmarked these scenarios against two U.S. EIA scenarios for the United States,
shown in Figure 4 [12]. The EIA reference case roughly tracks the ETP-6 case with respect to
energy and carbon efficiency but is closer to the ETP-4 scenario with respect to decarbonisation.
The GHG25 casewhich is the most aggressively green scenario reported by the EIAfalls
between ETP-6 and ETP-4 in energy efficiency tracks ETP-4 in carbon efficiency, and falls
between ETP-4 and ETP-2 with respect to decarbonisation. Importantly, none of the EIA
scenarios show the decrease in energy consumption implied by the ETP-2 scenario, and the
high levels attained on all three metrics in this scenario remain well out of reach in the GHG25
scenario. Certain aspects of ETP-4, on the other hand, do look reasonable.
While performing similar benchmarking for other countries is beyond the scope of this
paper, the U.S. results provide some basis for considering the ETP-2 scenario to be
aggressively optimistic. Our future work for Brazil involves looking at specific policy scenarios to
see if doubling the countrys decarbonisation measure by 2050 is within the realm of possibility.
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One useful tool for scenario analysis is the definition of meta-scenarioscreation of a set
of more generic, but uniquely identified, possible futures based on ranges of the various
published scenarios. Meta-scenarios help the discussion avoid getting bogged down in the
details of scenario-specific assumptions while preserving the general characteristics of various
possible future states of the system.
For Brazil, we define three meta-scenarios: Business as Usual (BAU), which roughly
corresponds to current policies; A Greener Brazil, in which new policies are adopted to break the
stagnation and begin further decarbonizing the energy system; and Global Sustainability, in
which Brazil participates in aggressive worldwide efforts to limit temperature increase. We
present the three meta-scenarios, juxtaposed with the specific scenarios presented above, in
Figure 5.
The benefit of a meta-scenario approach is seen in the fact that the various individual
scenarios in cross boundaries of the more generic scenarios; for instance, in energy efficiency,
both ETP-6 and ETP-4 seem to point toward A Greener Brazil, but in decarbonisation the former
is more aligned with BAU. These individual differences may result from specific assumptions
within each individual scenario, but examining them in concert allows us to identify key
catalystsincluding policy decisionsthat will define the pathway ultimately taken. We discuss
these pathways in the next section.
Figure 5: Decarbonization in Brazil meta-scenarios. Black lines represent individual published scenarios for Brazil;
coloured regions indicate meta-scenarios.
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6 Policy Implications
We noted above that Brazils energy system is remarkable. However, deviating from BAU
is dependent upon making further policy choices to support decarbonisation. While our analysis
comparing the WEO scenarios with detailed scenarios specific to the U.S. indicated that Global
Sustainability scenarios may be outside the bounds of most current policy forecasts, the fact
remains that some degree of further decarbonisation of Brazils energy system is possible.
Based on commonalities among the scenarios examined, moving away from BAU towards A
Greener Brazil depends on implementing policies supporting:
Reduced reliance on road transport for freight, implying the need for investments in
Brazils underdeveloped transport infrastructure;
Moving further, towards Global Sustainability, requires more aggressive policies in the
above areas in addition to CO2 pricingnot only in Brazil, but elsewhere.
Examination of meta-scenarios allows us to develop signposts to determine which path is
currently being trod and warning of potential roadblocks. A few barriers to further
decarbonisation of Brazils energy system are:
Inexpensive domestic fossil fuels. Competition from inexpensive domestic oil and
gas may make it more difficult for the government to justify higher fuel-blending
mandates for biofuels as well as put pressure on other renewables. While
deepwater extraction poses technical challenges, the shale gas boom in the U.S.
has shown how quickly access to fossil fuels can change the energy picture. The
Global Sustainability case involves reductions in petroleum use on the order of
10% in Brazil and 30% globally, which will not happen if gasoline remains a
competitive vehicle fuel.
However, the desire to support a strong domestic sugarcane industry may
counterbalance the push to use new oil production domestically. Brazils policies
which determine how the offshore pre-salt basins are developed and where the
products are sold will be important.
Droughts and climate change. The electricity crisis of 2001 demonstrated how
dependent Brazils electricity grid is on rainfall. Run-of-river hydroelectric plants
likely the dominant type to be installed in the futureare even more highly
dependent on rainfall. Any climate changes that reduce river and reservoirs levels
will force the use of back up thermal power plants.
Higher sugar prices. An increase in sugar prices could increase the price of ethanol
and minimize its share in the gasoline blend. Further, since much of the Brazilian
fleet consists of flex-fuel vehicles, and consumers can switch rather seamlessly
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between the fuels, demand for ethanol would be expected to have positive crossprice-elasticity with gasoline.
Lack of a carbon price. The Global Sustainability case seems to require that a
carbon price be implemented in many countries within the next few years.
7 References
[1]
[2]
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