The Global Landscape of Emissions Control Policy in Practice: A Review of Brazil

Jessica George, Tara Helms, Dana McManamon, and Kimberly Stama

SUMAK4190 Economics of Sustainability

Professor Kitty Chan

May 5, 2014

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Table of Contents

Executive Summary ...................................................................................................................................... 1

1. Background of Brazil ................................................................................................................................ 1

1.1 Demographics ..................................................................................................................................... 1

1.2 An Overview of the Economy ............................................................................................................ 3

1.3 Poverty, Inequality, and Informality ................................................................................................... 5

1.4 Economic Sustainability Issues ........................................................................................................... 7

2. Major Pollution Problems and Current Policies in Brazil ..................................................................... 7

2.1 Solid Waste ......................................................................................................................................... 7

2.1.1 National Solid Waste Policy ............................................................................................................ 9

2.1.2 E-Waste Management .................................................................................................................... 10

2.1.3 The U.S.-Brazil Joint Initative on Urban Sustainability (JIUS) ..................................................... 10

2.2 Deforestation ..................................................................................................................................... 11

2.2.1 Land Use and Ownership Policy .................................................................................................... 12

2.2.2 Command and Control Policy ........................................................................................................ 14

2.3 Air Pollution...................................................................................................................................... 14

2.3.1 Ambient Air Quality Policy ........................................................................................................... 17

2.3.2 National Climate Change Policy (NCCP) ...................................................................................... 18

2.3.3 Rio "Bicycle Capital City" ............................................................................................................. 18

2.3.4 Policy Changes for International Events ........................................................................................ 19

2.3.5 Poltica Nacional de Mobilidade Urbana ....................................................................................... 19

3. Recommendation ................................................................................................................................ 20

4. Conclusion .......................................................................................................................................... 25

References ............................................................................................................................................... 27

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Executive Summary

Brazil is currently the fourth largest greenhouse gas emitter in the world. Although its

large and controversial history of deforestation has played a significant role in Brazils pollution

problems, it is no longer projected as the countrys most pressing environmental challenge. With

its hosting Rio+20 in 2012 and the pressing 2014 FIFA World Cup and 2016 Summer Olympics,

Brazil has positioned itself to make greater strides toward achieving its energy and emission

reduction goals while under international attention. This paper will explore an overview of

Brazils structure as well as the major pollution issues, and their respective policies, faced by

todays population. At the conclusion of this paper, a recommendation will be provided for a

proposed policy to best aid lowering greenhouse gas emissions in Brazil.

1. Background of Brazil

1.1 Demographics

Brazil is the largest country in South America in terms of land area, population, and

GDP, and is the only country where Portuguese is the official language. Per the 2010 Instituto

Brasileiro de Geografia e Estatstica (IBGE) Census, the population of the country was

195,497,497 and is projected to continue to increase into 2042 (IBGE, 2010). 50.7% of the

population identifies with mulatto or black ethnicity, while 47.7% of the population identifies as

white. This is the first time in the history of the country where the majority of the population is

non-white. The gender distribution is roughly equal within the country as well. Catholicism is

the dominant religion representing 64.6% of the population, however virtually the entire

remainder of the population is Protestant or some other denomination of Christian.

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Figure 1 - 2014 Population Pyramid of Brazil (CIA World Factbook)

Since the 1960s the fertility rate in Brazil has been declining, leading to a rapid shift in

demographic transformation, particularly in age (Figure 1). Currently, the vast majority of the

population lies within the workforce age range, with the median age at 30.7 years, but over the

next two decades, it is projected that the labor force will decrease and the population will begin

to age (IBGE, 2010). This increase in the percentage of population in the senior citizen range

will undoubtedly have implications for the economic output of Brazil and the strain on social

assistance programs.

Educational attainment continues to be an area of concern in Brazil: 45% of the

population has attained pre-primary or primary levels of education only, while 41% has attained

at least upper secondary education (OECD, 2011). Among the younger population, progress is

being made. Those in the age ranges of 25 to 34 years old have a 53% attainment rate, much

higher than the general population. Tertiary education, however, is limited to about 11% of the

population. Literacy has been improving in Brazil over the course of the past decade, with 2010

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levels reaching 90.4% (IBGE, 2010). The average monthly income of workers was about

R$1,345 in 2010, a real gain of 5.5% from 2000.

1.2 An Overview of the Economy

The economy of Brazil had robust and sustained growth from 1920 to 1980, during which

gross domestic product (GDP) and GDP per capita increased at a relatively constant rate of 6.2%

and 3.6%, respectively (de Holanda Barbosa, 1998). This increase was largely the result of an

import substitution industrialization policy, which was implemented in the 1930's as a means for

the nation to recover from a severe price drop in coffee, which was a main export of the time.

This policy had several features which facilitated domestic growth. First, high tariffs and

stringent local content requirements were put into place. Further, the National Economic

Development Bank readily provided long-term credit at low or negative rates of interest.

Financial incentives were put into place to both attract foreign investment and promote exports.

Finally, government-owned companies were instituted in manufacturing, energy, petrochemical,

and telecommunications sectors. Starting in the 1950s, the automotive industry was concentrated

on using similar instruments as a part of Kubitscheks Target Plan. From 1920 to 1980, the

annual rate of economic growth in industry was over double that of agriculture (Kesidou, 2004).

In the late 1970s and early 1980s, there were a series of adverse economic events that

slowed development such as the 1979 oil shock, world recession, falling export prices,

increasing import prices, and rising rates of interest internationally (de Holanda Barbosa, 1998).

Since then, however, healthy growth continued in the 1990s as diversification of sectors has

expanded.

In 2011, the GDP of the country was $2,256.3 billion. In terms of GDP generation, the

service sector, including hospitality, tourism, communications, and financial services dominates

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as noted in Figure 2 (CIA Factbook, 2014). Within the agriculture sector bumper rice, soybeans,

sugar, coffee, and livestock are the primary revenue-generating crops (ECLAC, 2012). The

industrial sector is comprised of mining and construction as well as automobile production,

textiles, and garments.

Figure 2 2011 Brazilian GDP Generation and Employment by Sector (CIA World Factbook)

In urban areas, public services comprise the largest sector with 23% of GDP, followed by

distribution and retail with 17%, and business services with 15%. Mining and manufacturing are

also prevalent, particularly related to petrochemicals. The largest employers in Brazils cities

are Petrobas, BR Distribuidora, Shell, Tellemar, and Vale do Rio Doce. Rio de Janeiros top

exports include mineral fuels and oils, mineral ores, iron and steel (Global Cities Initiative,

2012).

In 2011, Brazilian exports totaled $261 billion. Primary exports in 2011 included iron

ore (17%), crude petroleum (8.8%), soybeans (6.3%), raw sugar (5.9%), and coffee (3.2%). In

fact, Brazil is the leading exporter of raw sugar, coffee, poultry meat, and frozen bovine meat in

the world (The Observatory of Economic Complexity, 2014). Interestingly, increasing levels of

automotive and aerospace exports are indicative of the focus on developing technological and

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manufacturing capabilities (The Observatory of Economic Complexity, 2014). In the same year,

imports totaled $147 billion. Primary imports were iron ore (5.6%), poultry meat (4.3%), refined

petroleum (4.2%), cars (3.6%), and crude petroleum (3.3%) (The Observatory of Economic

Complexity, 2014).

Since the 2009 financial crisis, there has been a deceleration of growth that can largely be

attributed to supply bottlenecks stemming from international imports. Additionally, growth is

projected to be within the 1%-2% range for the next several years, indicating a departure from

decades of strong growth. On the other hand, unemployment has been in steady decline from

11.5% of the labor force in 2004, to 5.6% in 2013 (United Nations, 2014).

1.3 Poverty, Inequality, and Informality

Throughout Brazil, poverty and inequality are prevalent despite steady increases in GDP

per capita and poverty reduction measures taken on in the new millennium, which have been

credited with decreases in extreme poverty and a growing middle class (Gacita, Mari, and

Woolcock, 2008). Although national unemployment rates are relatively low, 26% of the

population lives below the poverty line, which is defined as less than R$70 per month per the

national government, which indicates underemployment and inadequate wages (De Sainte Croix,

2012). The Gini coefficient in Brazil was 60.5 in 2005 as an indicator of high levels of

inequality (Kumar, 2005), and this has been exacerbated in the major cities of Brazil by

increasing urbanization and inhabitation of favelas. The Bolsa Familia program has been

commended internationally as a poverty reduction program; however there is still limited

socioeconomic mobility to those individuals who are born poor. Women, youth, and nonwhites

have additional barriers to entry to the labor market and are particularly vulnerable to changes in

the economy (Gacita, Mari, and Woolcock, 2008).

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Informal economy is present in both rural and urban areas of Brazil. Particularly in Rio

de Janeiro and So Paulo, favelas have become a physical embodiment of informality. The

favelas were a consequence of both the abolishment of slavery in Brazil and the migration and

settlement of farmers to the city for employment opportunities who were not immediately

incorporated into the urban workforce. The informal economy provided employment in service

and construction industries starting in the 1940s, and these still remain the largest sectors of

employment for residents of favelas (Pino, 1998). Although favelas do not have formal land

tenure rights in general, residents associations have emerged in various settlements to oversee

real estate ownership and transactions. Curiously, informal land valuation practices have

mirrored real estate trends in the formal market (Scruggs, 2013).

Furthermore, as informal economy and favelas have developed over time, systems of

access to informal loans and credit have emerged since residents are only able to access loans if

they have a formal address. As such, the informal economy possesses many features of and

simultaneously interacts with the formal economy, which blurs the lines between the two (Chen,

2003). Residents of favelas have several economic vulnerabilities which stem from a range of

issues. First, the susceptibility to environmental disasters is a hindrance to asset and savings

accrual, as frequent flooding and mudslides necessitates repair and purchase of new building

materials, equipment, etc. Furthermore, the lack of water, utility, and transportation

infrastructure create barriers to employment, government services, healthcare, and education.

Favelas are underserved by schools, limiting the development of skills required to pursue

alternative means of employment, particularly in youth populations. Finally, a lack of defined

land tenure rights leads to uncertainty and insecurity in the population while alienating favela

residents from full participation in municipal society.

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1.4 Economic Sustainability Issues

In terms of sustainability, Brazil faces interesting environmental challenges within the

paradigm of developing industrial capacity and recovering economic growth rates. Often,

economic development and sustainability goals have conflicting interests, but utilization of

appropriate governance tools and strategies could minimally interfere with the economy.

Simultaneously, there is increasing social unrest which can be attributed to income disparity, but

also to the inequitable distribution of impacts of environmental issues. Environmental policy and

governance interventions must be sensitive to these societal issues, and ideally shall be used as a

tool to reduce inequality and achieve social progress.

2. Major Pollution Problems and Current Policies in Brazil

2.1 Solid Waste

Like other rapidly developing economies, waste generation and management, particularly

in urban areas, remains a critical issue for Brazil. Poor end-of-life management of waste

generates environmental impacts that damage human health, hinder ecosystem services, and are a

detriment to quality of life. According to the most recent data available from the United Nations

Database (2011), 87% of the country is served by municipal waste collection systems, collecting

around 51 million metric tons per annum. Hazardous waste statistics are not currently available

due to poor management. Electronic waste, or e-waste, is the fastest growing waste stream in

Brazil driven by the growing middle class and the increasing obsolescence rate of technology. E-

waste poses a threat to the environment and human health due to hazards relating to toxic

substances such as lead, cadmium, mercury, brominated flame retardants, barium, beryllium,

toners, and phosphor (World Bank, 2012). During the sorting and dismantling of electronics,

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these substances can enter the biosphere and human body if managed poorly. Figure 3 shown

below demonstrates the typical flow of materials in their end-of-life management.

Figure 3 Generic E-waste Recycling Cycle (World Bank)

In the absence of official municipal and industrial waste management, waste pickers collect and

manage all types of waste informally. Brazil has long been a leader in efforts to organize waste pickers

and improve the livelihood of people relying on informalized waste collection. Due to Brazils efforts to

improve standards for waste pickers, over 5% of pickers work under contract and earn three or four times

the national minimum wage (WIEGO, 2011).

According to Pesquisa Nacional por Amostra de Domiclios (PNAD) (2011), Brazil has over

229,000 waste pickers of which 67% are men, 33% are women, and 25% of all waste pickers are between

50 and 64 years old. This population is largely uneducated, with only 14% of men and 6% of women

having attended school. Though this population makes a living off of waste collection, Brazil has a long

way to go in improving the poor social and health circumstances under which the majority of waste

pickers work.

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2.1.1 National Solid Waste Policy

In 2010, Brazil fully implemented the National Solid Waste Policy, prior to which no

national framework for solid waste management existed. Under the policy, producers and

consumers are responsible for the internalizing the costs and liabilities of waste management,

also known as the producer pays principle (Joint U.S.-Brazil Initiative on Urban Sustainability,

2012). Industry such as manufacturers and distributors are required to collect and process

recyclable materials such as paper, plastic, and metal. The National Solid Waste Policy also

covers household, public, and private waste including pesticides, hazardous waste, batteries,

tires, oils, light bulbs, and electronic waste. The policy requires the development of reverse

logistics channels to return household waste and materials to producers.

The primary objectives of the policy are first, to encourage and promote a waste

management hierarchy of reduce, reuse, recycle, and treat solid waste. The policy states that

solid waste must be disposed of in an ecological and environmentally responsible manner. In the

next few years, Brazil has pledged to invest in clean technologies in order to better manage waste

and reduce the environmental impacts associated with waste management. Brazil has adopted the

use of public-private partnerships to improve waste management channels and better strategize

recycling initiatives through reverse logistics. In addition to these partnerships, the Brazilian

federal government incentivizes and funds local recycling efforts through federal grant and

assistance programs. Finally, the policy outlines plans to prioritize green public procurement

and public among governments and cities (PNRS, 2010).

As such, solid waste management strategies are often adopted on a city level. For

example So Paulo, Brazils largest city, has set a goal to reduce the amount of waste sent to

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landfill from 98.2% to 20% over the next 20 years (Brazil Portal, 2014). The federal government

hopes this initiative will inspire other cities throughout the country to set similar targets.

The City of Rio de Janeiro currently collects around 1% of recyclables through its

municipal waste collection system, which reaches less than 1/3 of the city. Under the National

Solid Waste Law, the city is investing in its recycling and waste management program to ensure

more efficient and widespread collection. Rio de Janeiro is working with waste picking

communities to integrate pickers into the more structured waste management programs to ensure

they maintain financial stability (Joint U.S.-Brazil Initiative on Urban Sustainability, 2012).

2.1.2 E- Waste Management

In its report Wasting No Opportunity: The case for managing Brazils electronic waste

(2012), the World Bank identified the urgent need of a framework that manages e-waste and

creates clear responsibility for e-waste management. An effective federal policy will set

attainable and mandatory targets for management and create clear accountability and

responsibility structures (World Bank, 2012). Brazil has yet to implement a country-wide e-

waste policy, though many of the 26 states have individual state legislation for the

electronic/electrical manufacturing sector. For example in 2010 the state of Pernambuco, one of

the few states to recently enact a new policy, passed Law 14236, which imposes a social-

environmental state tax (ICMS) on solid waste (World Bank, 2012).

2.1.3 The U.S.-Brazil Joint Initiative on Urban Sustainability (JIUS)

In 2011, President Obama and President Rousseff launched the JIUS to promote the

development of sustainable urban infrastructure and expand investment in clean technology. This

initiative ties together efforts of cities within both Brazil and the United States to share best

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practice on urban environmental issues, including waste management. Going forward it is likely

that policies adopted in cities proven to be effective will be implemented in sister cities thereafter

(Joint U.S.-Brazil Initiative on Urban Sustainability, 2012).

2.2 Deforestation

The Brazilian Amazon is the largest region of tropical forest controlled by a single

country (Peres & Schneider, 2012). The forests in Brazil play a major role in carbon

sequestration. Over the past several decades, the Brazilian Amazon has been cleared for

agricultural farms, pastures, and ranches. At the national level, Brazil and Indonesia contain

35% of the total carbon stored in tropical forests and produce the largest emissions from forest

loss (Baccinni et al, 2012). A slash and burn agriculture method is typically used, replacing

primary forest with pasture or secondary forest (Binswanger, 1991). Carbon stocks in vegetation

replacing forest in Brazilian Amazonia also have a direct effect on net emissions of greenhouse

gases from land use-change (Fearnside, 1996). Overall, deforestation and land use changes

constitutes 75% of the greenhouse gases emitted in Brazil of which 59% comes from forest cover

loss and burning (Greenpeace, 2010).

Cattle ranching now drives the majority of deforestation in the Amazon. Just as

agriculture has rapidly expanded since the 1970s, cattle ranching has experienced continuous

expansion. Cattle ranching is anticipated to consume 79.5% of the land use in the Brazilian Legal

Amazon (Greenpeace 2010). This aligns to the increase in exports of cattle and beef, making

Brazil the worlds largest beef exporter and claimant to the largest commercial cattle herd in the

world (Greenpeace 2010). Cattle ranching is driven by economic reasoning: profits exist because

forest land in Brazil is currently relatively inexpensive. The figure below shows the increasing

trend of deforestation in Brazil correlated to total herd populations.

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Figure 4 Trend between cattle herd populations and deforestation in Brazil (Greenpeace)

2.2.1 Land Use and Ownership Policy

Government policy in the 1970s, 1980s, and 1990s promoted the transition of forest-

covered land to agricultural land use. Specifically, these policies encouraged deforestation in the

Amazon by increasing demand for farm, pasture, and ranch land (Binswanger, 1991). The

Brazilian Amazon still contains an abundance of virgin land. Agricultural expansion into these

forested areas is directly or indirectly subsidized by central government agencies, and therefore

offers economic incentives for deforestation (Peres & Schneider, 2012). Policies in Brazil that

endorse deforestation include tax policy and land allocation.

Existing tax policy exempts agricultural income from income taxation, forming an

agricultural tax shelter (Binswanger, 1991). Under this structure, 80%90% of total revenues

can be excluded from income taxation. Private firms can elect for a 10% flat tax rate on revenues

or the total cost of investments can be subtracted from gross income; therefore, private

corporations are incentivized to undertake investments in agriculture although these investments

typically offer a lower rate of return (Binswanger, 1991). This effectively drives up demand for

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land, putting urban investors and corporations in competition to accumulate large land holdings.

The increased demand contributes to faster expansion of agriculture into frontier areas and

increased land appreciation (Binswanger, 1991).

Although land allocation methods in Brazil are currently under transformation, land and

tenure legislation in Brazil rarely reflects actual land occupancy due to a lack of a centralized

registry. Brazil is also notorious for widespread forgery of deeds and has a long history of

squatters seizing both public and private lands (Fernandes, 2005). The current system is based on

case specific procedures which convert individual claims into legal titles (Binswanger, 1991).

Squatting has been used as a method to ensure claims since 1850: the squatter who lives on

unclaimed territory and has used it for at least one year and one day, has a right to over 100

hectares on that territory (Binswanger, 1991). Furthermore, if the squatter has been living on the

land for over five years, he/she has a right to a title. Private lands can also be squatted if not

challenged by the owner (Binswanger, 1991). Squatter rights vary throughout the country. In

Grande Carajas, for example, claimants who live on the land can obtain a title for up to three

times the area that he/she has cleared (Binswanger, 1991). This incentivizes squatters to deforest

even if agricultural needs do not justify the expansion. In this sense, clearing land has two

primary benefits: increased land claims based on how much forest has been converted into

pasture and protection against squatter invasion from clearly defined property lines. It is clear

that policy change is needed to avert incentivized deforestation from land allocation. As

described by Peres & Schneider (2012) Legitimizing the titles of over 80% of the private

landholdings in Brazilian Amazonia over the coming years, as dictated by the Amazonian

Landholding Regularization Act, remains a huge challenge, but this would encourage more

zealous behavior from occupants.

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2.2.2 Command and Control Policy

In just the past few years, Brazil has made great strides in reducing deforestation.

Avoiding deforestation can be seen as the most fiscally reasonable means of achieving reduced

greenhouse gas emissions (IPCC, 2007). During the 2000s, Brazil developed an advanced

satellite monitoring system for enforcement. This software feeds real time communication of

deforestation activity, allowing law enforcement to reach new deforestation locations just a few

days after detection (INPE, 2008). Additionally, the federal environmental police shaped

innovative and clever enforcement techniques including confiscation of illegally used assets and

location based trade embargos. Post 2007, the government started to blacklist local communities

with high de-forestation rates (UNEP, 2012). This selective targeting is cost efficient and forces

the community officials to share responsibility for the actions of the community members.

Improvements in technically advanced forest monitoring has also led Brazil to explore

opportunities in forest investment programs like REDD+ with the United Nations. The potential

for generating carbon credits are substantial. The EPRI (2010) estimates that Brazil could

supply 300-500 million tons CO2 of offsets annually to the international community by 2020 if

current REDD negotiations and design processes come to fruition. The largest constraint for

Brazil under the REDD mechanism is finding a buyer for the generated carbon credits, as the

current market in Europe does not permit trading of carbon credits in this form.

2.3 Air Pollution

Rapid urbanization in megacities such as So Paulo and Rio de Janeiro has exacerbated

not only waste management problems, but concentrated air pollution as well. The growing

population moving to urban areas in recent decades has resulted in large-scale industrial

development of city centers. Infrastructure and the sheer magnitude of city dwellers has led to

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the increasing generation of harmful pollutants. While deforestation in the Amazon Basin has

significantly contributed to air pollution and climate change, this section will mainly focus on air

pollution as a byproduct of urbanization and urban sprawl surrounding megacities in Brazil.

Brazil has been at the forefront of investing in and producing biofuels, such as sugarcane

ethanol, to reduce dependency on gasoline and simultaneously reduce greenhouse gas emissions.

In 2010, the EPA reported that sugarcane ethanol had a 61% reduction of total life cycle

emissions versus petroleum based fuels, thus designating it as an advanced biofuel (EPA, 2010).

While the use of biofuels will aid energy security and offset greenhouse gas emissions from

vehicle exhaust, there are still indirect effects from this source of energy. Sugarcane ethanol is

one of the most widely used biofuels, and Brazil is its largest producer. However, sugarcane has

resulted in an increase of regional emissions of air pollutants due to field burning for production

expansion (Tso, 2012). According to a study done by Indur Goklany, Brazilians are burning

four times the area of sugar cane plantations than previously realized and emitting increased

amounts of volatile gases:

Compared to gasoline and diesel, over its whole life cycle, every unit of energy

produced with sugar cane produces 10 times as much volatile organic compounds

(VOCs), carbon monoxide, and nitrous oxides. The amount PM10s and PM2.5s

produced with ethanol fuels is even higher, (2012).

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As Brazil is the only country in the world that extensively utilizes ethanol, it is inevitable

that air quality issues will relate more to ethanol-driven emissions. Vehicles using ethanol fuels

will have higher emissions of acetaldehyde, ethanol and nitrogen oxide, therefore explaining the

increased atmospheric concentrations of these gases in So Paulo, Rio de Janeiro and Brasilia. It

is important to note that these gases also result in substantial ozone issues as they are

contributors to photochemical air pollution and ozone formation (Anderson, 2009). A study was

commissioned by the Institute of Health and Sustainability that found 4,655 people died in So

Paulo as a result of air pollution in 2011. In that same period, traffic fatalities accounted for

1,556 deaths, HIV/AIDS 874 deaths and breast cancer 1,277 deaths (Messenger, 2013). This

same study found that respiratory illness from air pollution across the state of So Paulo

accounted for as many as 100,000 deaths from 2006-2011 due to a particulate average of 20 to

25 micrograms per cubic meter (Messenger, 2013).

Respiratory illness and increased air pollutant concentrations are all tied to increased

vehicle ownership and urban sprawl in Brazil. Due to inefficiencies in the public transportation

Figure 5 Comparisons of life-cycle emissions for conventional gasoline, diesel and sugar-cane ethanol in 2012 (Goklany)

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system, it can take many of the metros poorest residents several hours each direction every day

to get to work. As a result of economic expansion since the 1990s, Brazilians have had more

disposable income and the government has encouraged vehicle ownership as a sign of wealth and

prosperity. Tax exemptions have been used to stimulate car and motorcycle sales in order to

generate increased economic growth (Ortiz, 2013). According to The Guardian, In the last

decade alone, there has been a 119% increase in the number of cars on Brazil's roads while 40%

of Brazilian households now own at least one car, (Giannella 2013). Not only does an increase

in vehicle volume create congestion and gridlocks on the major road networks, it worsens air

quality and generates extensive increases in emission problems. As of 2010, 51% of greenhouse

gas emissions in So Paulo were contributed by transportation alone (Sovacool and Brown,

2010).

2.3.1 Ambient Air Quality Policy

In 1990 the National Environmental Council (CONAMA) passed Resolution No. 003/90,

or the Ambient Air Quality Policy, establishing air quality standards, sampling methods and

quality levels in Brazil. These air quality limits are only to be used in the absence of local

standards and as guidelines to set and control policies that limit health impacts associated to air

pollution. This policy sets standards for total suspended particles (TSP), smoke, inhalable

particles, sulfur dioxide (SO2), carbon monoxide (CO), ozone (O3) and nitrogen dioxide (NO2).

While this policy does measure important technical standards, it has not been amended to include

carbon dioxide, acetaldehyde or ethanol, the leading causes of respiratory issues in Brazils

megacities.

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2.3.2 National Climate Change Policy (NCCP)

In 2009, Brazil adopted Law 12.187, setting a voluntary national greenhouse gas emission

reduction target between 36.1% and 38.9% by 2020, relative to business as usual (Sopher & Mansell,

2013). The NCCP aims for emission reductions from generation and distribution of electric power,

urban public transportation, interstate transport of cargo and passengers, the manufacturing industry,

the durable consumer goods industry, chemical industries, the pulp and paper industries, mining, the

civil construction industry, health services and agriculture and cattle farming. Within this national

policy, sub-national climate actions have been developed in Brazilian states and cities to further

regulate target emissions. At the time of the adoption of this policy, So Paulo targeted emission

reductions of 30% relative to 2005-2010 levels and Rio de Janeiro pledged to reduce emissions by

20% by 2020 relative to 2005 levels (Sopher & Mansell, 2013).

2.3.3 Rio "Bicycle Capital City"

Rio "Bicycle Capital City" (Rio Capital da Bicicleta) is a program created by the city of

Rio de Janeiro to improve public transport and mobility through the promotion of bicycling.

According to the EPAs JUIS, bicycles require ten times less space than vehicles to transport the

same number of people and can reach a destination four times faster than by foot (Joint U.S.-

Brazil Initiative on Urban Sustainability, 2012). This program promotes the use of sustainable

modes of transit, resulting in easier commutes and a reduction of greenhouse gas emissions by

8% at the end of 2012 in Rio. Implementation of this policy was achieved by prioritizing

integration with the TransCarioca Bus Rapid Transit corridor and implementation of a bike-share

program called BikeRio that is integrated with Metro transportation. Bike racks have also been

added around the city and at business locations to offer public parking facilities (Joint U.S.-

Brazil Initiative on Urban Sustainability, 2012).

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2.3.4 Policy Changes for International Events

With the upcoming 2014 FIFA World Cup and 2016 Olympics, the Brazilian government

has allocated almost US$ 70 billion toward a project to add a bus-rapid transit line and a light-

rail transit line into Rio de Janeiro (Rio de Janeiro, Brazil, 2012). Transportation infrastructure

improvements have also been made relating to these upcoming events, including expansion of

bikeways, with the hopes to ease congestion and increase transportation efficiency in the center

city. Currently there is still a greater emphasis on car-oriented infrastructure and travel in the

megacities of Brazil, thwarting many sustainable efforts. Prior to the Olympics of 2016, Rio de

Janeiro will most feel the strain of its international ambitions and commitments and will take

more regulatory strides to reduce air pollution. It would benefit the Brazilian government to

follow in regulatory policy development as most programs to date are incentive based and

voluntary, therefore failing to effectively encourage climate change mitigation.

2.3.5 Poltica Nacional de Mobilidade Urbana

Law No. 12.587/2012, or the National Policy on Urban Mobility in Brazil went into

effect in 2012, requiring any cities with a population of at least 20,000 to create an urban

mobility plan. The law is meant to provide instruments authorized at the federal level with

which urban mobility may be improved, though the actual embodiment of these plans are

managed at the municipal level. The law is meant to be a departure from the previously

prevalent preference for private vehicle ownership throughout the country by placing an

emphasis on improvements to public transit and other modes of active transport such as biking

and walking. The law has provisions to restrict and charge for road usage at predetermined times

such that funds may be generated and used towards transit infrastructure and subsidizing transit

passes (Brazil Portal, 2012). This policy is not prescriptive in terms of how this sort of pricing

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scheme should be set, leaving much of the power for implementation in the hands of local

governments. For example, in Sao Paulo, a rodizio scheme had been used wherein 20% of

vehicles in the urban area were banned from driving during peak hours based on license plate

(Mahendra, 2008).

The ultimate goals of this policy are to reduce air pollution and decrease fuel

consumption while simultaneously attempting to lessen social inequalities. Despite these goals,

it is apparent that this law is insufficient to ensure environmental sustainability and social equity

of cities in Brazil, as there must be political will and societal commitment at the individual city-

scale to appropriately adapt the instruments provided by the Poltica Nacional de Mobilidade

Urbana. In this way, although the decentralized power structure of Brazilian governance

provides a unique opportunity for tailored solutions to be conceived of at the municipal level, it

also creates insufficient means of assurance of implementation.

3. Recommendation

Through examination of many of the primary environmental issues in Brazil, air pollution

is the area in which the least progress has been made and cities in particular have much room for

improvement. As discussed, the proliferation of automobile usage has contributed significantly

to issues of emissions and air quality deterioration. Amendments to the Poltica Nacional de

Mobilidade Urbana are suggested to provide more economically efficient and viable means of

implementation at the municipal level. The provision and promotion of instruments at the

federal level to implement a Pigouvian-based congestion pricing scheme at the city level, similar

to that used in Singapore, is recommended.

21

The most efficient method of road pricing has been a topic of debate for economists since

Adam Smith, but in modern times, there has been a shift toward pricing for congestion.

Typically marginal users of public roads consider only their own private cost, rather than

inconvenience to others. Therefore, the marginal societal cost exceeds the marginal personal

cost. The premise is to manage excessive demand on major roadways in dense metropolitan

areas by charging for negative externalities drivers cause, particularly during peak traffic periods.

Economists argue for a Pigouvian toll through which the individual cost of usage is equal to the

external diseconomies a given driver imposes on others. Road users, in turn, would become more

cognizant of their impact on one another, as well as the environment (Lindsey, 2006).

The Electronic Road Pricing (ERP) was introduced in Singapore in 1998, subsequent to

the Area Licensing Scheme (ALS) which is similar to the Rodizio currently in place in Sao

Paulo. In ERP, a cash card is inserted into an On-Board Unit (OBU), and tolls are deducted

electronically from the balance of the cash card through the use of a combination of optical

detection and radio frequency (Goh, 2002). The specific charge per user varies greatly

depending on the vehicle type, time of day, and location with respect to the Restricted Zone

(RZ). Furthermore, rates are adjusted quarterly to account for fluctuations in demand, as a

means to manage optimal road usage by encouraging travel via economically under-utilized

roads. ERP has surely allowed for finer tuning of tolls than previous systems of congestion

pricing in Singapore, moving pricing closer to economically ideal rates (Wilson, 1988).

Simultaneously, ERP reduced inconvenience and complexity to users, and brought down labor

and administrative costs significantly.

22

Both aforementioned congestion pricing schemes in Singapore attempted to bridge

private and social costs associated with driving. These toll mechanisms inevitably have had

impacts to societal welfare, and overall equity within the city-state. ALS and ERP must both be

evaluated with respect to social impacts to various socioeconomic and demographic groups.

Public perception of the ERP system was much more favorable than ALS because

motorists were charged more directly for using congested areas, rather than just for owning cars.

ERP encourages drivers to think critically about whether, when, and where to drive. This

decision is based on the cost of the trip, importance of the trip, alternative routes, and alternative

transport modes. Since ERP is a modified marginal cost pricing scheme, users are actually

contributing directly to improvements in transportation infrastructure, both roadways and transit

in Singapore.

Figure 6 Relationship between cost and traffic volume under a congestion pricing scheme (adapted from Velope Center)

23

Clearly, there is a decline in overall welfare for some users, but this can be mitigated by

building efficient transit systems which run independently of road congestion conditions. In order

to promote a healthy livelihood in urban areas of Brazil, there must be a balance between adequately

high road pricing and provisions for effective, convenient public transit. ERP provides the

means by which this may be achieved because of the flexibility of the system (Wilson, 1988).

In order to truly assess socioeconomic impacts of a pricing scheme such as ERP in Brazil,

the distributional effects and impact of different revenue uses must both be considered. Then,

the magnitude of net welfare surplus may be compared with the total distributional effects.

Many scholars assert that congestion charges are regressive because people with high economic

margins have a higher value of time, so will pay charges willingly for the time gain. Taking that

a step further, those with low income will suffer from congestions charges because of the inferior

options for deciding working hours, as previously mentioned. Another angle is that the rich will

be most impacted by congestion pricing because they are most likely to drive. Assuming that

lower-income individuals already commute by public transit, they would simply reap the benefits

of redistributed toll revenue (Wilson, 1988).

In the case study performed by Eliasson and Mattsson for Stockholm, impacts of

congestion pricing are separated into distinct categories: higher travel costs, changed travel

behavior, shorter travel times, and revenue generation (Eliasson & Mattsson, 2006). Four

avenues of revenue use are explored including: revenues split evenly to all adults in the region

(lump-sum redistribution), revenues used to improve public transport, revenues used to decrease

cost of car travel, and revenues used to decrease income tax. This study examines impacts to a

wide breadth of social and economic groups, with distinct impacts to each.

24

According to Paulo Cmara at the European Platform on Mobility Management, Sao

Paulos Rodizio scheme created an overall 18% reduction vehicle congestion in areas covered by

the scheme (2004). Traffic levels reduced by between 24% and 37% respectively in the morning

and afternoon. Overall, the scheme led to 79% time savings, 10% fuel savings, and a 2-5%

reduction in air emissions. In addition to reduction in traffic levels and pollution, number of

vehicle casualties decreased by 31%. Overall the scheme was able to achieve planned reductions

in congestion. Other cities would likely see similar reductions if a scheme like the Rodizio were

adopted across Brazil.

In terms of income, those on the higher end of the spectrum take a greater share of trips

by car and these journeys tend to be longer than lower income people, so these people in the

highest income bracket are most deeply impacting by congestion pricing. Revenue use for tax

cuts and to decrease the cost of travel benefit the rich, while revenue use for transit subsidies or

lump-sum distribution would tend to benefit the poor. Middle income residents would tend to be

net winners regardless of the revenue use scheme. Occupational groups are also impacted in

highly distinct ways when considering categories of employed, students, senior citizens, and

non-workers. Public transit improvements would tend to favor students and non-workers, while

lump-sum distribution would benefit seniors, as well as the aforementioned groups.

From a purely utilitarian standpoint, using revenues generated from congestion tolls for

public transportation improvements or lump-sum redistribution would maximize societal utility.

This is under strict assumptions that all individuals would follow the same utility function,

whereby an additional monetary unit gain would lead to a greater gain in utility for the poor than

the rich. These mechanisms of redistribution would mitigate losses to marginalized

25

socioeconomic groups caused by the imposition of road pricing that may have not previously

existed.

In terms of Pareto efficiency, lump-sum redistribution would maximize efficiency, as the

conversion of revenue to government-provided services is inherently inefficient. Practically,

however, the use of revenue to subsidize government-furnished transportation services is

favorable, as these services must be provided in Brazil regardless of funding source. As such,

the approach prescribed within the Poltica Nacional de Mobilidade Urbana to utilize toll

revenue toward transit infrastructure and subsidized transit passes maximizes efficiency and

societal welfare.

4. Conclusion

In closing, Brazil is at a critical time for addressing sustainability issues in the context of

attempting to accelerate economic development. More explicit congestion pricing guidelines

within the Poltica Nacional de Mobilidade Urbana would allow this policy to be a more

effective tool to combat air pollution, maximize economic efficiency, and lessen the disparities

between transportation impacts to different socioeconomic groups. Based upon previous studies

exploring equity associated with congestion pricing, the key factor of determination is how the

revenue generated from tolls are used, and the Brazilian government has already given this

careful consideration.

As such, one may assert that despite its decentralized power structure, the Brazilian

government has indeed attempted to make both the urban mobility instruments, and the

redistribution mechanism as equitable as practically possible. In terms of Pareto efficiency,

although this is not the first-best solution, in the imperfect transport climate that exists, the

26

recommended Singaporean ERP system maximizes consumer surplus to a great extent. In terms

of utilitarian efficiency, this ERP system is not the first-best solution either, but impacts to

societal utility are mitigated to a great enough extent to leave many residents the same, if not

better off than prior to the implementation of the road pricing scheme.

27

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