Professional Documents
Culture Documents
CLIMATE
REPORT
2022
Seizing Brazil's Climate Potential
BRAZIL CLIMATE SUMMIT
September 15-16th, 2022
Authors, co-authors and participants
In partnership with
1
© The Boston Consulting Group, Inc. 2022. All Rights Reserved.
This document has been prepared in good faith on the basis of information available at the date of
publication without any independent verification. BCG does not guarantee or make any representation or
warranty as to the accuracy, reliability, completeness, or currency of the information in this document nor its
usefulness in achieving any purpose. Recipients are responsible for assessing the relevance and accuracy of
the content of this document. It is unreasonable for any party to rely on this document for any purpose and
BCG will not be liable for any loss, damage, cost, or expense incurred or arising by reason of any person
using or relying on information in this document. To the fullest extent permitted by law (and except to the
extent otherwise agreed in a signed writing by BCG), BCG shall have no liability whatsoever to any party, and
any person using this document hereby waives any rights and claims it may have at any time against BCG
with regard to the document. Receipt and review of this document shall be deemed agreement with and
consideration for the foregoing.
Disclaimer This document is based on a primary qualitative and quantitative research executed by BCG. BCG does
not provide legal, accounting, or tax advice. Parties responsible for obtaining independent advice concerning
these matters. This advice may affect the guidance in the document. Further, BCG has made no
undertaking to update the document after the date hereof, notwithstanding that such information may
become outdated or inaccurate. BCG does not provide fairness opinions or valuations of market
transactions, and this document should not be relied on or construed as such. Further, any financial
This document does not purport to represent the views of the companies mentioned in the
document. Reference herein to any specific commercial product, process, or service by trade
name, trademark, manufacturer, or otherwise, does not necessarily constitute or imply its
endorsement, recommendation, or favoring by BCG.
Apart from any use as permitted under the applicable copyright laws, no part may be reproduced
in any form.
2
2
About this report
This report is a call-to-action for Brazilian leaders, decision-makers and citizens to catalyze efforts, tackle challenges
Objective & maximize value from opportunities intrinsic to BR during the transition of World's economy to Net-Zero (2020-50).
It is forward-looking and solution-oriented, while acknowledging, prioritizing and tackling BR challenges.
This report was built for all those willing to drive actions against Climate Change in Brazil (e.g., investors, board
Audience members, executives, entrepreneurs, academia, etc.), from anywhere in the world, especially those who believe
in Brazil's Green potential
Special BCG is thankful to the support received by the entire organizing team of Brazil Climate Summit, especially to
all Brazilian students at Columbia University who first decided to turn this dream-event into reality, contributing
thanks to accelerating the path to Net-Zero (www.brazilclimatesummit.com)
3
➤ ➤
report?
+
➤
➤
4
Executive Brazil is uniquely positioned and has a clear path ahead
summary to trigger effective climate solutions at scale for the
world
Transition to Net-Zero will Brazil is already ahead in BR is well-positioned to be Leaders are urged to
require the world to invest offering concrete climate a Net-Zero catalyst and engage & boost BR climate
$100-150T across 3 solutions at scale today attract potential
decades • BR power matrix is already $2-3T of investments by • BR as a global
• Crucial to avoid disasters ~85% clean (vs. 26% world) 2050 protagonist in the Net-
& up to ~30% in GDP • 20+ Mn Ha of RegAg1 • Potential to lead in Zero pathway...
loss RegAg1, NBS3, Green H2 &
1. Regenerative Agriculture (KPI for Crop-Livestock-Forest Integration) 2. Greenhouse gases 3. Nature-Based Solutions 4. Agriculture, forestry & other land use; Source: BCG's Brazil
Climate Report 2022; BCG analysis 5
➤
➤ +
Decarbonizing world's economy is urgent and crucial
to avoid major disasters and loss of wealth in this
century
CO2 concentration in the atmosphere GDP loss (per capita) by 2100
World, ppm due to disasters and Climate
Change
2.0°C range
450
400 ~417 ppm
~450 ppm
~430 ppm >4.0°C -30%
1.5°C range Current path GDP p.c.
in
2022 .
300
0
1.5°C -8%
Paris ambition GDP p.c.
0 200 400 600 800 1000 1200 1400 1600 1800 2000
2200
Note: Temperature increase refers to global warming by 2100; GDP loss (due to Global Warming impact) is per capita, vs. no additional global warming
Source: NASA’s Goddard Institute for Space Studies (GISS); UN Intergovernmental Panel on Climate Change (IPCC); BCG analysis 6
6
➤
➤ +
90% of world's GDP has committed to Net-Zero pledges…
Countries with progress on Net-Zero pledges As of Jun/2022
90 88
% %
of emissions
of GDP
In Law
In Policy Document
Declaration / Pledge
Proposed / Under Discussion
Note: National commitments independently of target date and that are considered sincere (either in law, in policy document, officially declared or achieved)
Source: ECIU 2021; Climate Watch (CAIT 2018); Net Zero Tracker; BCG analysis 7
➤
➤ +
… but large commitment-regulation gaps still remain
No net zero National net zero Net zero by 2050 ...+ sector-
commitment commitment1 + carbon pricing2 specific
regulation3
22 63 4%
% % 11%
+46
Rest of the world countries
without net zero
commitment1 + 5 US states4
2,253
+87 1,171
%
+1p0e8r
495 423
1,082
215 245
28 62 114 495
250
2015 2016 2017 2018 2019 2020 2021
%
companies
63 8 20 9
across all
sectors Energy % 42% 9% % %
35% % 14%
Current
policies
(Paris ambition)
budget 1.5°C path
(Paris ambition)
going from
three decades
1 1 0
20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50
• Investment is expected to be
highly frontloaded until 2035
Scale of
change Non exhaustive
in numbers Investments pursue Climate
Solutions at scale (some of
Commercially viable
– Biomass & biofuels
Total climate-aligned Avg. annual investments – Sustainable agriculture
accumulated investments in 2020-50 (peak of – NBS (carbon offset)
for the next 3 decades $10T per year around – Electrification & batteries
2030) –
H2
Green Hydrogen (enabling
- low-carbon steel/cement)
Source: GFMA and BCG Report – Climate Finance Markets & The Real Economy Dec/2020; BCG analysis 13
➤
➤ +
Trillion-dollar investments expected
to reach all sectors & regions
worldwide
Investment needs per sector Power & transport are
Worldwide, cumulative for period 2020-50, in US$
T the sectors with highest
Power 59.2 investments needs
Transport 41.1
Asia is the region with
Building 6.1
highest investment needs
Aviation 5.1
Improve grid flexibility & reliability • Storage still not utility scale today; technology for off-shore &
• Build new network connections/lines (e.g., north/south lines help mitigate long-distance transmission improving
$17T seasonality)
Energy
Invest in large-scale development of CCUS infrastructure (beyond • Limited commercial viability, need for high carbon price or
policies and incentives for large-scale deployment
$3T NBS)
• Critical for markets with newer coal plants e.g., China, South-East Asia Carbon Capture,
• Costs can be reduced through "hub" approach where shared infrastructure can Usage &
support multiple sectors Storage
Purchase battery electric commercial vehicles to replace or expand fleet Renewable Energy
$16.4T • Technology most relevant for intra-city transport and light commercial vehicles
Other decarbo- Use of autonomous driving to improve fuel efficiency; better supply chain optimizations
• Reduce fuel consumption through the use of platooning, accommodated by autonomous driving; technology expected to be ready for highway use in 2030
nization levers • Optimize utilization and supply chain efficiency through better route planning, asset utilization, etc.
Sectors involved by lever Real Estate Investors ~$6.1T estimated investmentCore Climateneeded globally overNeeds
trends associated 2020-2050
heavy Commercially viable
Residential subsidy
(in addition, ~$4.GT estimated for residential investments made by retail consumers, excluded from analysis)
$0.4T Increase efficiency of electric equipment • Cost-effective, commercially available technology; continued
Commercial • Advanced high-efficiency lighting, appliances and cooling systems to reduce energy
Electrification Energy R&D required
demand; sensors and controls for electrical equipment to further reduce energy
$3.4T consumption & Battery Efficiency
Residential
Reduce heating/cooling demand with advanced building envelope design
$0.5T • High performance windows, insulation, sealing, etc. to reduce heat loss; reflective • Viable technology with short payback periods; however,
Commercial limited adoption due to lack of awareness and downtime
surfaces, passive solar design, etc. to reduce cooling needs Energy Smart caused by renovations
$1.0T • Includes investment for low-energy new builds and to refurbish existing structures Efficiency Cities
Residential Replace conventional heating with advanced, low carbon tech. and electrification
$0.2T • Condensing boilers, high-efficiency gas-fired water heaters and high-efficiency biomass
• Viable and cost-effective options; more advanced technology
heaters to reduce energy consumption in the near-term
thermal technology
Residential
Develop system-level district heating/cooling
$0.03T • Investment to improve efficiency of older systems and/or shift energy supply to heat waste or
• Viable in areas with major urban development or high heat
Commercial
density
renewable energy Energy • Requires access to waste heat or renewable energy
$0.05T • Additionally, development of new systems in priority areas Efficiency
$0.1T performance
Improve process and energy efficiency of chemical production • Plant redesign, heat transfer/capture & steam system tech
are more nascent compared to equipment upgrades
$0.2T • Significant room to reduce energy loss through better heat recovery systems,
plant redesign to enable local heat transfer/capture Energy
• Opportunity to increase efficiency of industrial steam systems Efficiency
Deploy CCUS technology (beyond • Proven technology for blue H 2 and blue ammonia, however
not cost-competitive at scale;
$0.1T NBS) • Practical application for other chemicals in nascent stages
•
• Blue hydrogen
Investment (H 2 production
to retrofit w/ CCUS) expected to need large portion (~30%)
plant equipment Carbon Capture,
of investment Usage & Storage
• Apply other regenerative agriculture processes and practices (e.g., crop rotations)
Other decarbo- • Reduce food waste (33% of all the food produced goes to waste form production, transportation to storage)
•
nization levers Reduce enteric fermentation through animal feed, methane food pills - e.g., 3-nitrooxypropan
• Adopt fertilizers with increased Nitrogen Use Efficiency
Carbon
credits
Brazil can be the main Carbon Sink of the planet
27
❭
❭ +
Carbon credit markets are a mechanism to mitigate
GHG emissions & can reach US$1T before end of this
decade
How do emission trading systems work? Global carbon credit markets value¹ (US$ Preliminary
Saved emissions
2019 2020 2021 2023e 2024e 2025e 2026e 2027e 2028e
Carbon 2022e
Avg. volume
offset ~11 ~13 ~16 ~17 ~17 ~17 ~18 ~18 ~19
(Gt CO2e/yr)
~19
Avg. price ~24 ~24 ~29 ~34 ~38 ~42 ~47 ~51 ~56
Seller Buyer Seller (US$/t
~60
CO2e)
3 This process requires a third-party auditor 4 Carbon credits are issued by registered
2 Carbon credits are generated from to come and ensure that a project resulted entities based on opinion of third-party
renewable sources (like wind or
in avoidance of CO2 and other GHG in line auditor and their internal quality checks.
solar) instead of fossil fuels (like
with International Protocols
coal or gas)
Carbon markets | Carbon offset demand is expected to grow 30% per year
Global carbon
emissions
NBS is a set of levers to
compensate emitted
GHG
Avoided forest conversion (REDD) Other soil sequestration Avoided peatland impact
Halt conversion of native forests Apply cultivation techniques to avoid Halt degradation and/or loss of freshwater
emissions2 wetlands3
1. E.g., extend harvest cycles, introduce alternate logging practices like cable winching, thin competing vegetation such as vines, optimize logging schedule; 2. Changes in cultivation practices,
e.g., alternate wetting & drying & midseason drainage and residue & tillage management to avoid methane and N2O emissions; 3. E.g., to agricultural land or palm plantations;
4. Conservation agriculture technically one lever soil sequestration; 5. E.g., amending agriculture soil with biochar, sowing legumes in planted pastures, optimizing grazing intensity in pastures,
planting trees in croplands without lowering agriculture production Source: BCG analysis 34
Backup ❭
❭ +
NBS | Definitions of NBS levers and techniques/measures they
require
Avoided forest • Emissions of CO2 avoided by avoiding forest conversion Conservation • Additional soil carbon sequestration by planting cover crops
conversion (REDD) • Forests defined as >25% tree cover agriculture during part of year when main crop is not growing
• Suitable area excludes cropland already planted with a
Reforestation & • Additional carbon sequestration by converting non-forest perennial or winter crop, and cropland where climatic factors
afforestation (< 25% tree cover) to forest (> 25% tree cover) in areas where and cropping systems require a fallow period or harvest is
forests are the native cover type too late to allow cover crop planting
Natural forest • Additional carbon sequestration in above- and below-ground Improved rice • Avoided emissions of methane and N2O associated with
management tree biomass cultivation anaerobic decomposition
• Maximum potential requires timber harvests deferred for • Achievable by employing periodic draining of rice soils and
>50 years across all native forests currently under timber removal of rice residues in flooded and upland rice
production. Wood production lost is made up by increased production lands
yields from improved plantations and additional wood
production due to Reforestation Other alternative • Biochar: Add. carbon sequestr. by amending agric. soils with
• <USD 100 potential can be delivered by practices that agric. techniques biochar, which increases the agric. soil carbon pool by
continue and possibly increase timber production (e.g., converting non-recalcitrant carbon (crop residue biomass) to
reduced-impact logging, limited extension of harvest cycles) recalcitrant carbon (charcoal) through pyrolysis. Source of
biochar production limited to crop residue
• Nutrient mgmt: Avoided N2O emissions due to reduced fer-
7.1
~20%
of World's total 11.3
GHG emissions (affordable)
today
3.0
NBS | Most of the ~11 Gt CO2e/yr of NBS mitigation potential come from Forests
~20% 11.3
Individual of World's total GHG
Gt CO2e
NBS Cost–effective mitigation potential (GtCO2e) per year, by 2030 emissions today
levers
Reforestation & aforestration 3.0 Total
Others1 0.5
358 189
Maximum opportunity 1257
(mt CO2e/year)#
Kg CO2e/ha/year 237
1550
Note: Color code according to carbon mitigation intensity per area unity (kgCO2e/ha/year). Call outs represent total potential (total potential > economical mitigation potential)
Source: Griscom et al (2017) 39
Backup
+
❭
❭
Note: Color code according to carbon mitigation intensity per area unity (kgCO2e/ha/year). Call outs represent total potential (total potential > economical mitigation potential)
Source: Griscom et al (2017) 40
❭
❭ +
Clean
energy
BR can supply the world with Clean Energy at
Scale
41
❭
❭ +
Brazil has a relatively clean Energy/Power Matrix
versus world average, reflecting its rich natural
resources base
BR is more renewable than rest of the world… … due to its rich natural resources base
Share of renewables on:
Energy Matrix
Hydro potential: hydro contributes to ~12% of
Power Matrix Brazil's current energy matrix and ~65% of its
Today Today
power matrix, helping companies on scope 2
~14% ~26%
2040 2030
World ~22% ~46% Solar & Wind potential: Brazil clean
11%
11% 25% Solar & Wind potential: Brazil clean
23% 4%
3% energy production is estimated at ~5mn TJ
reserved.
rightsreserved.
65 37% Gas
85%
% 93
Coal
Allrights
Renew. 81
(2020) % 74 74
Nucl
Group. All
10% 64 %
% %
Consulting Group.
ear
26%
Hydro %
16
Boston Consulting
9% Renew. Biomass
% 2 (2020)
11% 8 Solar and Wind
by Boston
%
Brazil % World Brazil Global Global Global Global
2022 by
Company peer peer peer peer
© 2022
Copyright ©
Copyright
Note: Considers only centralized power generation connected to national grid (~85% of total power matrix). Scope Scope
Source: IEA, BEN, press search, Refinitiv ESG Database (July/21), company specific reports, BCG analysis 44
2 1
+
❭
❭
20
% United States In May 2022, the European Commission
4 days1
19 days
34 days
Transit time to Europe (days)
1. There is the possibility to transport green hydrogen from North Africa to Europe via pipelines (new pipelines or repurposing the natural gas pipelines)
Note: Considers an average speed of 13 knots
Source: SeaRates Transit Time Calculator 47
Backup
+
❭
❭
~15.0% ~6mn TJ
~360mn TJ
~2.0% 0.5mn ~25mn
TJ TJ
134
18% Cleaner
26% Fossil with CCS² 78x
88 17%
9% 10% 1.6x
Emission-free H2 expected to grow from ~1% to ~40% … mainly driven by increasing pressure from
of global demand during the current decade… regulators, investors, consumers and others
212 EXAMPLES
Green H2 will
38% dominate the
Regulators
134 market by 2030 Several countries have already
18%
established
and regulated carbon credit markets,
88 26% will pressure all industries & sectors to look
which
17%
for renewable solutions and energy
Autothermal reforming
Current methods Electrical pathways
Partial oxidation Future methods Carbon pathways
Methane Pyrolysis Feedstocks Thermal pathways
Other pathways
Downhole conversion
Microwave technologies
Source: The Royal Society; BCG analysis 52
❭
❭ +
Green H2 already has promising investments in Brazil…
Global investors show high interest in new Green H2 projects in different regions of Non exhaustive
Industrial waste
Organic industrial waste: 1.2
Includes papermill sludge, meat processing, brewery wastes…
Biomass | Sources are already used today for transport, power and heating
Non-exhaustive
Best suited for…
Key biomass sources Biofuels E-fuels Biogas Power / heat Comments
Revenues¹ by application and location (US$ Bn, Forecasted biofuels capacity² for 2050
2020) (EJ)
5% ~110 1%
8% ~140
~35
1% ~100 ~90
Additional light vehicles fleet by type of fuel and country Forecast of additional light vehicles fleet in Brazil
(mn vehicles, 2020) by type of fuel (mn vehicles)
+85%
2 14 14 3.6
4% 224% 1% 9% 10%
3% 21% 4% 12%
0% 2%
37%
2.0
42%
91%
2020 2030
Ethanol and gasoline Gasoline Diesel Electric vehicles
Ethanol and gasoline Gasoline Diesel Electric vehicles
Note: Projections of Brazilian fleet consider current inertial scenario, in which new technologies such as electric vehicles are mostly used for specific situations
Source: Anfavea, Sindipeças, BCG projections (April/2021), BCG analysis 57
❭
❭ +
Ethanol is cost-competitive versus fossil-based fuels and
is expected to remain competitive in the future
Ethanol remains cost-competitive vs gasoline besides efficiency difference Example
Ethanol
1.50
1.00
2020 2025e 2030e 2035e 2040e 2045e 2050e
Note: Levelized cost of ethanol considers that ethanol efficiency is 70% of gasoline's
Source: Statista, Agência Brasil, Intelligent HQ, US Energy Administration Information, BCG analysis 58
+
❭
❭
Sustainable
agriculture
BR could feed the planet with Sustainable Food at
Scale
… increasingly using
1. Assumptions include larger adherence to more sustainable techniques such as increasing crop yield, reforestation and afforestation 2. As per defined in Farm Bill (1990)
Source: Climate TRACE, FOFAO, USDA, BCG analysis 61
❭
❭ +
Brazil has what it takes to grow sustainable food at
scale Three key requirements to enable Sustainable Agriculture at scale Not exhaustive
62 Hectares of Agricultural land1 Brazil's crop yield vs world's ~20 hectares of Crop-Livestock-Forest
mn (the 4th largest country) 3x average (gap to remain by mn Integra. in 2020 (vs.~2mn in
Of global renewable fresh water AgTechs in BR (+40% in 2 ~460 Low cost of Green NH3 enables
15% (largest country)
1.5k years) w/ focus on farming USD/ton cost-competitive supply for both
2030 domestic and export markets
productivity
Macro-factors such as favorable weather, cheap labor and civil stability enable Brazil to be a key food producer for the
world
1. Land used for cultivation of crops only. It does not include land that is potentially cultivable but is not normally cultivated 2. As per Plano ABC
Source: Index Mundi, Worldbank , Observatory of Economic Complexity, World Population Review, FOFAO, IPEA, BCG analysis 62
Backup
+
❭
❭
24
Growing productivity 22
Brazil
| Brazil is 3x more
20
productive than
18
world average and is Some factors help explain Brazilian high productivity: ~3x
16
expected to remain ~3x • Warm weather, w/ no extremes 2 harvests¹ per year
10
8 World
6
2020 2030 2040 2050
Offers credit to farmers, using AI in risk Big data solutions to build agrobusiness
assessment: satellite images are used overview: credit assessment, social, legal
to estimate historical volume and and environment compliance, soil use,
predict coming cycles productivity…
Total 2021:
Agriculture
Livestock
17.4
290%
266% Brazil achieved its
+16% 250% emissions goals¹ in Agri,
per year removing 152mn ton CO2e
+16% 11.5
191% (113% of target by 2020)
1.9 39%
25%
2005 2010 2015 2020 Biological Plantated No-till ILPF Animal Recovered Total
fixation forests farming waste Pastures
of N2 treatment
34 75 1.5%
108
42 28 69 1.8%
9 0.1%
4133
34 8 41 0.3%
Cropland Livestock
1. Land used for cultivation of crops and animal husbandry. It does not include land that is potentially cultivable but is not normally cultivated
Source: MAPBiomas, Index Mundi, Worldbank, BCG analysis 66
Backup ❭
❭ +
Food production at scale | Brazil is the largest exporter of
Soybeans
2019, in US$ Billion Cumulative
World
RANK
exports – 10 largest exporters share (%)
Indonesia
Source: Observatory of Economic Complexity; BCG analysis 70
0.95
Backup ❭
❭ +
Food production at scale | Brazil is the #1 exporter of Raw Sugar,
Cane
2019, in US$ Billion Cumulative
World
RANK
exports – 10 largest exporters share (%)
Green industrial
products
BR can be a global hub of low-carbon industrial
goods
74
❭
❭ +
Thanks to its cleaner energy matrix and green
initiatives, Brazil already produces "greener" industrial
goods today Select examples
Brazilian steel emits Brazil is the lowest Brazil reduced by Brazil reduced by 44%
~35% less than world's emission country in ~5%1 GHG emissions GHG emissions in
average (1.7 vs 2.7ton the world, with 11% by volume in mining chemical industrial
CO2e/ton steel) lower GHG emissions sector (2018-2020) processes (2006-2016)
than world's avg.
Gerdau has +250k hectares Votorantim has set a Vale has signed an Braskem committed to
of forests in MG, being the NZ goal by 2050 by agreement with the becoming NZ by 2050² by
largest producer of plant- replacing fossil fuels with government of Pará to increasing use of green
based charcoal in the world biomass and municipality build a “green” crude iron plastic and clean energy,
(+ high use of scrap metal) waste plant in the city of Marabá amongst other initiatives
1. Estimated based on Vale, whose estimated market share is ~55% (in revenue, 2020) 2. On scopes 1 and 2, scope 3 not included. Source: SNIC, CNI, Citi GPS, Raizen Ethanol Sustainability
report, expert interview, press releases, BCG analysis 75
+
❭
❭
Low-carbon Steel
Of power matrix is
85% clean (vs. 25% world's) Final
industrial
products
Low-carbon Cement with low
1. Levelized cost of energy 2. Levelized cost of Hydrogen 3. Based on 2019 key importers 4. Considers iron ores as reference for market share
Source: Observatory of Economic Complexity; BCG analysis 76
➤
➤ +
... and attract $2-3T of investments over three
decades, potentially doubling BR private investment
level by 2030 Preliminary
1 2 3 4 5
Investment Brazil new Climate Brazil Business as Brazil annual
Emissions baseline
projections investments Usual investments investment level
1. Investments to explore BR carbon positive potential were estimated based on two key categories mapped: Nature-based solutions and Clean Energy. Other levers, like green industrial products, exist
but are expected to hold smaller potential or are partially covered by either NBS or Energy. Remaining potential was group in "Others" and estimated to bring an additional investment level of 10%.
Source: BCG analysis 78
❭
➤ +
Investment needs to reach Net-Zero | $2T required in 30
yrs
A Summary of climate finance investment need in Brazil until 2050, USD B
240-270
$2T
of investments
(11%) 200-240 will be required
115-320
(~11%)
300+ Mt CO2e per year by 2030 LCOE: $25/MWh pre-incentives; (cost <$1.9/Kg pre-incentives
through NBS, creating $15B+ in 7-10 GW installed yearly, with + competitive/fast delivery of
additional yearly revenues in $10B+/yr in investments derivatives to Europe/others)
BR
NOW is
the time to
act!
82
BR Climate Potential
Action plan to Seize
+
Zero illegal
2030 2030 2030 2028
Deforestation
Targets added in
the last 2 years
Net Zero by - 2060 2050 2050
CURRENT TARGETS
1. NDC stands for National Determined Contribution
Source: Brazil's NDC submission; NDC do Brasil: Avaliação da atualização submetida à UNFCCC 2022; BCG analysis 83
+
❭
❭
1 Set net-zero ambition 5 Set ambitious targets 11 Push for transparency 16 Influence and lead
(Aligned to Paris agreement) (Aligned to Paris agreement) (Standards on emissions, ESG risks (Your organization, government,
& impact measurem. frameworks) others)
2 Define roadmap 6 Reduce CO2 intensity 12 Scrutinize targets 17 Make your home
(With interim targets by sector) (On operations and value chain)
(On operations and value chains) green
(Green power, recycle)
3 Introduce carbon 7 Assess climate risks 13 Support plans, actions 18 Change mobility habits
revenues)
(And protect industry, low-earners)
Challenges &
2
opportunities Manufacturing Metals & &
Forests Cattle raising Agriculture Transport
Key
3 Access to Capacitation Fostering of Policy and Infra. planning
Enablers
cheap funding and skilling Innovation governance and roll-out
1 1
Continuously 33% of AuM
40% of
A platform to go 2-5ppt. margin evolving 0.2-0.4ppt. lower invested >10% valuation
millennials use
beyond the core premium regulation cost of capital sustainably premium
ESG to select
job
There is one and only one social The climate crisis has already been
responsibility of business—to use its solved. We already have all the facts
…expectations resources and engage in activities and solutions. All we have to do is
designed to increase its profits to wake up and change.
from the
Environmentally public have
Milton Friedman,
1970
Greta Thunberg,
2018
responsible changed…
companies
drive higher
Life Magazine 1962 Time Magazine, December 2019
(potential) %
employees
of employees said that they've left a job in the past
~30 because of the company's lack of a sustainability plan
%
Source: World Resource Institute 2018; Accenture Chemicals Global Consumer Sustainability Survey; BCG analysis 87
+
❭
❭
leads to market New sales by C&A with new Faster growth for Unilever's
C2C1 Certified apparel "sustainable living"
expansion & ~4M line in first two years2 – best- 69 brands3 vs rest of
selling products with margins
new business
business, relating to 75% of
%
fields
growth
Environmentally
responsible
actions drive Reducing
water stress2
Promoting
employee safety3
Avoiding &
combating corruption4
higher
• Xi Jinping’s calling for "green finance" and Hong Kong now requiring
reporting on ESG risks and materiality methodology
• "Plastic Waste Import Ban" – regulation prohibits import from
certain type
of plastics packaging with low grades and high pollution
Source: BCG analysis 90
❭
❭ +
Oil & gas Automotive Aviation Cement Chemicals Food Steel FMCG Shipping Power
And allow
-
- 23bp
- -
- 41bp
- 56bp
companies to - 72bp 63bp
82bp
- 100bp
access -
180bp
134bp
cheaper -
capital...
266bp
investor
decision- making Aviation FMCG Shipping Chemicals Cement Steel Food Automotive Power
Drivers of company
valuation1 (%)
BCG's Value Creators
Report 2021 found
emissions intensity as
Company Estimated second largest driver of
valuation
50
EBITDA margin
company valuation
benefits from Less carbon-intensive
lower emissions
1. Considering nonfinancial variables in financial regression analysis; 2. Scope 1 and 2 emissions per dollar of revenue
Source: BCG's Value Creators Report 2021: Value Creation in a Decarbonizing Economy; S&P Capital IQ; BCG
ValueScience Center 93
+
❭
❭
5
pasturelands
7 4
agricultural sector alone
Source: How Emerging Economies Can Pursue Green Recoveries; World Resources Institute 2020; BCG Analysis 94
+
❭
❭
2019, in US$ Bn
being discussed target EU is implementing
Carbon Border Tax
(likely by 2023) and
China 63.4 others may follow
EU1 30.0
USA 29.7 Other core markets
Argentina 9.8 already announced
Japan 5.4 NZ commitments
Up to 20% of farmland
Lower GDP (33M hectares) lost by 2050
and higher
Droughts Inflation:
(less rain) Lower BR
purchase ~51M people live in
power
coastal
and will likely need to relocate
Source: Impacts of Climate Change on Brazilian Agriculture, World Bank 2013; Climate & Health Country Profile – Brazil, WHO 2015; IBGE; press search; BCG analysis 96
❭
❭
97
GHG emissions
Diagnostic of BR
+
5 Brazi 2.4 4% #
1.68 +33
2.03
%
1.36 1.29
1.17
0.97
0.74
2019
GDP
1.7 1.1 2.9 1.9 1.4 14.3 87.6 1.7 1.7 21.4 5.1 2.0 3.9 2.7
(US$ Tn) 1.3 1.4 2.9
1. In kg CO2e/US$, only for economies with GDP > US$1 Tn
Source: Climate TRACE; World Bank; BCG analysis 102
❭
❭ +
Brazil's emissions & challenges
highly differ from those in rest of the Other countries mainly
struggle with:
world Power
Total GHG emissions ~1/3 of China's emissions
2019, share of total (in Billion Tons CO2e) ~1/4 of USA's emissions
100% Only 4% of Brazil's
emissions
reserved.
rightsreserved.
Only 5% of Brazil's
emissions
Allrights
Top 10 13% 8% 27% 19% 11% 10% 7% 5% 35.2 Brazil must focus on:
Group. All
(excl. Brazil)
Consulting Group.
Forests (deforestation)
Boston Consulting
~1/2 of Brazil's emissions
Brazil 49% 21% 4 5% 8% 4 7% 2.4
by Boston
% %
Agriculture (incl. meat)
~1/5 of Brazil's emissions
2022 by
AFOLU1
© 2022
Copyright ©
1. Combination of agriculture, ~70% of all Brazilian emissions
Copyright
Forests Power Transport Buildings Maritime
forestry and other land use
Source: Climate TRACE; BCG Agriculture Manufacturing Oil and gas Waste Mining 103
103
analysis
❭
❭ +
Brazil's emissions differ from other large emitters'
Top 10 countries – Greenhouse gas (GHG)
emissions
Per country, 2019, share of total (in Billion Tons CO2e)
13.8 7.1 3.9 2.4 1.9 1.6 1.4 1.0
3.4
6% 7% 1.2 3% 4% 1%
100%
8% 9% 0%
11% 7% 8% 10% 1%
6% 6% 4% 3% 13%
8% 8% 11% 8%
8 16% 16%
6% 8% 5% 3% 5% 22%
% 5
4% 8% 11% %
7% 17%
20% 9% 6%
24% 11% 21% 13%
32%
12%
19% 9% 95%
Forests Power Manufacturing Transport Oil and Buildings Waste Maritime Extraction
gas
104
Agriculture
❭
❭ +
BR emits ~4% of world's GHG; share varies per
sector
Share of GHG emissions coming from Brazil, in each
Rest of the World vs. Brazil, 2019, share of total emissions (in Billion Tons
BR on global
sector BR GHG rank
CO2e)
Forests 89 11% 11.2 #1
%
Agriculture 92 8 6.4 #3
% %
Extraction 92 8 0.1 #4
% %
Waste 95 5 3.3 #4
% %
Transport 97 3 7.3 #7
% %
Oil and gas 98 2% #11
397 3,064
Total Forest fires Forest Scrubland Savannas Total Forest fires Forest Scrubland Savannas
clearing fires fires clearing fires fires
Brazil, #1 polluter in Forests, is responsible alone for ~12% of all global emissions in this sector.
Similar profiles in Brazil and RoW: ~60% of the emissions come from forest fires & ~30% from forest clearing.
Source: Climate TRACE; BCG analysis 106
Backup
+
❭
❭
(35%)
123
Brazil is responsible for ~9% of all global emissions in the sector. BR emissions are more concentrated
in enteric fermentation (68%) when compared to RoW (42%) and less in managed soils (24% vs 35%).
Source: Climate TRACE; BCG analysis 107
Backup
+
❭
❭
4.2 3.1 51
(100%) (73%) ~8% 15 ~92%
of all global (100%) of all global
emissions in 22 emissions in
Extraction
(30%) Extraction
(43%)
Brazil is responsible for ~8% of all global emissions in the sector. BR emissions are more concentrated
in iron mining (73%) when compared to RoW (30%) and less in copper mining (11% vs 43%).
Source: Climate TRACE; BCG analysis 108
Backup
+
❭
❭
Brazil is responsible for ~5% of all global emissions in the sector. BR emissions are more concentrated
in wastewater (60%) when compared to RoW (37%) and less in open burning waste (3% vs 34%).
Source: Climate TRACE; BCG analysis 109
Backup
+
❭
❭
Brazil is responsible for ~3% of all global emissions in the sector. BR and RoW
emissions are more concentrated in roads (88% and 83%). Other categories are less
relevant. 110
Source: Climate TRACE; BCG analysis
Backup
+
❭
❭
99 44 5,596 2,689
(100%) (45%) ~2% (100%) (48%) ~98%
of all global of all global
emissions in emissions in
Oli & Gas Oil & Gas
39 1,295
(40%) (23%)
Total Oil and gas Oil refining Solid fuel Total Oil and gas Oil refining Solid fuel
production transformation production transformation
Brazil is responsible for ~2% of all global emissions in the sector. BR emissions are more concentrated
in oil refining (40%) when compared to RoW (23%) and less in solid fuel transformation (16% vs 29%).
Source: Climate TRACE; BCG analysis 111
Backup
+
❭
❭
Total Steel Other Cement Pulp Petro- Aluminum Total Steel Other Cement Pulp Petro- Aluminum
manuf. production paper chemicals manuf. production paper chemicals
Brazil is responsible for ~1% of all global emissions in the sector. BR emissions are more concentrated
in steel (38%) when compared to RoW (24%). Other manufacturing and cement are relevant across.
Source: Climate TRACE; BCG analysis 112
❭
❭ +
Globally, 3 sectors are responsible for ~55% of emissions
Global GHG emissions per sector (2015-2020) in Billion Tons CO2e XX Sector's contribution to total global emissions
~55% %
Power Forests Transport Agriculture
22%
Manufacturing 18% 12 10
15% 15 % 15 %
15 15 15
10 10 10 10 10
5 5 5 5 5
0 0 0 0 0
'15 '16 '17 '18 '19 2020 '15 '16 '17 '18 '19 2020 '15 '16 '17 '18 '19 '15 '16 '17 '18 '19 2020 '15 '16 '17 '19 2020
2020 '18
10 10 10 10 10
5 5 5 5 5
0 0 0 0 0
'15 '16 '17 '18 '19 '15 '16 '17 '18 '19 '15 '16 '17 '18 '19 '15 '16 '17 '18 '19 '15 '16 '17 '18 '19
2020 2020 2020 2020 2020
Source: Climate TRACE; World Bank; BCG analysis 113
❭
❭ +
World's Top 5 GHG polluters by segment
Top 5 GHG emitters (and Brazil) by sector, in 2019
Power Forests Transport Agriculture
Manufacturing
Gt Co2e Share Gt Co2e Share Gt Co2e Share Gt Co2e Share Gt Co2e Share
#1 China 4.85 35% #1 Brazil 1.19 11% #1 China 4.44 46% #1 USA 1.71 23% #1 India 0.84 13%
#2 USA 1.74 12% #2 Australia 0.98 9% #2 India 0.78 8% #2 China 0.89 12% #2 China 0.65 10%
#3 India 1.15 8% #3 Congo1 0.96 9% #3 USA 0.66 7% #3 India 0.31 4% #3 Brazil 0.52 8%
#4 Russia 0.83 6% #4 Russia 0.92 8% #4 Russia 0.39 4% #4 Russia 0.25 3% #4 Indonesia 0.45 7%
#5 Japan 0.51 4% #5 Angola 0.67 6% #5 Japan 0.26 3% #5 Japan 0.23 3% #5 USA 0.40 6%
0.14
#2 China 1.08 19% #2 USA 0.76 18% #2 India 0.31 9% #2 Liberia 11% #2 Australia 8.42 15%
0.10
#3 Russia 0.54 9% #3 Russia 0.25 6% #3 Indonesia 0.17 5% #3 Marshall Isl. 0.09 9% #3 Chile 6.87 12%
#4 Canada 0.26 4% #4 India 0.23 5% #4 Brazil 0.16 5% #4 Hong Kong 0.08 9% #4 Brazil 4.20 8%
#5 Indonesia
1. Democratic Republic0.21 4%
of Congo #5 Japan 0.17 4% #5 USA 0.14 4% #5 Singapore 7% #5 USA 3.56 6%
Source: Climate TRACE; BCG analysis 114
0.06
❭
❭ +
Typically, a few countries contribute to ~60% of all
GHG
Cumulative share (up to 60%) of global GHG emissions, in 2019
(%) Transport Agriculture
Power Forests Manufacturing USA 23.3% India 13.0%
China 35.5% China 23.1%
China 34.6% Brazil 10.6% China Brazil 31.2%
India 39.7%
45.7% Indonesia 38.2%
Russia 43.1%
USA 47.0% Australia 19.3% India USA 44.4%
53.7% Japan 46.2%
Pakistan 47.6%
India 55.2% Congo 27.8% USA Germany 49.0% Bangladesh 49.7%
60.5% Brazil 51.7% Argentina 51.8%
Russia 61.2% Russia 36.1% Mexico 53.9% Russia 53.7%
Angola France 56.1% Myanmar 55.5%
42.1% UK 58.1% Ethiopia 57.3%
USA Mexico 58.9%
Indonesia 60.2%
46.9% Australia 60.4%
Indonesia 50.8%
1.7
Gt CO2e/yr
1.5
Gt CO2e/yr
1.3
Gt CO2e/yr
1.0
Gt CO2e/yr
1.0
Gt CO2e/yr
Source: BBC; Instituto Brasileiro de Florestas; Observatório Pantanal; Reuters, Statista; press search 127
Thank you
bcg.com