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Global

Dialogueon

BorderCarbonAdjustments

ThecaseofBrazil

IISDREPORT

lIlsD

InternationalInstituteforsustainableDevelopment

?2024InternationalInstituteforSustainableDevelopment|IISD.orgJuly2024

GlobalDialogueonBorderCarbonAdjustments:ThecaseofBrazil

?2024InternationalInstituteforSustainableDevelopment

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GlobalDialogueonBorderCarbonAdjustments:ThecaseofBrazil

July2024

WrittenbyCINDES–CentrodeEstudosdeIntegra??oe

Desenvolvimento

Photo:iStock

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GlobalDialogueonBorderCarbonAdjustments:ThecaseofBrazil

TableofContents

1.0Introduction 1

2.0Context 3

2.1WhatIsaBCA? 3

2.2WhyHaveBCAsBecomeaRelevantTopicintheInternationalAgenda? 4

2.3Brazil’sIn-CountryProcessanditsObjectives 6

3.0TheExpectedImpactsofEU’sCBAMinBrazilandtheRisksofBCADiffusiontoits

Jurisdictions 7

3.1TheRelevanceoftheEUMarketforCBAM-AffectedProducts 7

3.2Brazil’sRelevanceasaSuppliertotheEuropeanMarketandItsMainCompetitors 10

4.0ReactionsandResponsesbytheMainStakeholders 14

4.1ResponsebytheBrazilianGovernment 14

4.2ResponsesbytheBusinessSector 14

5.0TheDialoguesinBrazil:Stakeholders’mainconcernsandstances 18

5.1TheFirstDialogue:Mainstatementsfromstakeholders 18

5.2TheSecondDialogue:KeydesignelementsofBCAs,principlesandbestpractices,

andimplementationissues 19

6.0TheFinancialSectorRole:Aworkinprocess 23

7.0BCAsasaPublicIssueinBrazil:Alimiteddebate 25

References 27

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GlobalDialogueonBorderCarbonAdjustments:ThecaseofBrazil

ListofFigures

Figure1.Chapter26productsexportsdistribution(averageparticipation2020–2022) 8

Figure2.Chapter72productsexportsdistribution(averageparticipation2020–2022) 9

Figure3.Chapter73productexportdistribution(averageparticipation2020–2022) 9

Figure4.Chapter76productsexportsdistribution(averageparticipation2020–2022) 10

ListofTables

Table1.BrazilianexportsofCBAMproducts–EU(average2020–2022) 8

Table2.Theworld’smainexportersofCBAM-affectedproductsintheiron,steel,and

aluminumsectors 11

Table3.EU’smainsuppliersoftheCBAM-affectedproductsintheiron,steel,andaluminum

sectors 11

Table4.RelativeexpositiontotheCBAMindexfortheironandsteelsector:Braziland

itsmaincompetitorsintheEU 12

Table5.RelativeexpositiontotheCBAMindexforthealuminumsector:Brazilanditsmain

competitorsintheEU 13

ListofBoxes

Box1.CNI’ssubmissiontotheEuropeanCommissiononJuly11,2023:Briefsummary 15

Box2.CNIrecommendationsforthedesignofnewBCAs 16

Box3.InterviewwithJoaquimLevy:Summarynotes 23

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GlobalDialogueonBorderCarbonAdjustments:ThecaseofBrazil

1.0Introduction

TheEuropeanUnion’s(EU’s)pioneeringCarbonBorderAdjustmentMechanism(CBAM)isnotanaccidentofpolicy.Severalothercountriesareconsideringadoptingbordercarbonadjustment,andmorewillinevitablydoso.

Withsocietiesincreasinglydemandingclimatechangemitigationactionsfromtheir

governments,anycountryorjurisdictionthatrespondsbyimplementingcarbonpricingwillhavetograpplewithdeployingalevelplayingfieldtotheiremissions-intensive,heavilytradedsectors—steel,aluminum,chemicals,plastics,cement,fertilizers,etc.

Wherethepolicyresponseinvolvesprotectionlikeabordercarbonadjustment(BCA),asithasintheEU,therearethreesortsofrisksfordevelopingcountries:

?First,regimescouldbeestablishedwithoutcaretoharmonizerequirements,withexportershavingtoreportandcertifycarbonemissionstodifferentstandardsinmultipleexportmarkets.

?Second,suchregimesmaynotconsiderthecircumstancesofdevelopingcountry

exporters,whomaylackaccesstofinanceforlow-carboncapitalinvestments,who

mayneverhavebeenrequiredtoestablishgreenhousegas(GHG)accountingregimes,andwhomaybesituatedincountrieswithlowcapacitytosupporttheirlow-carbon

transitions.

?Third,suchregimesmaybedeliberatelycraftedtoshutoutexportsfromdevelopingcountriesandotherexporters.

WiththeleadershipoftheInternationalInstituteforSustainableDevelopmentandthe

supportoftheLaudesFoundation,thisprojectaimstolowereachofthoserisksbycraftinganinternationallyagreedlistofbestpracticesinthisnovelareaofpolicymaking.

ThisinitiativeaimstobuildaglobaldialogueonBCAs,drawinginstakeholderandinvestorperspectivestoinfluencetheshapeofgovernmentpolicytowardeffectiveandequitable

climatemitigation.Thisprocessbeginswithnationaldialoguesinfivecountries,including

CanadaandtheUnitedKingdom(countriesintheprocessofadoptingtheirownBCA

mechanisms)andBrazil,Vietnam,andTrinidadandTobago(countriespotentiallyaffectedbytheeffectsofBCAsontheirexports).

InBrazil,thedialogueswerecoordinatedbyCentrodeEstudosdeIntegra??oe

Desenvolvimento(CINDES)andbenefitedfromcooperationwiththeNational

ConfederationofIndustry(CNI).Brazilwasthefirstcountrytoconcludethenationaldialogue,andthisreportgathersthemainfindingsoftheinitiative.

Thisreportisorganizedintosevensections.Section2setsoutthescene,discussingthe

context,therelevanceofthetopic,andtheorganizationofthedialoguesinBrazil.Section

3assessestheexpectedimpactsoftheEU’sCBAMinBrazilandtherisksofBCAdiffusiontootherjurisdictions,usingdatatoillustratethefindings.Section4summarizesthemain

reactionsofstakeholderstothetopicoftheEU’sCBAM.Section5detailsthestances

undertakenbystakeholdersparticipatinginthedialoguesregardingthemaincomponentsof

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GlobalDialogueonBorderCarbonAdjustments:ThecaseofBrazil

CBAM.Itisfollowedbyasmallsixthsectionsummarizingtheviewsofthefinancialsectoronthetopic.Section7presentssomefinalthoughtsaboutthedebateinBrazilandstakeholders’viewsonwhatthefollowingstepsshouldbe.

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GlobalDialogueonBorderCarbonAdjustments:ThecaseofBrazil

2.0Context

2.1WhatIsaBCA?

ABCAisanattempttomakeimportedgoodsbearthesamecarboncoststhatdomestic

goodsmustbear.Itisusuallyaimedatenergy-intensive,trade-exposed(EITE)sectorssuch

assteel,aluminum,cement,fertilizers,plastics,andchemicals.Withinthosesectors,thefocusisupstreamonbasicandsemi-processedmaterials.Thosedomesticallyproducedgoods,

beingenergy-intensive,willfeelthepinchofanycarbonpricing,butsincetheyaretrade-

exposed,theirproducerswillfinditdifficulttopassalonganycarboncoststoconsumerssinceinternationalcompetitorsmaynotfacesimilarcosts.

Thatprospectriskscarbonleakage,whichcanhappenthroughtherelocationoffirmstootherjurisdictions,throughthelossofmarketsharetoforeignproducers,orthroughthediversionofgreenfieldinvestmenttootherjurisdictions.Evidenceismixedontheexistenceofcarbonleakage,butitiswidelyagreedthattheriskofleakagewillincreaseascarbonpricesbecomemoremeaningful.

ThereisnotasingletypeofBCA;rather,thefinalresultandimpactswilldependstronglyonchoicesmadeaboutpolicyoptionsduringtheelaborationprocess.Someofthebasicchoicesincludethefollowing:

?Willitassessalevyonimportsonly,orwillitalsorebatecarboncoststoexports?

?Whatgoods/sectorswillitcover?Howfarupanddownwillthevaluechainextendincoveredsectors?

?Howwillembodiedemissionsbeestimatedattheborder?Actualdata?Assumeddefaults?Ifthelatter,canthedefaultsbechallenged?

?WhatGHGemissionswillbecovered?Possibilitiesincludedirect(scope1)emissions,emissionsfrompurchasedelectricity(scope2),orvarioustypesofscope3emissions

(e.g.,frompurchasedinputgoodsorfromthetransportofgoods).

?Whatpricewillbeputonembodiedemissions?

?Willitexemptstatesfromcoveragebasedonnational-levelcriterialikeclimateambitionordevelopmentstatus?

?WilltheBCAchargebeloweredtoaccountforacarbonpricepaidinthecountryofexport?Whataboutnon-price-basedclimatepolicies?

?Whatwillbedonewiththerevenues?Willanybetransferredtotheaffectedcountriesorproducers?

Theunderlyingclimatepolicyinstrumentwilldeterminemanyofthesepolicychoices.For

example,iftheinstrument(acarbontaxoranemissionstradingsystem[ETS]regulation)

onlycoversdirect(scope1)emissions,thenthelikelychoiceforaBCAwouldbetocoverthesameemissions.

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GlobalDialogueonBorderCarbonAdjustments:ThecaseofBrazil

Intheabstract,itisimpossibletosaywhetherBCAsareeffective,fair,andlegal;thiscanonlybedoneinthecontextofaspecificBCA.TheanswerswilldependfundamentallyonhowtheBCAinquestionfinallymanifestsduetotheabovementionedchoices.

TheimplicationisthatBCAshavethepotentialtobeaninstrumentinlinewithnational

andinternationallegalobligationsthatfocusjustonenvironmentalprotection.Still,italsocanpotentiallybeaprotectionistinstrumentfocusedonunfairlyandillegallydisadvantagingforeignproducers.

BCAspresentfundamentalchallengesforcountriesconsideringitsuseasapolicytoolandforthosefacingtheprospectofsuchatoolbeingusedbytheirtradingpartners.

ForcountrieslikeBrazilthatarefacingtheprospectofBCAsintheirtradingpartners,thechallengesinclude,asastartingpoint,howbesttosupporttheirexportersinunderstandingandcomplyingwithBCAprovisionswiththeleastpossibleimpairmentofcompetitiveness.

Atahigherlevel,thechallengesincludehowtoinfluencethepolicyanddesignchoices

madebytheirtradingpartners—thatis,howtoensurethattheirrealitiesandconcerns

areconsidered.Aspartofthatchallenge,akeyissueishowtohelpensurethatiftherearemultipleBCAregimes,theirvariousinstitutions,measurements,andreportingprotocolsarenotdivergent,needlesslyforcingexporterstoconformtodifferentrequirementsinregimesaimedatthesameobjectives.Anotheraspectofthatchallengeisthequestionofwhat

normstouseinassessingandcritiquingBCAregimesandproposals.TradelawoffersonebenchmarkbywhichsomeaspectsofaBCAregimecanbejudged,butitisnotparticularlyhelpfulinansweringmanyrelevantdesignquestions.

Thecriticalstarting-pointquestionstoanswerineachcountry,aspartofanefforttoaddressthepossibilitythattradingpartnerswilladoptBCAs,are:

?Whatarethecountry’ssectoralvulnerabilitiestoforeignBCAs?Whatarethepotentialimpacts?

?WhatoptionsandchannelsexisttoinfluencetheadoptionordesignofforeignBCAs?

?Whatprinciplesorbest-practicestandardscouldbeusedasbenchmarkstojudgethedesignchoicesmadebyforeigndesignersinelaboratingaBCAregime?

2.2WhyHaveBCAsBecomeaRelevantTopicintheInternationalAgenda?

BCAsbecomeahottopicintradeandenvironmentpolicycircles.Theproximatereasonis

thecomingintolawoftheEU’sCBAMinMay2023anditsenforcementinOctober2023.

StartinginJanuary2026,CBAMwillimposechargesonupstreamgoodsintheironandsteel,aluminum,cement,andfertilizersectors(aswellasonelectricityimports),forcingthemto

purchaseemissionsallowancesasiftheyhadbeenproducedundertheEUETS.

Buttheunderlyingreasonsaremorefundamental.Asthesciencearoundclimatechange

becomesmoreunequivocal,theimpactsofclimatechangeareincreasinglyfelt,thecostof

low-carbontechnologiescomesdown,andgovernmentsareunderincreasingpressuretoact.

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GlobalDialogueonBorderCarbonAdjustments:ThecaseofBrazil

Ascountriesrampuptheirclimateambition,somewillimposecostsonproducersinEITEsectors.Iftheydo,theywillbeforcedtoconsiderhowtoprotectthosesectorsfromleakage:theincreaseinGHGemissionsinotherjurisdictionsinresponsetoclimatepoliciesinan

implementingjurisdiction.Withnoplantoaddressleakage,policy-makersriskthepolitical

falloutfromfosteringdeindustrializationratherthandecarbonization.BCAsareoneofonlyafewtoolsdedicatedtothisend,soitwillbeincreasinglyconsidered.

TheresultisaflurryofinterestinBCAs:

?CanadaandtheUnitedKingdom,bothcountrieswithcarbonpricingregimes,havecompletedformalpublicconsultationsonwhatBCAmightlooklikeintheircountries(DepartmentofFinance,2021;UnitedKingdom,2023a),andtheUnitedKingdomhasannouncedthatitwillimplementaBCAasof2027(UnitedKingdom,2023b).

?Japan’s2020GreenGrowthStrategycalledfortheconsiderationofBCAs,thoughtherehasbeennopublicconsiderationsincethattime(MinistryofEconomy,TradeandIndustry,2020).

?InAustralia,aspartofthecountry’skeystoneclimateregulationreform,theSafeguardMechanism,thegovernmentisundertakingareviewofpolicyoptionstoaddress

carbonleakage,explicitlyincludingBCAs(DepartmentofClimateChange,Energy,theEnvironmentandWater,n.d.,2023).1

?TheUnitedStateshasrepeatedlyannounceditsintentiontoputaBCAregimein

place,startingwithPresidentBiden’spresidentialcampaignandcontinuingwith

announcementsintheU.S.TradeRepresentative’s2021AnnualReport.SeveralfailedlegislativeattemptsatcarbonpricingandBCAshavegonebytheboardsincethen,

butarecentbillbySenatorCassidyisseekingbipartisansupportbyproposingbordercarbonchargeswithoutadomesticcarbonprice.2

Morebroadly,BCAsarepartofalargertrendtoconsiderthecarboncontentoftradedgoods,reflectedinguidelinesforgreengovernmentprocurement,deforestation-freeproductsrules,privatesectorlow-carbonrequirementsforupstreamvaluechains,andproposalssuchastheU.S.–EUGlobalArrangementonSustainableSteelandAluminumandvariousversionsof

aclimateclub.3

Inshort,weareseeingincreasinginterestintoolslikeBCAsasapartoftheinevitablepolicy

responsetoworseningclimatechange.Theupshotisthatwewillsurelyseemoresuchtools

inuseinthecomingyears,moretradedgoods,andmoresectorscovered.Whilethecurrent

trendsweighheavilytowardusebyhigh-incomecountries,thatmaychange;manyemerging

developingcountrieshavestrongindustrialsectorsandplansforclimateambitionoftheirown.

1See

.au/sites/default/files/documents/safeguard-mechanism-reforms-factsheet-2023.pdf

2See:

/bill/118th-congress/senate-bill/3198/text

3Aclimateclubisacoalitionofcountriesintendingtoadoptstringentclimatechangemitigationpolicies.WilliamNordhausproposedthatcountrieswillingtoadoptthesepoliciesshouldcreateaclub,introducecarbonpricing

amongmemberstates,andimposefeesonimportedgoodsfromcountriesthatarenotpartoftheclubnoradopt

similarcarbonpricingmechanisms(Nordhaus,2015).

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GlobalDialogueonBorderCarbonAdjustments:ThecaseofBrazil

2.3Brazil’sIn-CountryProcessanditsObjectives

InBrazil,thedialogueprocesswasstructuredbasedontwoworkshops,whichgatheredthe

mainstakeholdersofthe“BCAissue.”Foreachworkshop,CINDESprepareddocumentsandmaterialsthatwerepreviouslydistributedtothosewhocouldconfirmtheirattendance.Aftereachworkshop,CINDESpreparedareportsynthesizingthedebatesandconclusiveremarksandrecommendations.Attheendofthesecondworkshop,theparticipantswereaskedtofilloutashortfeedbackquestionnairetoassessthedialogues’mainimpactsandidentifypossiblenextstepsorfollow-upactions.Thefirstworkshopwasheldinahybridformat,whilethe

secondwasin-person.

ThetwoworkshopswereorganizedthroughapartnershipbetweenCINDESandCNI,whosharedthecoordinationoftasksfortheevent,includingidentifyingthestakeholderstoinviteandissuinginvitations,amongotherresponsibilities.

CNIprovidedthevenuesandinfrastructurefortheworkshops,whileCINDEScontributedtothelistofinviteesandthetechnicalcontentforthemeeting.Thefirsteventwasheldinahybridformat,within-personandvirtualparticipationfrominterestedparties.

Theproject’sfirstworkshoptookplaceontheafternoonofSeptember21,2023,atthe

headquartersofCNIinBrasília,withsignificantparticipationfromfederalgovernment

agenciesandrepresentativesofbusinessassociationsinthesteel,aluminum,chemical,glass,andoilsectors,eventhoughsomeofthesesectorsarenotcurrentlycoveredbythescopeoftheEU’sCBAM.

Theabsenceofinvitedrepresentativesfromthefinancialandworkers’confederationsis

anindicatorthatCBAMhasnotyetreceivedattentionontheirpolicyagendas,whichis

unsurprisingforthosefollowingBrazil’seconomicandpoliticallandscapeanddiscussions

abouttradepolicy.Labourunionsgenerallydonotgetinvolvedinthedebaterelatedtotradepolicyexcepttosupportbusinesses’demandsforprotection.Inasimilarvein,theprivate

financialsector’sinterestintradepolicyariseswhentrademattersareperceivedasasourceofrisksoropportunitiesfortheirclients.InBrazil,concernsrelatedtoCBAM/BCAsdonotseemtohavereachedthatlevelyet.

Thesecondmeeting,heldinS?oPauloonNovember23,2023,atCNIlocaloffices,

involvedonlynon-governmentalstakeholders(businessorganizationsandcompanies

fromindustrialsectorspotentiallyaffectedbyBCAs,thinktanks,andrepresentativesof

theacademia).Itsobjectivewastoformulateproposalsandrecommendationssothat

mechanismssuchastheEUCBAMconsidertheinterestsofthemainactorsinvolvedand/orthoseimpactedbythemechanism.

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GlobalDialogueonBorderCarbonAdjustments:ThecaseofBrazil

3.0TheExpectedImpactsofEU’sCBAMinBrazilandtheRisksofBCADiffusiontoitsJurisdictions

ToBrazil,theprimaryconcernraisedbyCBAMrelatestoitssystemicimpactsonthe

internationaltraderegime.Itsunilateralnatureandtheprospectsofitsdiffusiontovariousnationaljurisdictions,eachwithitsownmodelsandtechnicalstandards,canbringaboutdiversionsanddistortionsinglobaltrade,withadverseeffectsoneconomicgrowthand

consumerwelfare.

3.1TheRelevanceoftheEUMarketforCBAM-AffectedProducts

ConsideringtheproductswithinthescopeoftheEU’sCBAM—theonlyBCAforwhich

ruleshavealreadybeendisclosed—itisestimatedthatjustoverUSD3billionofBrazilian

exportsin2022wouldbeaffectedbythemechanism.TheshareofBrazilianexportscoveredbyCBAMinthecountry’sGDPisonly0.15%,indicatingthataslongasthemechanismislimitedtotheEuropeanbloc’smarket,itseffectsontheBrazilianeconomywillbelimited.4

ExportsofproductsincludedinCBAMaccountedforanaverageof5.8%ofBrazil’s

totalexportstotheworldoverthepast3years(2020–2022).TheEuropeanUnion

accountedforapproximately10%ofthetotalBrazilianexportsoftheseproductstothe

world,withtheaveragevalueexportedtotheEUduringthisperiodequivalentto0.6%ofBrazil’stotalexports.

ProductsintheironandsteelsectoraccountforalmostalltheBrazilianexportsaffectedbytheEuropeanmechanism:92%ofthevalueofexportsoftheproductgroup,withaluminumcominginsecondat3%ofthetotal,alwaysconsideringtheaverageoftheprevious3years.Therefore,theanalysisoftheimpactsofCBAM,initscurrentconfiguration,inBrazilshouldfocusonthissubsetofproducts.

TheEUisnotasignificantdestinationforBrazilianexportsofthoseproducts,asshown

inTable1.Forironandsteelproducts,theEuropeanblocrepresents10.7%ofthetotal

productsexportsinChapter72—castiron,iron,andsteel—byfar,themostrelevantinexportvalueand6.3%forproductsinChapter73(worksofcastiron,iron,orsteel).

Cementexportsarenegligibleintermsofvalue,withBraziliantradebeingmoreintensewithneighbouringcountries.Inthecaseofhydrogen,aproductinChapter28(inorganicchemicalsproducts),exportsarestillincipient.However,thereisasignificantinvestmentmovementinthecountry,mostofwhichisaimedattheEuropeanmarketandisbeingdevelopedtomeet

theregulationsimposedbythebloc.Finally,inthecaseoffertilizers,Brazilisanetimporteroftheproduct,whichisessentialforthecountry’slargeagriculturalproduction.

4AllthefiguresrelatingtoBrazilianexportsareofficialdata,extractedfrom

.br/pt/home

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GlobalDialogueonBorderCarbonAdjustments:ThecaseofBrazil

Table1.BrazilianexportsofCBAMproducts–EU(average2020–2022)5

Chapter

Description

Value,freeonboard

(USD)

EU’sparticipationinthetotalexports

25

Salt,sulphur,earthandstones,plaster,lime,andcement

70,656,884.33

42.87%

26

Ores,slag,andashes

298,486,685.67

10.34%

28

Inorganicchemicalproducts

10,952,163.00

25.12%

31

Fertilizers

913,739.67

0.44%

72

Castiron,iron,andsteel

1.130,279,958.33

10.68%

73

Worksofcastiron,iron,orsteel

70,541,212.67

6.28%

76

Aluminumanditsworks

54,127,963.33

5.22%

Source:ComexStat,2023.

Figures1to4showthegeographicaldistributionoftheBrazilianexportsoftheseproducts,aggregatedbytheHarmonizedSystem(HS)chapters,butconsideringonlytheones

affectedbytheCBAM.

Figure1.Chapter26productsexportsdistribution(averageparticipation2020–2022)

Ores,slags,andashes

13.7%

/Argentina

40.3%

SouthKorea9.8%Japan9.7%

Other

Trinidad&Tobago5.1%Libya2.6%

13.0%

UnitedStates

UnitedArabEmirates2.0%Other11.1%

12.5%

China

10.3%

10.1%

EgyptEuropeanUnion

Source:ComexStat,2023.

5ThenumbersrefertotheexportsofgoodswithinthechaptersthatareunderthescopeoftheEUCBAM.

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GlobalDialogueonBorderCarbonAdjustments:ThecaseofBrazil

Figure2.Chapter72productsexportsdistribution(averageparticipation2020–2022)

CastIron,iron,andsteel

Canada3.56%Peru2.05%

Türkiye2.04%Chile1.82%

Bolivia1.59%Other10.25%

21.31%

Other

5.57%

Mexico

6.96%/

Argentina

7.75%

China

10.68%

47.73%

UnitedStates

EuropeanUnion

Source:ComexStat,2023.

Figure3.Chapter73productexportdistribution(averageparticipation2020–2022)

Worksofcastiron,ironorsteel

24.6%

States

United

48.1%

Other

Paraguay4.4%China3.6%

Chile3.3%

Mexico3.1%Canada3.1%Other30.6%

9.6%

Argentina

6.3%

EuropeanUnion

5.3%

6.1%

UnitedArabEmiratesUruguay

Source:ComexStat,2023.

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GlobalDialogueonBorderCarbonAdjustments:ThecaseofBrazil

Figure4.Chapter76productsexportsdistribution(averageparticipation2020–2022)

Aluminumanditsworks

29.4%

/Japan

22.3%

Other

Mexico3.7%

Paraguay3.3%

Colombia3.3%

Switzerland2.7%Uruguay2.2%

Other7.1%

5.2%

EuropeanUnion

7.7%

Chile

19.2%

Argentina

16.1%

UnitedStates

Source:ComexStat,2023.

AlthoughtheEUisnotarelevantdestinationforBrazilianexportsofthemainproducts

affectedbyCBAM,ifthetrendofimposingBCAsspreadstoothermarketsliketheUnitedStatesandJapan,thethreatstoBrazilianexportscouldbecomemoresignificant.ThegraphsaboveshowthattheUnitedStatesabsorbsnearly50%ofBrazilianChapter72exports

and25%ofChapter73exports.Foraluminum,thegreaterriskisthatJapanmayimposeaBCA,asthecountryaccountsfor30%ofBrazilianforeignsalesoftheproduct.AmongothercountriesconsideringtheadoptionofBCAs,onlyCanadaappearsasoneofthetop10destinationsforBrazil’ssteelexports,butevenithaslowparticipation(around3%ofChapters72and73exports).TheUnitedKingdomandAustraliaarenotevenamongtherelevantdestinationsforBrazil’sexportsofBCA-targetedgoods.

3.2Brazil’sRelevanceasaSuppliertotheEuropeanMarketandItsMainCompetitors

Exceptforironagglomeratesandconcentrates(Chapter26oftheHS),ofwhichBrazilisthesecond-largestglobalexporter,BrazilisnotaprimaryoriginatorofglobalimportsofthesetofproductsunderCBAM,asshowninTable2.ThemainironandsteelsectorsuppliersareChina,EUcountries,Japan,SouthKorea,andtheUnitedStates.Brazil’smaincompetitorsinaluminumareChina,Europe,Canada,theUnitedStates,andIndia.

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GlobalDialogueonBorderCarbonAdjustments:ThecaseofBrazil

Table2.Theworld’smainexportersofCBAM-affectedproductsintheiron,steel,andaluminumsectors

26–Ores,