Brazil’s Ecological Transformation Plan (ETP) outlines a strategy to align climate objectives with social and economic development, aiming to support the country’s transition toward a low-carbon economy.

By Raquel Nadal, Ministry of Finance, Brazil.

Brazil’s energy profile provides a strong basis for decarbonization: 92% of electricity generation comes from renewable sources (a global average of 27%), and biofuels account for 21% of transportation fuels (a global average of 4%). Additionally, Brazil has ample land suitable for renewable energy expansion and reserves of critical minerals, including nickel, rare earths, and uranium. These factors create opportunities, but they do not eliminate the complexity of the required transition ahead.

Recognizing these challenges, the Brazilian government launched the Ecological Transformation Plan(ETP) as a comprehensive framework to decarbonize the economy, improve productivity, and reduce regional and social inequalities. With many Brazilians still living in poverty, the plan aims to integrate climate action with inclusive and equitable development.

The ETP is organized around six strategic pillars, each with a specific policy agenda:

1- Sustainable finance: This pillar focuses on redirecting capital flows toward sustainable investments. Initiatives include a green taxonomy and Eco-Invest, a mechanism designed to attract private capital for long-term green projects. Eco-Invest also offers currency hedge facilities to reduce risks for international investors. The goal is to create financial conditions that make sustainability-oriented projects more viable.

2- Technological modernization: This pillar aims to modernize industrial processes and promote low-carbon technologies. The objective is to enhance productivity and competitiveness, enabling Brazilian industries to participate in global low-carbon value chains.

3- Bioeconomy and agro-food systems: Land use and agriculture account for over 70% of Brazil’s greenhouse gas emissions, making this sector central to a low-carbon economy. Policies focus on restoring degraded pasturelands, reducing deforestation, and enhancing the value of forest-based products. The aim is to turn the sector into a source of climate solutions while supporting biodiversity and rural livelihoods.

4- Energy transition: This pillar seeks to accelerate renewable energy deployment and expand electrification in transport.

5- Circular economy: The focus here is on improving resource efficiency through recycling and reuse, reducing demand for raw materials, lowering emissions, and creating new business opportunities.

6- Green infrastructure and adaptation: This pillar promotes climate-resilient infrastructure, linking investments in areas such as urban mobility and flood protection with job creation and improved quality of life.

Expected Outcomes and Associated Risks

Two studies — one conducted with the World Bank using a dynamic stochastic model and another led by UNEP’s Partnership for Action on Green Economy using an input-output model — estimate that full implementation of the ETP could:

· Increase Brazil’s potential GDP by up to 1 percentage point by 2050

· Create 2.3 million new jobs

· Boost per capita income and investment

· Reduce inequality

·        All while meeting the net-zero emissions target.

These projections, however, depend on effective implementation and risk management. Brazil must navigate several critical risks:

· Agricultural emissions and deforestation: Stronger and more inclusive growth could increase demand for agricultural products, raising emissions and deforestation risks. Productivity improvements and regulatory enforcement will be critical.

· Labor market adjustments: Skills may not match demand, and some sectors — such as oil and automotive — could lose jobs. Policies for training, mobility, and regional development will be needed to mitigate these impacts.

· Fiscal constraints: While revenues from carbon markets and selective green taxes may emerge, Brazil’s fiscal framework limits public spending to stabilize debt and control inflation. This could restrict public investment unless innovative financing solutions are adopted.

· Climate shocks: Extreme weather events, such as floods and droughts, have already affected crops and livestock, contributing to food inflation and monetary tightening. These shocks can increase financing costs and slow progress.

· Political continuity: If mandates are unclear or the costs of inaction are not well communicated, key initiatives — such as the green taxonomy and carbon market — could face discontinuity. Broad-based support and institutional stability will be essential.

The Ecological Transformation Plan represents an effort to integrate climate policy with economic and social priorities. Its success will depend on careful coordination, robust planning, and sustained political commitment. A transition to a low-carbon economy presents opportunities for growth and inclusion, but it also entails significant trade-offs and risks that necessitate proactive management.

Read the Executive Summary of the MODELING THE IMPACTS OF BRAZIL’S ECOLOGICAL TRANSFORMATION PLAN.

Watch the YouTube video about the Ecological Transformation Plan.