World Bank report urges Brazil to pair fiscal reform with carbon pricing

The World Bank's "Double Dividend" report recommends Brazil adopt emissions trading, fuel-tax rationalisation, and land-tax reform to improve its fiscal balance by over 5% of GDP while cutting emissions. The integration of carbon pricing into fiscal planning offers Indian policymakers a model for aligning revenue strategy with climate targets.

The World Bank released "Double Dividend: Policies to Achieve Fiscal and Environmental Sustainability," urging Brazil to pursue synergistic fiscal and green reforms that could improve its fiscal balance by over 5% of GDP. With public debt nearing 80% of GDP, the report calls for moving from a projected 2024 deficit to a primary surplus of about 3% of GDP, mostly through expenditure reforms. Recommended instruments include emissions trading systems (ETS), fuel-tax rationalisation, and reform of land and income taxation to deliver fiscal and environmental gains together.

The report targets Brazil's agricultural sector, where phasing out untargeted subsidies could save up to 0.5% of GDP and reforming the underperforming rural land tax could raise as much as 0.6% of GDP to fund reforestation. It addresses public compensation, pensions, and personal income tax exemptions that benefit high-income earners. Brazil is falling behind on a 59% GHG-emissions reduction target by 2030 and net-zero by 2050, with the current fiscal framework lacking mechanisms to incentivise emission reductions or sustainability investment.

ESG professionals and policy advocates should use the report to identify regulatory gaps and align corporate strategies with evolving tax and climate dynamics. The World Bank recommends imposing a carbon price through an ETS, revising fossil-fuel tax structures, and scaling investment in renewable energy, green hydrogen, and low-emission transport such as rail and inland waterways. Indian policymakers can study how environmental fiscal reform could attract green finance. Monitor adoption of these instruments and Brazil's progress toward fiscal credibility ahead of climate negotiations.

Key figure — Fiscal improvement potential: over 5% of GDP from combined reforms