Private participation and its effects on energy mitigation in Brazil

The decarbonization of the energy sector has become a core element of current mitigation efforts, as the sector is responsible globally for the majority of greenhouse gas emissions (GHGs). Among the countries with the highest share of renewable energy production, Brazil is emerging as a potential for public-private cooperation to advance energy transition. Yet, there is still a lack of clarity as to how the private sector has, and may be, affecting mitigation efforts in the country and, as a result, its transition. A knowledge gap persists, as previous literature has shown mixed results for the effects of private participation (PPI) on environmental outcomes, and ambiguities and lack of data undermine further research. This research paper aims to address these gaps by providing a comprehensive policy and econometric analysis of the impacts of private participation on the energy sector. By employing an Autoregressive Distributed Lag (ARDL) model, this study aimed to assess the short- and long-run implications of PPI in the Brazilian energy case from 2000 to 2022, post-privatization. This study determined an optimal lag of 3 years through lag-order selection statistics but was only able to execute a complete analysis of the data at a lag of one year, due to the temporal limitations of the available data. Through ARDL, this research paper was able to assess statistically significant short-run effects of PPI on CO2 emissions, which contradict findings from other authors. However, temporal limitations also restricted the possibility of verifying long-run effects, due to sample size. These constraints highlight the need for further research, employing longer time periods to better understand the dynamics of private participation and its impacts on mitigation. As such, the present paper makes recommendations to develop the collection of national data on private participation in Brazil, to help facilitate the functioning of the hybrid energy market and encourage future and necessary research.