Climate change policy in Brazil and Mexico: Results from the MIT EPPA model

• Climate commitments by Mexico and Brazil for 2020 are reachable but come at different costs.
• Brazil reduces deforestation at no additional cost.
• Mexico's pledges will cost 4 billion US dollars in terms of reduced GDP in 2020.
• Climate policy should be designed for the specific characteristics of each country.
• Energy trade (biofuels, oil and natural gas) can be substantially affected.

Based on an in-depth analysis of results from the MIT Economic Projection and Policy Analysis (EPPA) model of climate policies for Brazil and Mexico, we demonstrate that commitments by Mexico and Brazil for 2020—made during the UN climate meetings in Copenhagen and Cancun—are reachable, but they come at different costs for each country. We find that Brazil's commitments will be met through reduced deforestation, and at no additional cost; however, Mexico's pledges will cost 4 billion US dollars in terms of reduced GDP in 2020. We explore short- and long-term implications of several policy scenarios after 2020, considering current policy debates in both countries. The comparative analysis of these two economies underscores the need for climate policy designed for the specific characteristics of each country, accounting for variables such as natural resources and current economic structure. Our results also suggest that both Brazil and Mexico may face other environmental and economic impacts from stringent global climate policies, affecting variables such as the value of energy resources in international trade.