Assessing the Financial Impact of Carbon Pricing on the Brazilian Steel Industry: A Scenario-Based Analysis

Steel production accounts for approximately 7% of global GHG emissions. Brazil is the largest steel producer in Latin America, and carbon pricing is rapidly moving from a policy debate to an operational reality, making the financial exposure of Brazilian steelmakers to carbon regulation one of the most pressing industrial sustainability questions in an emerging market context. This study evaluates the financial exposure of the Brazilian steel industry to three carbon pricing scenarios: (i) a domestic cap-and-trade mechanism under Brazil’s Greenhouse Gas Emissions Trading System (SBCE); (ii) Carbon Border Adjustment Mechanisms (CBAMs) applied by key trading partners (EU, a hypothetical USA scenario, and a global scenario); and (iii) supply chain (Scope 3) exposure, relevant under net-zero corporate commitments and the expected expansion of EU-CBAM coverage. Using a scenario-based financial impact approach, with both macro-level (industry) and micro-level (company) analyses, results show that domestic carbon pricing could increase production costs by 7–21%, generating USD 1.6–4.9 billion in additional annual costs (equivalent to 4.3–13.3% of annual industry revenue). International CBAM exposure could reduce Brazilian steel export revenues by USD 570 million to USD 1.7 billion in a global scenario (1.5–4.6% of annual industry revenue). Supply chain emissions represent 68% of the industry’s total carbon pricing exposure, equivalent to USD 1.1–3.3 billion in domestic pricing costs and USD 388 million–1.16 billion in CBAM export revenue reduction. A company-level case study confirms the pattern, with lower Scope 3 intensity yielding a comparatively smaller but still material exposure. These findings offer practical decision support for steel companies and policymakers navigating the transition to a low-carbon economy.