Year: 2025
Type: article
Abstract: For emerging economies like Brazil, decarbonization represents a core developmental challenge that necessitates the transformation of key economic sectors. While international climate finance is critical for enabling this transition, its actual effectiveness remains poorly understood. This study introduces a novel, multi-sectoral analytical framework to evaluate how climate finance drives decarbonization across Brazil's interconnected energy, agriculture, and water sectors. Our analysis reveals that decarbonization outcomes are not determined by financial inputs alone, but by an integrated system of National Climate Capacity. We find that financial inputs, regulatory quality, and income level form a unified and dominant latent construct, demonstrating that these components are functionally inseparable in driving outcomes. The research uncovers striking sectoral divergence, with agriculture yielding dramatically higher decarbonization returns than energy or water interventions. Furthermore, mitigation finance consistently and significantly outperforms adaptation finance, achieving a substantially higher magnitude of CO2 reduction. These finding challenges core assumptions about the fungibility between finance types. Crucially, we translate these insights into an actionable optimization framework. Using clustering and decision trees, we derive clear, data-driven rules for prioritizing projects such as those in high-regulatory-quality, low fossil-dependence contexts to maximize decarbonization returns. These findings necessitate a paradigm shift from siloed project evaluation toward integrated national capacity building. We provide policymakers with evidence-based investment strategies to transform climate finance into measurable decarbonization progress in Brazil and other major emerging economies.
Author: Anis Bensadi
Institution: Shenzhen Technology University
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: diamond
OpenAlex ID: W7116730258