This study aims to assess the cost of the carbon emissions externality associated with the Brazilian electrical sector through an analysis of direct emissions from thermal generation in two distinct scenarios. Firstly, the 2021 water crisis is examined, resulting in an increase in marginal operating costs and, due to a higher participation of thermal power plants, an escalation in greenhouse gas emissions. Subsequently, the scenario of 2022 is analyzed, characterized by the minimum clearing price of differences throughout the year. Additionally, a general context is presented on the concept of externality, carbon pricing models worldwide, and the Brazilian electrical sector’s scenario in the carbon market. The obtained results underscore the necessity of an approach with a more extensive temporal horizon for allowances. This concept emerges from an understanding of the dynamics of the Brazilian electrical sector, which underwent a significant transition within a short timeframe, shifting from a water crisis scenario to minimum marginal operating cost prices. Consequently, a disproportionate burden is placed on thermal power plants during crucial periods when they play a vital role in ensuring energy and power supply. This broader temporal consideration, as already evidenced in voluntary carbon market programs, proves crucial for the effectiveness and equity of carbon pricing in the dynamic context of the Brazilian electrical sector.
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