Spotlight: Brazil decarbonization opportunities

Brazil is pushing to regulate its carbon credit market, as senator Leila Barros of center-left PDT party presented a bill to implement a greenhouse gas emissions trading system.  

Backed by the federal government, the initiative comes as President Luiz Inácio Lula da Silva tries to turn the country into a global environmental leader. 

Barros’ proposal creates a mechanism for trading assets like Brazilian emissions quota and certificates of verified emissions reduction or removal and carbon credits, which will be considered securities.

Companies will receive a certain number of quotas that correspond to the amount of greenhouse gases they can emit. By investing in improving their processes and reducing emissions, they can have leftover quotas, which can be traded in accordance with the terms of subsequent regulations from the local securities and exchange commission (CVM). 

The bill sets an emissions limit of 25,000t/y of CO2, focusing on carbon-intensive industries, such as oil and gas and steel mills. 

“This bill defines the basic rules of the game. It's the starting point for creating a carbon pricing instrument in Brazil, signaling to economic agents that emissions have a price,” Henrique Pereira, COO of decarbonization solutions provider WayCarbon, told BNamericas.

Pereira said electrification is a great opportunity to reduce emissions in various sectors, such as transportation and the steel industry. In terms of electricity generation, he sees potential for technologies such as battery banks to increase efficiency of systems with associated thermal power plants. 

The government recently launched a program to decarbonize isolated systems (i.e., not connected to the national grid) in the Amazon region, which are highly dependent on diesel-fired generation. 

"We also see opportunities for solutions aimed at efficiency gains in energy transmission and distribution, such as smart grids," he said. 

Pereira highlighted that the oil and gas sector is among those that will need to change. “These companies have great capacity for research, development and innovation, and already see the issue of gas emissions as a business risk,” he said. 

Brazil’s main oil and gas producer, state company Petrobras has created an energy transition executive management and plans to allocate 6-15% of its capex to low-carbon projects during the 2024-28 period.

Speaking at the Oil and Gas Governors Meeting in Geneva, CEO Jean Paul Prates said the oil industry is not only part of the problem but also part of the solution. 

"There can be no fair energy transition, no ecological transition, without the engagement of the oil industry. Our industry is essential for the energy transition because it has cutting-edge technology, qualified personnel, capillarity with economies in various countries and profiles, and the scale to promote the necessary transformation," he said.

On Thursday, oil workers union FUP met for the first time with the new management of subsidiary Petrobras Biocombustível (PBio) to discuss the energy transition and the strengthening of the company.

According to FUP, PBio is of great importance in the process of decarbonizing Petrobras' production, reducing dependence on fossil fuels and promoting the development of local agriculture. 

BIOMETHANE

Luis Guilherme de Sá, a consultant at LG Business Adviser, believes there is a lot of room for biomethane growth in Brazil, mainly in areas not served by pipelines, through small scale liquefaction or compressed gas projects. 

“The internalization of biomethane is underway. It will happen and require solutions. Companies are looking to decarbonize, and the small scale allows them to do so,” he told BNamericas, highlighting that Brazil’s agribusiness is a great potential biogas source. 

Biomethane could play a crucial role in reducing Brazil’s dependence on diesel imports, he said, and even replace liquefied petroleum gas and vehicular natural gas in the industrial and automotive segments.

Sá recently launched a documentary on solutions that are shaping the future of energy in the world, such as solar, wind, hydroelectric, geothermal, oceanic and nuclear sources.

FUNDING

The national climate change fund was resumed on Thursday with a contribution of 10bn reais (US$2bn) to finance projects that help mitigate and adapt to the climate crisis. 

The amount was announced by the environment and climate change ministry and development bank BNDES after a meeting at environmental regulator Ibama in Brasília. 

Support will be given to initiatives that contribute to resilient and sustainable urban development, green industry, transport logistics, public transportation and green mobility, energy transition, native forests and water resources, and green services and innovation.