Brazil introduces sustainability obligations in highway concession contracts

Brazil's transport ministry announced the inclusion of sustainability obligations in highway concession contracts, as the risks associated with climate changes increase.

The government published a decree in the official gazette establishing the obligation to allocate a minimum of 1% of gross revenue from federal road concession contracts to the development of sustainable infrastructure in the projects.

"New road concession projects must include actions for sustainable alternatives for collecting and disposing of resources, conserving fauna and flora, encouraging energy efficiency and using renewable energy sources," the ministry said in a statement.

"Regarding current contracts, the national land transport agency (ANTT) will be responsible for carrying out technical studies to identify vulnerable areas and mapping the need for actions to promote the adequacy of contracts," it added.

The measure is likely to lead to an increase in road tolls.

"This government measure will probably have a direct impact on highway users, since the highway concessionaires will have to pass on this additional cost in new contracts to tolls," Alberto Sogayar, an infrastructure lawyer at Sogayar e Alcântara Advogados, told BNamericas.

The measure was expected by market participants, as concern about the impacts of extreme weather events has increased, particularly in the wake of unprecedented flooding in Rio Grande do Sul state in May, underscoring the risks for the infrastructure sector.

"Extreme weather events are a reality that we're already facing and more government measures on this front will likely be added to future contracts. This is already happening in the private sector. After the events in Rio Grande do Sul, I worked on a contract between an engineering and construction company that will provide services to a highway concessionaire and that contract includes a series of clauses predicting potential impacts from extreme weather events," said Sogayar.

In parallel with greater government and private sector efforts to mitigate the impacts of climate change, the public are also now becoming more aware of the effects.

A survey published this week by research institute the Datafolha i newspaper Folha de S. Paulo shows that 97% of Brazilians say they have now noticed the impacts of climate change. These impacts include extreme heat, intense rains or storms, extreme drought, floods and landslides.