Brazil fossil fuel subsidies outpace renewables: Study

Market: Crude oil, Electricity, Oil products
29/10/24

Brazil's spending on fossil fuels subsidies in 2023 was around 4.5 times larger than its spending on renewables subsidies, according to a study published by the institute of socioeconomic studies Inesc.

The country spent R99.8bn ($17.49bn) in subsidies for both fossil fuels and renewables in 2023, a 3.6pc increase from 2022, the study said. Of the total, R81.74bn were related to fossil fuels — a 0.5pc decrease from a year prior — while R18.06bn went to renewable sources, a near 27pc hike from 2022.

The slight fossil fuel subsidies reduction was due to the return of taxes on gasoline, such as the VAT-like PIS/Confins, the study said. "The government lost the chance of providing greater relief for public coffers as it decided to maintain exemptions for diesel," it added.

But while incentives to fossil fuel consumption decreased, those for exploration and production activities increased by R5.55bn.

Cassio Carvalho, a co-author of the study for Inesc, said the fossil fuels subsidies will harm Brazil's energy transition. "The study indicates that consumers are bearing the subsidies for renewables through electricity bills, while the oil and natural gas industry remains untouched," Carvalho said.

Ending subsidies to fossil fuels is an "unavoidable global commitment" laid out in the UN Cop 28 climate summit in Dubai, said Alessandra Cardoso, the other co-authored of the study.

"What is expected of the Brazilian government is that it recognizes the problem of production subsidies as a domestic problem, the solution to which involves global reform," she said. "Brazil needs to take on this agenda as part of its leading role in the global climate scenario, especially as it will host Cop 30."

Brazil will host Cop 30 in 2025 in Para's state capital Belem, on the edge of the Amazon forest.

By Lucas Parolin

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