Brazil approved a series of new laws in 2024 that aim to accelerate the energy transition and attract investment as the country prepares to host the UN's Cop 30 climate summit in Belem, Para state, next year.
These measures aim to cut emissions in the transport and industrial sectors and curb deforestation, historically the country's largest emissions zone.
The transport sector, responsible for nearly 10pc of Brazil's total emissions last year, has become a key target of new government policies. The government's Green Mobility and Innovation program (Mover) offers tax breaks for automakers that invest in decarbonization. Over 100 companies have agreed to invest roughly R130bn ($20.7bn) to produce low-emissions vehicles and auto parts domestically, boosting domestic production of EVs.
Additionally, the fuels of the futures law promotes consumption of both first and second-generation biofuels. The law clears the way to increase the mandatory ethanol blend in gasoline to as much as 35pc, up from the current maximum of 27.5pc, while paves the way for higher mandatory biodiesel blends, which are slated to reach 20pc in 2030 from 14pc currently and can potentially rise by 25pc in the future.
The law supports domestic production and consumption of sustainable aviation fuel (SAF) and hydro-treated vegetable oil (HVO). The government is estimating that the approval of the legislation will result in roughly R17.5bn in investments in new biorefineries over the next decade.
The government is forecasting that the use of biofuels and electricity in the transport sector will increase by 27pc from current levels by the end of 2026 and by 50pc by the end of 2033.
Brazil also approved long-awaited low-carbon hydrogen legislation, establishing a regulatory framework and a tax-credit scheme for investment in low-carbon hydrogen. With the regulatory framework in place, several green hydrogen projects are expected to move forward in 2025 and 2026, including three in the Port of Pecem in Ceara state and one green fertilizer project in Minas Gerais. The government sees green hydrogen as a way to reduce emissions in its steel, cement and aluminum industries.
Legislation for a regulated carbon market was another milestone, providing another source of revenue for the decarbonization of the economy. The legislation creates the Brazilian emissions trading system (SBCE) and stipulates that companies with over 25,000 t/yr of emissions will be subject to the cap-and-trade system, which is around 5,000 companies covering about 15pc of Brazil's emissions, according to finance ministry estimates.
The carbon market is seen as an important tool to help Brazil finance the protection of its tropical forests and to reduce deforestation, which was responsible for nearly half of the country's emissions last year.
Final steps
Two other bills are awaiting presidential sanction, including one that will clear the way for investments in offshore wind, allowing companies to conduct assessments of areas for future developments.
The law will allow the government to hold its first auctions for offshore wind concessions in 2026.
The legislature also approved the energy transition acceleration program (Paten) this week to facilitate access to low-cost financing for the country's decarbonization process. The bill creates incentives for companies to substitute fossil fuels with renewable energy. The law will create a new fund, which will be managed by Brazil's Bndes development bank and can finance projects in a wide range of sectors related to the energy transition and decarbonization.
With the new legal framework in place, Brazil is hoping to use its position as the host of the Cop 30 climate summit to showcase its potential as a leader in the global fight against climate change.
