Brazil's industrial sector, which was responsible for roughly 4pc of the country's total emissions in 2023, is taking a multifaceted approach to reduce its carbon footprint.
The roadmap for emissions reductions in the industrial sector was issued earlier this month in a joint study produced by the country's National Industrial Confederation (CNI) together with the trade ministry.
The study included an in-depth assessment of industrial decarbonization proposals in key economies across the globe to establish a benchmark for domestic industry. It highlighted that Brazilian industries have multiple advantages compared with other countries such as the US, UK and Germany, largely because Brazil's abundance of renewable electricity allows industries to more easily transition to this power source.
The proposal recommends the employment of a broad range of solutions, including the increased use of renewable power and the adoption of new technologies, such as carbon capture and storage (CCS) and renewable hydrogen. But it also suggests more controversial proposals, such as the increased use of natural gas to replace other fossil fuels with higher carbon footprints.
Although the government is not expected to release specific targets for each sector until next year, the approval of legislation that will create a regulated carbon market sets the stage for sectors with large carbon footprints to implement mandatory emissions reduction plans. The law stipulates that companies with emissions greater than 25,000 t of CO2 equivalent (CO2e)/yr will be subject to the cap-and-trade system. Companies with emissions from 10,000-25,000 t CO2e/yr will need to report their emissions but will not be required to offset them.
New regulation will underpin the decarbonization of Brazil's industrial sector, the study noted, but much of it was passed this year and still needs regulations. The proposal cited the potential for CCS, which was approved in October as part of the fuels of the future law. Although additional regulations are still needed for the sector, the law creates a legal framework for investments to move forward. CCS is expected to play an important role in emissions reductions specifically for the steel and cement sectors. State-owned Petrobras is already planning investments in a pilot CCS hub, which can be used by other carbon-intensive industries.
The study also sees an important role for low-carbon hydrogen, particularly for hard-to-abate industries. Legislation for the development of the country's green hydrogen sector was approved in October and foresees R18.3bn in subsidies for these industries from 2028-2032. With the new law, four low-carbon hydrogen projects are expected to get off the ground next year: two in the port of Pecem in Ceara state, one in Pernambuco state and one in Minas Gerais state.
Gas debate
The plan also sees increased use of natural gas to replace fuels with higher carbon footprints as an immediate solution to lower emissions.
This strategy is already advancing in Brazil. Earlier this year, Norwegian aluminium producer Hydro concluded investments allowing Alunorte alumina refinery in Para state to use natural gas, replacing fuel oil in its industrial production. The company estimates that the conversion will reduce the smelter's carbon emissions by 30pc. Similarly, natural gas plays a pivotal role in mining company Vale which is working to increase natural gas consumption to reduce the use of diesel and fuel oil in its industrial processes.
The trade ministry study calls for policies that will expand gas transport and distribution infrastructure. Currently, the legislature is debating a bill that would classify the construction of new gas pipelines and gas as energy transition investments, allowing them to qualify for subsidized financing. This proposal has been criticized by environmental groups, such as the energy and environment institute (Iema), which argues that investments in gas will delay the country's energy transition.
