Brazil’s senate rejects additionality rule for green H2

Brazil's senate has rejected an amendment to a hydrogen regulatory framework draft bill that would have introduced a green hydrogen definition with an additionality requirement.

The draft law already includes a definition of "low-carbon hydrogen", describing any hydrogen with maximum life-cycle greenhouse gas emissions of 4kg of CO2 equivalent per kg. It also includes a definition of "renewable hydrogen" which refers to hydrogen made from "renewable sources, including solar, wind, hydraulic, biomass, biogas, biomethane, landfill gases, geothermal, tidal and oceanic".

The proposed amendment would have added a separate narrower "green hydrogen" category to specifically denote hydrogen made from either solar or wind power assets that enter into operation not more than 36 months before the bill becomes law. This was intended to encourage the development of new renewable power assets, although an exception would have been made for projects located in "subsystems" of the electricity mix where renewables have a 90pc share.

But the senate voted against adding this category, alongside other amendments that were also rejected.

The EU included an additionality requirement in its definition of renewable hydrogen and derivatives. Brazilian producers not complying with this might struggle to export their products to the bloc as they would, for instance, not count towards EU targets for renewable hydrogen use.

But the EU also provides an exception from the rule for projects connected to electricity systems that have a 90pc renewables share. This could include many parts of Brazil, given that the country's overall renewables share in the electricity mix was 93pc in 2023, according to the Brazilian ministry of mines and energy.

Additionality is also a key requirement for accessing hydrogen production tax credits in the US, but Australia recently decided against such a rule for its own production tax credits.

Brazil's senate had already approved the main hydrogen regulatory framework bill on 19 June. Having now decided on the proposed amendments, the senate has forwarded the bill to the chamber of deputies which already passed the law once but has to review it as some changes were made in the senate.

Besides defining the different types of hydrogen, the draft bill also outlines plans for certification and for incentives in support of hydrogen production, consumption and transport. These include low-carbon hydrogen production and consumption tax credits, for which an 18.3bn Brazilian reals ($3.3bn) budget has been set aside for 2028-32. Producers could get tax credits of up to R6.58 per kg of output.

By Stefan Krumpelmann