Brazil and its decarbonization

 


Brazil still has no deadline for phasing out fossil fuels, although at the end of January, Minister of Mines and Energy Alexandre Silveira signed a cooperation agreement with the International Energy Agency to accelerate the country's energy transition.

Brazil's climate target (known as NDC, an acronym for Nationally Determined Contribution) outlines emission reduction scenarios for the entire economy, without specifying deadlines for specific sectors. The federal government is developing a new plan, but it is not expected to be implemented until 2025.

Brazilian ESG observers are clear that the country's policy is not one of transition and that, at least until 2030, the expansion of hydrocarbon production and consumption will continue to be a priority. Indeed, the new PAC demonstrates this imbalance. Most of the R$ 565.4 billion foreseen in the program's Transition and Energy Security Axis goes to dirty fuels: 64% of the total will go to the oil and gas industry, while only 12% will go to clean energy production. Moreover, according to the program, most funds for oil and gas would come from the state, while all funds for renewables would come from private sources. Something that can work. Most renewable energy projects in the region are unsubsidized, but in any case, there is talk of energy transition, but no resources or investment strategy.

In Brazil, the main sources of emissions are deforestation and agriculture, with energy coming in third. This is because most of Brazil's electricity comes from renewable sources (87% in 2022). This percentage drops to 47% when analyzing the energy matrix but is still much higher than the world average (Globally, only 28% of electricity and 15% of the total energy matrix comes from renewable sources). In contrast, Brazil currently ranks eighth in the world in oil production, 27th in gas, and 29th in coal, and plans to go further.

Brazil's energy plan calls for a 63% increase in oil production and a 124% increase in gas production between 2022 and 2032. This is what worries many. It is a Brazilian contradiction, because Brazil is making good progress in the electricity matrix, but also does not want to commit to abandoning fossil fuels. Something that can be bipartisan, to use a term. That is, both the PT and the conservative forces are pointing in this direction.

Paradoxically, this is happening in a scenario where there are already scenarios that show that Brazil could reach 100% renewable electricity generation by 2035-2040, which is basically a mission to remove natural gas from the matrix, so much so that Brazil currently has 93% renewable energy. This is feasible, but what is happening is that natural gas, coal, and oil have more to do with energy security and revenue for the treasury than sustainability. A conjunctural point.

What's coming.

Lula's government makes no bones about it. In a note, the Ministry of Mines and Energy states that the national climate policy will be detailed in the Climate Plan and that "the energy transition is not a disruptive process, so the world will continue to need oil in the coming decades." According to the Ministry, since 2023, the Lula government has been perfecting and implementing policies related to these climate commitments, without losing sight of the fact that this process must not jeopardize the country's energy security and impose high energy costs on the population and the economy.

In any case, it is not a national problem, but a global one. It is impossible to be clearer, but this can be used against Brazil. Unjustly, in fact, but effectively in negotiations with the West, to prevent Brazil from positioning its export products as has happened in the Atlantic powers. Nevertheless, the Brazilian reality waits for the needs of the markets and that is enough for it. It is a continental country that needs not only energy security, but also additional income to meet its social development needs.



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