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Low-carbon economy is Brazil’s focus

por Leda Cavalcanti

Rodrigo Rollemberg, a graduate in History from the University of Brasília (UnB), is the Secretary of Green Economy, Decarbonization and Bioindustry of the Ministry of Development, Industry, Commerce and Services – MDIC. Born in Rio de Janeiro and a legislative analyst at the Federal Senate, he was a district deputy from 1995 to 1998 (alternate) and from 1999 to 2002; federal deputy for the Federal District, from 2007 to 2011; senator for the Federal District, from 2011 to 2014; and Governor of the Federal District from 2015 to 2018. He also held the positions of Secretary of Tourism, Leisure and Youth of the Federal District and Secretary of Science and Technology for Social Inclusion of the Ministry of Science and Technology in the first term of the Lula government. He chaired the Committee on the Environment, Consumer Protection and Oversight and Control of the Federal Senate, during the vote on the Forest Code.

For decades, Brazilian industry has been working to adopt more sustainable practices and, in this regard, it is one of the leading in the world. It uses a large part of its energy matrix extremely renewable, particularly electricity, due to the abundance of solar, photovoltaic and hydroelectric energy. The country also has one of the highest recycling rates in the world, which greatly reduces energy consumption and emissions in aluminum production.

The steel industry uses a significant amount of charcoal, which is more sustainable than mineral charcoal. The pulp and paper industry has large areas of planted forests, which avoids the use of native forests and increases the removal of greenhouse gases. The cement industry, many years ago, adapted to the use of alternative fuels, such as tires, which would otherwise end up in the environment.

New laws, such as those on carbon markets, hydrogen and offshore wind energy, should create opportunities for the industry to emit even less by using low-emission domestic fuels. And the MDIC is developing new public policies, such as the National Strategy for Industrial Decarbonization. “Industries must continue to invest in the country, considering our clean energy matrix and increasingly favorable sustainability legislation. And industries from other countries must consider decarbonizing their production by investing in Brazil, a practice called powershoring,” says Rodrigo Rollemberg.

How does the MDIC act on environmental issues?

RODRIGO ROLLEMBERG – With the re-creation of the Ministry of Development, Industry, Commerce and Services (MDIC), on the first day of President Lula’s government, the Secretariat of Green Economy, Decarbonization and Bioindustry (SEV) was established. It acts by proposing, implementing and evaluating public policies for the development of the green economy; the decarbonization of productive sectors; the promotion of bioindustry in the country; and the promotion of industrial complexity related to the sustainable use of biomass and Brazilian genetic heritage. For this reason, it works to promote the green legislative agenda together with several public and private actors, such as the Ministries of Finance, Mines and Energy, Environment, the National Confederation of Industry and productive associations.

The Brazilian energy matrix is ​​already more renewable than that of the world’s largest economies and there is a vast field for developing the green economy in the country, taking advantage of the opportunities arising from natural resources.

Has Brazil made progress on this issue?

RR – We were able to approve laws on hydrogen, the fuel of the future, and the regulated carbon market. We are leading policies and seeking to attract investment to Brazilian industry. Among other actions, SEV is developing the National Strategy for Industrial Decarbonization, which will contain the means of implementation for the decarbonization of Brazilian industry, which already has lower emission rates than other countries, but needs better policies to do even more. One of the actions of MDIC was to join the Industrial Transition Accelerator (ITA). Brazil has a significant industrial base, abundant natural resources, and access to low-cost renewable energy, which positions it to establish itself as a global powerhouse in the production of green industrial goods. ITA will help strengthen investments for Brazil’s emerging green industries to mobilize the capital needed to decarbonize the global economy.

Among the actions undertaken, what are the main results obtained?

RR – The federal government has developed initiatives such as the Pact for Ecological Transformation between the Three Powers; the update of the Climate Plan, considering the horizon between 2024 and 2035, with the elaboration of National Mitigation and Adaptation Strategies, as well as the respective Sectoral Plans: the Ecological Transformation Plan; the National Energy Transition Policy (PNTE); the development of the Brazilian Sustainable Taxonomy; the launch of the Brazil Climate and Ecological Transformation Investment Platform (BIP) and the Foreign Private Capital Mobilization and Exchange Rate Protection Program (Eco Invest Brasil); and the resumption of the Climate Fund and the Amazon Fund. To give you an idea of ​​the impact of just one of these initiatives on the country’s economy, the National Bank for Economic and Social Development (BNDES) released, in seven months of 2024, the equivalent of 2.5 times all the approvals in the history of the BNDES Climate Fund program from 2013 to 2023 (BRL3 billion, at today’s values). In other words, from April to October 2024, the bank approved BRL7.3 billion for Climate Fund operations. This represents 70% of the approximately BRL10.4 billion contributed by the Union to BNDES in April to finance projects to mitigate climate change and its effects. The MDIC and SEV contributed decisively to several actions

And what about the other programs?

RR – I would like to mention the Green Mobility and Innovation Program (Mover), which encourages investments in new technologies and increases the requirements for decarbonizing the Brazilian automotive fleet. It provides for BRL19.3 billion in incentives through 2028 and is one of the main drivers of the series of investments announced by the automotive industry, around BRL130 billion. In addition, employees of the Ministry and the Secretariat of Green Economy actively worked on building the technical and legal framework for the Fuel of the Future Program, which promotes the decarbonization of the transportation matrix in Brazil; the legal framework for low-carbon hydrogen, which, through the Low-Carbon Hydrogen Development Program (PHBC), provides for the granting of BRL18.3 billion in tax credits between 2028 and 2032; the creation of the Brazilian Greenhouse Gas Emissions Trading System (SBCE), which establishes emissions ceilings and a market for the sale of bonds; and the Amazon Seal, which will define national guidelines for the standardization and certification of industrialized products and services, demonstrably produced from raw materials and inputs from Amazonian biodiversity, which meet environmental, economic and social sustainability requirements. Another important initiative was the launch of the CBA Conecta project, whose objective is to foster an environment of collaboration and partnerships between the Amazon Biotechnology Center, located in Manaus (AM), and local industries.

What benefits does this operating model bring?

RR – With it, the CBA ceases to be just a research center and becomes a bio business center and, in partnership with private companies, especially those from the Manaus Industrial Hub, can develop products from the biodiversity of the Amazon. I would also like to highlight the participation of MDIC and SEV in the launch, in Brazil, of the Industrial Transition Accelerator (ITA), created in December 2023, at COP28, by the United Arab Emirates, the United Nations Framework Convention on Climate Change (UNFCCC) and Bloomberg Philanthropies, to bring together global leaders, financial institutions and governments with the aim of unlocking investments at scale and implementing decarbonization solutions.

New laws, such as those on carbon, hydrogen and offshore wind energy markets, should create opportunities for industry to emit even less by using low-emission domestic fuels.

Is there a conviction that economic development is linked to environmental preservation?

RR – This conviction was made explicit in the final declaration of the G20 Summit, published in November 2024, in Rio de Janeiro. The leaders emphasized the role of sustainable development in its three dimensions – economic, social and environmental – as a guiding principle for cooperation in favor of people, the planet and prosperity, with the goal of overcoming our collective challenges. Regarding sustainable finance, they recognized “the importance of optimizing the operations of vertical climate and environmental funds, aligning them with the needs, priorities and strategies of countries to strengthen national ownership and maximize the impact of investments”. They also reaffirmed that developing countries need to be supported in their transitions to low-carbon emissions and that they will work to facilitate low-cost financing for this purpose. And they expressed support for reliable, diversified, sustainable and responsible supply chains for energy transitions, including for minerals and critical materials processed at source, semiconductors and technologies. This concept of sustainable development is already part of the most diverse production chains.

Is Brazil on its way to a low-carbon economy?

RR – Yes. I will mention two important initiatives to facilitate this medium – and long-term journey towards a low-carbon economy. The first was the approval of the legal framework for low-carbon hydrogen. The approval of Laws No. 14,948/2024 and 14,990/2024 brings legal certainty, predictability, and attractiveness to investments in green hydrogen in Brazil. Through the Special Incentive Regime for the Production of Low-Carbon Hydrogen (Rehidro), the regulatory framework extends tax incentives to companies producing low-carbon hydrogen as provided for in Law 11,488/07 – which created the Special Incentive Regime for the Development of Infrastructure (Reidi) – granting suspension of PIS, Cofins, and PIS/Cofins-Import on the purchase or import of new machinery, devices, instruments, and equipment, and construction materials intended for hydrogen projects. The second was the approval of the carbon market in Brazil, with the establishment of the Brazilian Emissions Trading System (SBCE). The carbon market can be a crucial tool for Brazil to achieve its greenhouse gas emissions reduction targets, established in its Nationally Determined Contribution (NDC) under the Paris Agreement. By pricing carbon emissions, the market incentivizes the decarbonization of the economy, rewarding companies and sectors that reduce their emissions and penalizing those that do not.

Does Brazil make good use of its natural resources?

RR – Brazil’s energy matrix is ​​already more renewable than that of the world’s largest economies, which represents a comparative advantage in the context of the energy transition. However, there is a vast field for us to further develop the green economy in our country and take advantage of the opportunities arising from our natural resources. To this end, the federal government has several public policy instruments that are already being implemented. For example, the New Industry Brazil (NIB), which has BRL342.7 billion in resources to support projects through 2026, has as one of its missions the bioeconomy, decarbonization, and energy transition and security to guarantee resources for future generations. This mission has as an aspirational goal for 2033 to promote green industry, reducing CO2 emissions by 30% per industry value added, increasing the share of biofuels in the transportation energy matrix by 50%, and increasing the technological and sustainable use of biodiversity by industry by 1% per year. In this sense, in 2023, for Mission 5 alone, the Study and Project Financing Agency (Finep) supported 179 projects, totaling BRL2.541 billion – an amount referring to Finep resources and counterparts.

What are the biggest impacts of climate change on the economy?

RR – The impacts are broad and diverse. In July, a report by the International Labor Organization (ILO) – “Heat at work: Implications for safety and health” – warned of the increase in the number of workers exposed to heat stress worldwide. According to this study, the Americas region recorded the fastest increase in the proportion of heat-related occupational injuries since 2000, with an increase of 33.3%. In Rio Grande do Sul, the volume of payments from the insurance market in response to claims related to floods reached BRL5.6 billion at the end of July 2024, according to estimates by the National Confederation of Insurers (CNSeg). In this context, BNDES, through 8,439 operations, made BRL17.01 billion available in credit approvals (working capital; machinery and equipment; investment and reconstruction) to this state. In turn, in September, the federal government issued Provisional Measure No. 1,258/2024, which opened BRL514.4 million in extraordinary credit for emergency actions to combat the effects of the fires and the severe drought situation that affected a large part of the North Region and the Legal Amazon.

Source: Eletrolar News Magazine – Edition #165