Home » Brazil to launch ‘most ambitious’ green transition package
Brazil Economy Featured Global News Government South America

Brazil to launch ‘most ambitious’ green transition package

Investors welcome bold environmentalist programme from leftwing president

The package, which will be unveiled in August or September, will encompass about 100 initiatives including carbon trading, the bioeconomy and infrastructure adaptation across six policy areas, officials co-ordinating the plan told the Financial Times.

“The idea is to have the most ambitious plan to decarbonise an economy in the world, at least among developing countries,” said a senior official involved in the planning.

The expected announcement of the package comes as Brazil appears to have slowed the rampant deforestation of the Amazon during the previous administration of far-right president Jair Bolsonaro. Official data suggests the destruction of the rainforest decreased by more than 33 per cent in the first six months of this year compared with the same period last year.

Brazil is the latest country to launch a bold programme to green its economy. The Joe Biden administration’s Inflation Reduction Act pledges hundreds of billions of dollars in subsidies and tax breaks to encourage companies to develop green technology and create jobs in the US. The EU is also relaxing state-aid rules to unlock more government spending on the green transition.

Although some activists have remained cautious about Lula’s environmental commitment at a time when state-controlled Petrobras is increasing oil and gas production, many investors have lauded Brasília’s change in attitude.

“We are already seeing specific opportunities tied to the environment receive more international investment,” said Daniel Rummery at Brunel Partners, which advises foreign investors in Brazil. “More significant is how it changes the ‘mood music’ internationally that Brazil is no longer an environmental pariah.”

The official added: “Decarbonisation [is] an opportunity for the country to strengthen its technological capabilities. So it’s really a development plan that tries to harmonise development with a low-carbon economy.”

Lula administration officials hope the green transition package will continue beyond his presidency, with a view to fulfilling Brazil’s international commitments to climate neutrality by 2050.

Among the first initiatives will be legislation for the creation of a regulated carbon market, which will be sent to Congress in the coming months.

“We’re very confident that it’s not going to be very tough to approve it in Congress, because the sector that is most directly affected — industry — is supporting the carbon market,” said an official at the finance ministry.

The plan also envisages the redeployment of federal funds for research and development to focus on green technologies and the expansion of technical education in the relevant geographic areas, such as biotechnology in the Amazon rainforest or renewable energy in the sun-soaked and gusty north-east.

It will also target the development of new products and industries based on the diversity of the country’s multiple biomes. Such bioeconomy initiatives have long been championed by environmentalists.

Pedro Côrtes, professor at the Energy and Environment Institute at São Paulo university, said: “Brazil needs to adopt a proactive stance that associates environmental preservation with economic development. For example, biotechnology could use national flora for the development of pharmaceutical products.”

The finance ministry official said: “We have to put together economic opportunities because otherwise it won’t be sustainable in the medium and long run.”

With more than 90 per cent of Brazil’s electricity already generated by clean energy — notably hydropower — officials want the country to develop as a hub for green technologies, such as renewable hydrogen.

The official said: “Our challenge is to have more stages of the value chain produced in Brazil. We want to export the technologies necessary to produce renewable hydrogen and [other] technologies for the decarbonisation of our economy.”

The government estimates the package, which will involve multiple ministries as well as the presidency, will be worth hundreds of billions of dollars over the next decade.

But it says the bulk of that will come from partnerships with the private sector and private investment. In the areas that require public money “we are working on making tweaks in existing funds, so that it will fit in our budget. We don’t want to break our fiscal rules,” one official said in a nod to investors’ concerns over government spending.

Sérgio Margulis, chief economist of Convergência pelo Brasil, a business roundtable, said the government’s proposed package was “timely”. But he warned many initiatives were likely to face political obstacles.

“It is a difficult political moment with a behind-the-times Congress and an agricultural sector that is thriving but also very conservative in relation to the environment,” he said.

But Rafael Dubeux, an adviser at the finance ministry, is optimistic the agenda would succeed, saying it was not only pro-environment but pro-development.

“We’re still a poor country . . . and we do have to make it politically feasible to show to the population that it’s also going to bring opportunities in terms of well-paid jobs and productivity increases,” he said. “The merger of these two objectives is very central to the plan.”

Source: The Financial Times