Brazil’s energy transition towards a low-carbon economy should seek to maximize the comparative advantages that the country already has in the energy area and seek complementarity with what is being done in Europe, the United States, and other parts of the world instead of copying them.
In addition to contributing to the reduction of global warming under the goals agreed upon at the UN Climate Conferences, the larger objective should be to take advantage of this process as an opportunity to boost economic development, job creation, and poverty reduction in the country.
“As we already have a hyper-clean energy matrix, we must do something different, seeking not the similarity but the complementarity with what is being done in Europe and other parts of the world. We must look at energy transition as an opportunity to achieve what is most relevant for the country today: fighting poverty, creating jobs, and improving economic and social development,” said civil engineer Jerson Kelman, former director of regulatory agencies ANA (National Water and Sanitation Agency) and ANEEL (National Electric Energy Agency), government-controlled company SABESP, and private company Light.
“Brazil has a well-structured energy system and is the country with the greatest potential to expand its energy matrix in a different way than the rest of the planet. However, we have a serious governance and institutional problem, caused partly by setbacks in the autonomy of regulatory agencies and energy planning. Added to this is the current government’s lack of political commitment to the environmental agenda,” said engineer David Zylbersztajn, former general director of the National Petroleum Agency (ANP).
Kelman and Zylbersztajn, who have extensive experience in the government and private sector, kicked off the webinar held by the FHC Foundation, whose first panel focused on policy and regulatory challenges.
The second panel, about the challenges of companies, had Wilson Ferreira Jr., president of Vibra Energia; Clarissa Sadock, president of AES Brasil; and Solange Ribeiro, deputy president of Neoenergia; as debaters.
The focus should be on Amazon protection and reforestation
Unlike most developed countries, or countries with a similar level of development to ours—where the biggest challenge is to replace the use of hydrocarbons in the production of electricity, mainly oil and mineral coal, with renewable sources—, here the focus should be on reducing CO2 emissions resulting from land use: agriculture, livestock, and land use change, that is, deforestation.
According to Kelman, only 18% of greenhouse gas emissions in Brazil, estimated at 2 billion tons of CO2 equivalent per year (4% of the world total), are related to the energy sector. He said, “While in the rest of the world, three-quarters of emissions are associated with energy, in Brazil, three-quarters of our emissions are associated with agriculture, livestock, and deforestation, especially in the Amazon.”
“As we will not reduce our agricultural and livestock production because these are essential sectors for our economy and, in general, they already use adequate techniques, we must focus on the preservation of our forests and the reforestation of degraded areas,” added Mr. Kelman, who is also a Coppe-UFRJ professor.
According to him, deforestation alone, including slash-and-burns and illegal logging without replanting, accounts for almost 50% of the country’s CO2 emissions. “We have a super clean matrix. We totally wipe out any other country in the world. We’re supposed to be the good guys, but right now, we’re the international villains for the way we’re treating the Amazon. That just cannot continue,” he asserted.
Plan the transition and integrate the various sources available
According to David Zylbersztajn, 48% of Brazilian energy production comes from renewable sources, compared to 14% worldwide and only 11% in OECD countries. “This is because, between the 1960s and 1970s, Brazil decided to use its water potential for energy production, not for an environmental reason, but for the economic, technological, and availability reasons,” he recalls.
In addition, after the oil shock in the 1970s, Brazil, which produced a lot of sugarcane, bet on ethanol as an alternative fuel to gasoline. “Despite all the problems, we still have the world’s leading biofuel program,” said Mr. Zylbersztajn, who is also a PUC-Rio professor.
More recently, the country advanced in the production of wind and solar energy and is also a significant producer of natural gas, which, despite being a fossil fuel, is less polluting than coal and oil and has a role to play in ensuring national energy security. Brazil will also not fail to exploit its pre-salt oil reserves but should replace their use with renewable sources whenever possible.
“Our biggest challenge is to plan this transition well, integrating the various energy sources available into our national energy planning. To achieve this goal, I think of a triangle in which one of the vertices is energy security, the other is the climate issue, and the third is economic development. The size of each side of this triangle will determine the speed with which we will move towards reducing our emissions and meeting the goals we took on at the UN climate conferences (especially at COP 21 and COP 26),” he explained.
“There is a lot of money available worldwide for investment in the energy area, and Brazil can benefit from this global effort toward a low-carbon economy. Everything will depend, however, on the country’s effective commitment to reducing its CO2 emissions and who is in charge of the Brazilian energy system. We are living through times of uncertainty, but I am optimistic about Brazil’s role in the global energy transition,” concluded Zylbersztajn.
Diplomacy must act in defense of Brazil’s interests during the transition
According to Jerson Kelman, Brazil needs to do its part in fighting deforestation in the Amazon, the country’s primary source of greenhouse gas emissions; on the other hand, however, it must be tenacious in defending its interests in the ongoing international negotiations, whether in the environmental or energy area. “We should not accept any policy that increases the cost of our products if it is not associated with a real opportunity to achieve what is fundamental today in Brazil: the fight against poverty and the acceleration of economic development,” he said.
To exemplify, he cited the new rules that will regulate the green hydrogen market, produced from electrolysis, using renewable sources. “We may be major exporters of liquid hydrogen or ammonia to Europe, but for this to happen, the rules for producing green hydrogen must be appropriate to our energy reality. Itamaraty (Brazil’s Ministry of Foreign Affairs) has a key role in this regard,” said Kelman.
As an example, he argued that the production of this new fuel “admits different shades of green so that the green hydrogen production plants in the country can be connected directly to our electric grid, which is mostly renewable, instead of requiring a 100% renewable energy source.”
Business leaders show optimism, despite successive crises
“If Brazil can face the challenges of preserving the Amazon and reforesting degraded areas, we will undoubtedly be an environmental powerhouse with a contribution to its energy matrix like no other country has. To achieve this goal, a public policy that integrates governments, companies, and academia is fundamental,” said engineer Wilson Ferreira Jr., who is a former president of Eletrobrás and currently directs Vibra Energia (formerly BR Distribuidora, a subsidiary of Petrobras until 2019, whose privatization was completed in 2021).
Traditionally a company that distributes and markets petroleum-derived fuels, Vibra is seeking to diversify its activities to also become a company that markets biofuels such as green diesel, biomethane, and green fuel for airplanes. For example, it entered into a partnership to open the first green refinery in the state of Roraima, planting palm trees in 120,000 hectares of degraded areas.
“We created a multi-energy platform to enable consumers to choose the alternatives that make the most sense for them when buying energy, enabling the decarbonization of their emissions,” said Ferreira Jr.
“Our great mission is also to help our customers, who are large industries and businesses, to make their energy transition. They are increasingly demanding of our environmental, social, and corporate (ESG) governance and want to know all the details of our operation,” Sadock said.
According to the president of AES Brasil, a company that operates in the hydroelectric sector in the states of São Paulo, Bahia, Rio Grande do Norte, and Ceará, it is urgent that the carbon credit market becomes a reality and matures in the world and Brazil. “This will be the ace in the hole for the preservation of the Amazon, as it can bring many resources to the region in exchange for the preservation of the forest,” he said.
“The multiple crises we have been through, including the Covid-19 pandemic and now the war in Ukraine, have tested companies to the maximum, but we are managing to overcome the difficulties and move forward,” said Solange Ribeiro, from Neoenergia, a company operating in 18 states and Brazil’s federal district (Brasília) in electricity generation, transmission, distribution, and commercialization.
Ribeiro highlighted the need for the country to create good regulatory frameworks to stimulate innovation, create the conditions for infrastructure investments and transform Brazil into a country that exports renewable energy. “The country needs to take advantage of timing and regulate the renewable energy market as other countries have, such as the United States, Australia, and China,” he said.
According to the deputy president of Neoenergia, the path to be followed is that of the 3Ds: decentralization, digitalization, and decarbonization. “Soon, electricity will be delivered to the consumer in an increasingly customized way, according to their needs, using networks in a better way,” he explained.
Otávio Dias is the content editor at Fundação FHC. He is a political and international affairs journalist, former correspondent of Folha de São Paulo in London, and former editor of the estadao.com.br website.
Portuguese to English translation by Melissa Harkin, CT and Todd Harkin – Harkin Translations.