by Gabriel Chiappini
(exios.com.br) The review of the incentive policies of the Inflation Reduction Act (IRA) in the United States and the withdrawal of the world’s largest economy from the Paris Agreement, under the Donald Trump administration, opens up new opportunities for Brazil to attract investments in green projects, such as wind generation and green hydrogen, according to industry executives.
There is an understanding that the commitment of companies and investment funds to environmental goals can boost Brazil as a global player in the energy transition.
However, the country faces macroeconomic challenges that may hinder the arrival of these resources.
Green differential
The United States’ decision to suspend incentives provided for in the IRA, which allocated billions of dollars to clean energy projects, frees up capital that was previously directed to the North American market, according to Luis Viga, chairman of the board of the Brazilian Green Hydrogen Industry Association (ABIHV) and of Fortescue Brasil.
“There are examples of companies that have given up on hydrogen projects in Brazil to direct investments to the US, attracted by the IRA incentives under the Biden administration. With the suspension of these incentives, some of these resources may return to Brazil,” says Viga in an interview with the Axis agency.
He points out that after the hydrogen market went through a “hype” phase, investors are now looking at where the conditions are met that actually lead to hydrogen production at a lower cost, such as the abundance of renewable energy.
“This is the case in Brazil. If we want to attract investments to Brazil, our competitive edge is green,” he emphasizes.
Viga says that, although many companies are reviewing their sustainable policies and projects, Fortescue — the fourth largest iron ore mining company in the world — is committed to its climate goals, including abandoning the use of fossil fuels in its operations in Australia by 2030.
Here, the company hopes to launch a green hydrogen production plant in the Pecém Complex, in Ceará, with an estimated investment of R$17.5 billion. The project is expected to produce around 500 tons of hydrogen per day from the electrolysis of water, using 1.2 gigawatts of renewable energy.
The challenges are macroeconomic
For Elbia Gannoum, president of the Brazilian Association of Wind Energy and New Technologies (Abeeólica), Brazil is well positioned to attract these investments, ranked among the five most attractive countries in the world for the renewable energy industry.
“The country ends up being in a better position to attract renewable resources in general, both for offshore and onshore wind power, hydrogen, and even to offer energy to data centers and companies that want to consume renewable energy,” he highlights in an interview with Axis.
Despite the opportunities, Gannoum points out that Brazil has macroeconomic challenges that are not very favorable for investments, such as a fiscal deficit, inflation, and high interest rates.
“The moment for investment in Brazil is quite challenging. On the other hand, these are investments that look at the long term, and we have the capacity to deal with this series of complex variables,” he points out.
Juliana Ramalho, partner in the ESG area at Mattos Filho law firm, also notes that bureaucratic and tax issues are other obstacles.
“Bureaucratic and tax issues are important drivers when investors are looking at Brazil,” she says.
Still, the lawyer believes there is potential to attract companies that are truly committed to environmental policies, in contrast to the repositioning of the US and large companies in relation to ESG (Environmental, Social, and Governance) practices.
“Brazil has great potential. Some [companies] have ridden the [ESG] wave. These will give up on this wave at the first opportunity. And there are other companies that are very serious and will continue to pursue this ESG agenda.”
Giovani Loss, partner in the Energy Transition area at Mattos Filho, emphasizes that legislation has evolved to prevent greenwashing, requiring companies to be more transparent in their reports and commitments, in addition to pressure from society itself, which reduces the effects of Trump’s political actions on companies’ decisions.
“Multinational companies face other pressures from other governments, the judiciary and the population, stakeholders and investors. This even calls into question the State’s traditional regulatory capacity, because it exceeds the State’s capacity to regulate a series of measures”, he comments.
“Companies understand that decisions are not only directed by the government, but by their own strategies, and that the demand for clean energy is here to stay and will only increase”, adds Loss.
Read original article: https://eixos.com.br/transicao-energetica/brasil-emerge-como-destino-para-investimentos-verdes-apos-guinada-nos-eua/
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