FILE PHOTO: Brazil's President Luiz Inacio Lula da Silva delivers a national statement at the World Climate Action Summit during the United Nations Climate Change Conference (COP28) in Dubai, United Arab Emirates, December 1, 2023. REUTERS/Thaier Al Sudani/File Photo
SAO PAULO: President Luiz Inacio Lula da Silva’s pledge to launch a green transition of Brazil’s economy is facing pushback from allies within his own government.
While finance minister Fernando Haddad is seeking to exclude fossil fuels from special tax incentives as part of an “ecological transformation” of Latin America’s largest economy, Mines and Energy Minister Alexandre Silveira is pushing to increase support for oil and gas projects.
The internal spat is shining a light on the challenges facing oil-rich Brazil as it tries to move away from fossil fuels, and that other nations may also confront as they seek to live up to energy transition plans agreed to at this month’s United Nations Climate Change Conference (COP28) in Dubai.
Haddad, the face of the Lula government’s green economic plans, wants to review a special tax regime that provides benefits to infrastructure investments, with the aim of limiting the incentives only to low-carbon projects, according to two people with knowledge of the matter.
He is seeking a similar adjustment for bonds linked to infrastructure projects, according to the people, who requested anonymity because the discussion isn’t public.
The Mines and Energy Ministry opposes the plans, and is also pushing for its own changes to rules governing thermoelectric auctions in a bid to attract more investors.
The sales were one of the conditions lawmakers included in a 2021 bill that allowed power utility Eletrobras to be privatised.
Congress is weighing legislation that includes the technical changes Silveira is seeking, which would increase demand for fossil fuels.
The bill, which would pave the way for offshore wind energy production, also extends contracts for some existing coal-fired thermoelectric plants until 2050.
The Finance Ministry declined to comment.
In a written statement, the Mines and Energy Ministry said that oil and gas exploration will help cover the costs of the green transition while also providing money for a fund that finances health and education.
The ministry’s efforts to guarantee energy security go “hand-in-hand with the energy transition,” it said.
The tug-of-war has not yet escalated to the president himself, the people familiar said.
Lula earlier this year intervened in another internal dispute after Brazil’s environmental regulator blocked state-controlled oil company Petroleo Brasileiro SA’s plans to explore an offshore field near the mouth of the Amazon River.
Lula ultimately sided with Petrobras, and the oil giant in September received a permit to research a part of the region known as the Equatorial Margin.
But the leftist leader has pitched the green transition and decarbonisation as some of his administration’s biggest priorities, and he has made climate change a major theme of Brazil’s presidency of the Group of 20 nations.
Lula recently returned from the COP28 climate talks in Dubai, where global leaders reached a deal that committed to a global transition away from fossil fuels for the first time.
The agreement, however, included room for natural gas, even as environmental groups argue that expanded production threatens goals to reach net-zero emissions by 2050. — Bloomberg
