Brazil's fossil push undermines Lula's green ambitions

• Brazil wants to increase exports of green fuels
• Subsidies for fossil fuels still rise
• Number of natural gas power plants grows

RIO DE JANEIRO - Brazil is positioning itself as a leader in the global transition towards clean energy, with hydropower as its top source of electricity, wind and solar growing rapidly, and renewables fuelling a quarter of its transport.

But Brazil has also invested heavily in fossil fuels, and the government plans to turn the country from world's seventh biggest oil producer into its fourth by 2030.

President Luís Inácio Lula da Silva, who will host the United Nations COP30 climate summit next year, this month signed a new law regulating the country's green hydrogen industry.

"Which country can compete with ours in the matter of energy transition?" he asked at the signing ceremony.

Lula has said he aims to transform Brazil into a global exporter of low carbon fuel and become the "Saudi Arabia of renewable energy in 10 years".

But Brazil's green ambitions could be undermined by proposals to increase drilling for fossil fuels, including near the mouth of the River Amazon, and the construction of more thermal power plants, mostly run on polluting natural gas.

The government says Brazil needs to produce oil and gas for its own energy security.   

Environmentalists argue, however, that Brazil's green energy exports will not bring true climate gains if the country's energy surplus is achieved by burning more fossils.

"If we follow the path of expanding thermal power plants ... our own energy mix will have a bigger carbon footprint," said Cássio Cardoso Carvalho, researcher at the Institute of Socioeconomic Studies (Inesc) rights group.

Brazil's Mines and Energy Ministry said natural gas had the smallest carbon footprint compared to other fossil fuels such as diesel and coal, and its production and use were "fully aligned with the country's plans to reach net-zero in 2050".

Fossil subsidies

Between 2018 and 2022, the federal government subsidised fossil fuels to the tune of 335 billion reais ($58 billion) - more than five times more than renewables, Inesc said.

Carvalho said Brazil's green energy potential should enable the country to do without natural gas, but he had not seen a significant shift in subsidies since Lula returned to power in 2023.

Altogether, Brazil is allocating 472 billion reais to oil, natural gas and biofuels between 2024 and 2027, an Inesc analysis showed, but only 0.2% of that is going to its energy transition programme.

Brazil's Mines and Energy Ministry said in an email there would still be demand for oil and gas "at least until 2050", and the country would become a net importer of oil by the 2030s unless it continued to explore its own reserves.

Felipe Peixoto, energy secretary for the state of Rio de Janeiro, which produces the largest amount of oil and gas, said fossil fuel was "fundamental for the state's economic development. We rely on it for royalties, companies and jobs".

Brazil is now building 15 additional gas-powered plants, which non-profit civil society organisation Arayara International Institute said should increase the Brazil's natural gas generation capacity by at least 30%.

Inconstant elements

Oil industry leaders say another reason fossil fuels are needed is the variability of the energy supply from renewables.

Burning natural gas "has become a daily necessity for when the sun goes down or wind varies," said Mauricio Tolmasquim, energy transition director at Petrobras, the country's largest oil and gas producer.

Oil, natural gas and coal power plants accounted for 7.5% of energy generated in Brazil in 2023, data from Brazil's Energy Research Office showed, while some 60% was generated by hydro-electric power stations.

But when water is short, Brazil burns more fossil fuels. In 2021, when a severe drought hit hydropower reservoirs, 19% of the country's energy was generated by fossil fuel power plants.

This led to a surge in electricity prices as well as carbon emissions, something environmentalists say could become more frequent as the country's rain volumes become more volatile due to climate change, itself a product of emissions.

This month, severe drought in the Amazon for the second consecutive year forced a policy shift toward using more thermal sources in Brazil's northern region, authorities said.

But Arayara director Juliano Araújo said natural gas generation could exacerbate water shortages at times of drought.

"Most of the natural gas-powered thermal plants consume huge amounts of water," he said.

With natural gas prices many times higher than renewables, Araújo said Brazil should direct funds from fossil fuels to expand solar and wind generation and spare its hydrocarbon reserves.

"It is not true that natural gas is a secure, firm energy source," he said.

($1 = 5.7720 reais)

(Reporting by Andre Cabette Fabio; Editing by Jon Hemming and Jack Graham.)