Brazil minister says oil and green ambitions are not contradictory

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There is “no contradiction” between Brazil’s plans to step up oil and gas exploration, including in waters off the Amazon rainforest, and its aspiration to lead the world’s transition to green energy, the energy minister said.

With nearly 90 per cent of its electricity generated from renewable sources, as well as a big biofuels programme, Brazil has the “political, economic and moral authority” to talk about a just and inclusive energy transition with rich nations, Alexandre Silveira told the Financial Times.

President Luiz Inácio Lula da Silva has won international acclaim for taking rapid action towards a goal of ending deforestation in the Amazon by 2030, reversing steep increases in rainforest destruction under his far-right predecessor Jair Bolsonaro.

But in the same week that Lula was telling the UN General Assembly that the climate crisis “knocks on our door, destroys our homes, our cities, our countries, kills and imposes suffering on our brothers”, Silveira was arguing that exploratory drilling in an ecologically sensitive area where the Amazon river meets the Atlantic should go ahead.

A request by state-controlled oil company Petrobras to conduct exploratory drilling in the Equatorial Margin offshore zone, which stretches across the coastline of six impoverished Amazonian states, was rejected by Brazil’s environmental regulator this year. Petrobras has appealed against the decision.

“It’s the right of the Brazilian people to understand their mineral wealth, whether on or offshore,” Silveira said in an interview when asked about proposed drilling in the Foz de Amazonas basin, an area 175km from the northern coast which forms part of the Equatorial Margin. He said part of Brazil’s oil revenue is sent to a “social fund which finances health, education and the energy transition”.

Brazil is projected to rise three places to become the world’s sixth biggest oil producer by 2030 if its current projects are realised. But opening up the coastal strip off the Amazon could unlock reserves containing up to 30bn barrels of oil equivalent, turning it into the fourth biggest oil producer behind the US, Saudi Arabia and Russia, according to government plans.

“I don’t see any contradiction between the exploration of oil and gas and the clear, objective, safe and firm decision . . . to carry out the energy transition in a just and inclusive way,” said Silveira, a centrist politician and former businessman who was in New York during UN climate week to discuss Brazil’s green energy plans. “The reality of the world is that we still need fossil fuels.”

Any oil drilling carried out at the mouth of the Amazon basin or along the adjoining coast would abide by strict rules to avoid environmental damage, he added.

Silveira said Brazil was making the case to the US, China and European powers that a climate transition had to be fair for all members of society. Rich nations, he added, had to “understand that there is no peace without [social] inclusion, there is no peace when you have poverty and hunger”.  

A recent study by Boston Consulting Group concluded that Brazil’s high proportion of renewable power and interconnected grid made it one of the best-placed countries for the production of green hydrogen, but said tax and investment incentives were needed to compete with other countries.

Citing official statistics, Silveira said “the world average is 28 per cent clean and renewable energy and we have 88 per cent”.

Brazil would find it difficult to fund large government subsidies for green hydrogen, as some wealthy nations are doing, because of the need to focus scarce resources on health, education and public security, he said. But the government would try to find legal and regulatory incentives to help the nascent industry and did not rule out tax perks to drive decarbonisation. 

Brazil is also betting big on biofuels, hoping to exploit further the potential of a bioethanol programme derived from sugarcane which uses waste products to increase efficiency and reduce emissions. Biofuels already help power the country’s vehicles and could be used in aviation fuel.

“Those who invested in second-generation ethanol in Brazil, in decarbonised ethanol, are making money and being successful,” Silveira said. 

But the minister said he remained concerned about protectionism by wealthy nations, which he said would only hinder social inclusion in the shift to clean energy.

“The [trade] barriers put up…