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Brazil Struggles With An Energy Tax Dilemma

The energy ministry in Brazil wants newly proposed tax incentives for energy infrastructure to include oil projects and refineries in a renewed debate over whether the energy transition or Brazil’s massive oil and gas industry should take priority.  

The administration of Brazilian President Luiz Inacio Lula da Silva is looking to accelerate the energy transition, but it is also betting on continued development of the oil and gas industry, to pay for more incentives for green initiatives.

Now the Brazilian Mines and Energy Ministry is pushing for the proposed tax incentives for electricity generation, power grids, and natural gas facilities to extend to refineries and oil projects, Reuters reported on Thursday, citing a senior official and a document it has seen.

“Oil refining will continue to be fundamental for guaranteeing supply for a long time, so it is essential that projects aimed at decarbonizing refining be a priority, as they are adhering to energy transition and energy security,” Mines and Energy Ministry officials wrote in the document seen by Reuters.

The Brazilian government is considering an emissions cap and protection for indigenous communities involved in carbon offsetting as part of a new carbon market, Rafael Dubeux, a senior coordinator of the country’s energy transition plan, told Reuters in an interview earlier this month.

Despite the efforts to accelerate emissions reductions, the Brazilian administration has signaled that there isn’t a discrepancy in Brazil’s efforts to advance the energy transition and its state oil company Petrobras pursuing drilling in domestic frontier areas.

“There is no contradiction. You indicate where you want to get and then you'll need resources for that,” Lula’s chief of staff Rui Costa said in a radio interview this week carried by Reuters.

“We are going to build a sustainable, renewable energy matrix, but it's obvious that we need to fund that transition process,” Costa added.

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By Tsvetana Paraskova for Oilprice.com

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