Brazil emerges as a destination for green investments, after a US turnaround – hydrogen included

Brazil emerges as a destination for green investments, after a US turnaround – hydrogen included

US incentive review and exit from Paris Agreement open up new opportunities to attract green projects

RIO — The review of the incentive policies of the Inflation Reduction Act (IRA) in the United States and the exit 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, in the view of 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 Fortescue Brasil. 

Viga in an interview with the Axis agency, says :

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,

He points out that after the hydrogen market went through a “hype” phase, investors are now looking at where conditions are met that actually lead to hydrogen production at a lower cost, such as the abundance of renewable energy. 

He emphasizes,

This is the case in Brazil. If we want to bring investment to Brazil, our differential is green,

Viga says that while many companies are reviewing their sustainability policies and projects, Fortescue — the world’s fourth-largest iron ore miner — is committed to its climate goals, including phasing out fossil fuels at its Australian operations 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 expects to produce around 500 tons of hydrogen per day from the electrolysis of water, using 1.2 gigawatts of renewable energy.

“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 highlights that Brazil has macroeconomic challenges that are not very favorable for investments, such as fiscal deficit, inflation and high interest rates. 

He points out,

The current situation 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,

Juliana Ramalho , partner in the ESG area at Mattos Filho, also notes that bureaucratic and tax issues are other obstacles.

He says,

Issues of bureaucracy and taxation are important drivers when investors are looking at Brazil,

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 companies 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, highlights that legislation has evolved to prevent greenwashing , forcing 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 acts on companies’ decisions.

He comments,

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,

Loss, adds :

Companies understand that decisions are not only driven by the government, but by their own strategies, and that the demand for clean energy is here to stay and will only increase,

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