Brazil has taken a significant step towards establishing a legal framework for low-carbon hydrogen production. The National Policy for Low-Carbon Hydrogen was adopted last December. It sets out details for the voluntary Brazilian Hydrogen Certification System (SBCH2). SBCH2 will certify the greenhouse gas (GHG) emissions intensity of hydrogen.
Presidential Veto Limits Incentives
Despite the law’s passage, President Luiz Inácio Lula da Silva has vetoed some of the incentives. The vetoed incentives were approved last month, citing violations of financial and budgetary legislation. They would have been funded from various sources, including donations, loans, and surplus profits.
Incentives Still Available for Hydrogen Producers
Despite the cutbacks, the Brazilian Government announced that incentives would still be available for hydrogen producers. BRL 18bn ($3.14bn) will be provided over five years. These incentives include tax and duty suspensions for hydrogen producers’ purchases and imports.
Brazil’s Potential in the Global Hydrogen Market
President Lula da Silva emphasized Brazil’s competitive advantage in the global hydrogen market, stating, “When I see these people talking about green hydrogen, solar energy, wind energy, biomass, I wonder: what country in the world can compete with Brazil?” The law is expected to bring legal certainty, predictability, and attractiveness to the $30bn of hydrogen projects already announced in the country.
Domestic Demand and Research Investments
Despite Brazil’s significant hydrogen export potential, incentive beneficiaries will be required to sell some of the hydrogen produced to meet domestic demand. Additionally, investments will be made in research, development, and innovation in the hydrogen sector.
A New Industry for Brazil
Alexandre Silveira, Brazilian Minister of Mines and Energy, said the President was creating a new industry for Brazil and “lighting the flame” that would “revolutionize” the world’s energy mix. The approved text creates a “Brazilian standard” to certify low-carbon hydrogen, which will have a “competition authority” to set public policy guidelines.
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