Dirty energy threat to green Brazil
Brazil is a leading producer of biofuels
Brazil boasts of being one of the world’s “greenest” energy suppliers, but recent policy initiatives could jeopardise its desire to be a big player in future climate change discussions.
“In the 1970s, Brazil’s energy production was dominated by two sources, wood and oil,” says Maurício Tolmasquim, president of Brazil’s Energy Research Company (EPE).
As its economy has expanded, so has its demand for energy, but even now, 46% of Brazil’s energy production is from renewable sources.
This compares with the global average of only 13%, making Brazil one of the greenest countries in the world.
BBC Brasil has been back to its home country as part of a series looking at where the fast-growing Bric economies (Brazil, Russia, India and China) will be in 2020.
But despite a proud record as a green energy producer, it found that Brazil’s environmental credentials are under threat.
Much of Brazil’s energy comes from hydro-electric plants, but the licensing of these is notoriously difficult.
The result is a push towards thermoelectric plants, which are easier to get permission to build.
“We are being forced to accept more expensive and less environmentally sound plants,” argues Maurício Tolmasquin.
Still, fossil fuel’s share of Brazil’s energy production is small, accounting for only 10% of the total.
But the new thermoelectric plants should take that share up to nearly 17%.
Some experts say they worry about the strategy. They believe that Brazil is giving out the wrong signals.
Brazilian domestic energy consumption is predicted to grow by 3.3% a year on average until 2030, according to a report by Ernst & Young and the economic research institute Fundacao Getulio Vargas (FGV).
Yet its energy production is due to rise by 4.2% a year over the same period.
This means that Brazil is set to become one of the major world energy exporters by 2020 if it keeps building power stations and fulfils its potential as a major biofuel producer.
Advocates of Brazil’s energy strategy point with pride to its biofuel production.
They are quick to highlight the differences between Brazil’s sugar cane ethanol and the corn-based ethanol produced in the United States.
While the latter is also an important food, sugar cane is generally considered a more efficient and less power-hungry alternative.
However, Brazilian ethanol is still far from being a global commodity, even though the Ernst and Young report foresees a “gradual reduction” in international trade barriers, such as import tariffs.
There are also expectations that within the next decade, so-called second-generation Brazilian ethanol could become a reality.
Instead of being extracted from sugar cane itself, it would use by-products currently discarded, such as sugar cane’s fibrous residue and harvest leftovers.
The Brazilian government forecasts a 150% growth in ethanol production until 2020.
However, ethanol’s world market share is still small, with some estimates putting ethanol consumption at only 1% of that of oil.
Compared to the other Bric countries (Russia, India and China), only the Russians have gas and oil reserves large enough to make them liquid fuel exporters.
Recent discoveries of massive underwater oil reserves in an area stretching some 800km along the south-eastern coast of Brazil has raised the possibility that Brazil could also be a big oil exporter.
However, there are also huge technical difficulties to overcome before the oil can be tapped. The reserves are buried some 7km underneath the sea bed – which makes its exploration very expensive.
Some figures put the initial investment for exploration at about $1 trillion, so oil would need to be priced at about $40 (£27) a barrel to make it viable.
But with exploration and production costs falling, Brazil seems set to receive a huge economic boost as it heads toward 2020.
Carlos Nobre, from Brazil’s National Institute for Spatial Research (Inpe), says “a great chance” of making Brazil “the cleanest” country in the world could be lost.
He says that Brazil’s strategies for solar, wind and biomass power are poor when compared to developed countries.
“Clean countries will be granted great credibility in the future. They will be leading the world. And Brazil has the potential to do that,” he says.
Despite its investment in biofuels, Mr Nobre believes that plans for new thermoelectric plants reflect “very short-term” thinking by the Brazilian government.
“You only need to look at the prices of oil and coal to see that their long-term use will be questionable.”
Mr Nobre says that Brazil runs the risk of falling behind technologically by not investing in alternative energy.
“If all countries are walking in the same direction and we’re not, we’re risking Brazil’s technological future,” he says.
Compiled by the BBC Brazilian Service team as part of their series on the Bric countries (Brazil, Russia, India and China).
If you want to invest in Argentina, Uruguay, Chile or Brazil contact us at:
- Alquileres de inmuebles y galpones en Entre Ríos
- Argentina Economic Overview
- Argentina Investment incentives
- Argentina Tax system
- Brazil Investment Growth
- Compra Venta de campos en Entre Rios
- Legal Framework for Investments in Argentina
- Living in Argentina
- Tax Information For Brazil
- Uruguay Investment regime
- Uruguay taxes
- Why Argentina
- Why Invest in Brazil
- Why Investment in Uruguay
SOBRE AGRO INVEST ARGENTINA