Brazil’s oil and green transition should be the big topics of the New Year – 12/26/2023 – Vinicius Torres Freire

Next year, just around the corner, Brazil must make essential decisions about what it will do with oil and how it will plan the “green transition”. Around February, the government should launch a more systematic and detailed version of the Ecological Transformation Plan (PTE). At some point, Ibama’s decision on oil research in the Foz do Amazonas Basin must come out, in principle denied, a decision that Petrobras has appealed. Although very important, the oil case does not stop there.

Minister Marina Silva (Environment) once again spoke of a ceiling, a limit, for oil exploration, in an interview with the “Financial Times” this Tuesday. He was soft, he spoke of “debate”, but his position is known and of international interest.

More immediately, it is important to know: 1) How much would this limit be and when; 2) How oil and gas exploration plans relate to the Ecological Transformation Plan; 3) What is the balance of losses and gains with the expansion of the oil business (which will still generate a lot of money).

The state-owned Energy Planning Company predicts that oil production in Brazil would increase from 3.4 million barrels per day now to 4.5 million in 2026 (the last of Lula 3) and to 5.4 million in 2032, when it would begin to decline. Almost 92% of the reserves on which the forecast for 2032 is based have already been discovered (others are almost the same). Still, it is necessary to invest to find new oil (such as in the Equatorial Margin, including Foz do Amazonas) and explore the reserves already discovered. What to do?

Projection errors regarding the use, exploration and price of oil are often exorbitant. Furthermore, there has been rapid technological innovation in fuel use, alternative energy development, and materials manufacturing. The math becomes much more complicated when trying to choose the use of productive resources: does more capital dedicated to oil reduce the amount of capital invested in new energy? Does cheap oil discourage the production and use of cleaner energy? The list of questions is long and overwhelmingly difficult.

It is quite possible that the decision of what to do with oil in Brazil will end up in the hands of a coalition of crude politicians who will not give up the prospect of a lot of money. Oil money can still yield progress here and help solve the hole in the government’s accounts. It can actually finance the various “ecological transformations” we need. Of course, all of this tends to be mere idle talk, given the average standard of governance and public debate in Brazil. But it’s a serious matter.

In Brazil, 49% of greenhouse gases come from “land use changes” (roughly speaking, deforestation and similar reasons); 25% from agriculture; 18% of energy use; 4% from “industrial processes and product use” (PIUP); 4% waste (garbage). This is data from 2021 from the “Analysis of greenhouse gas emissions and their implications for Brazil’s climate goals” from the Climate Observatory, from 2023.

Ending deforestation, reducing the inefficiency of livestock farming, more scientific and technological research and investing in better managed crops and pastures would do a huge service in reducing emissions, gross and net. It is also necessary to invest in new fuels and energy sources, which are subsidized in the rich world. All of this requires money, which we currently don’t have (at least the government doesn’t have), particularly to set up a large science and technology system, aimed at practical and urgent results.

PTE, oil and direct and indirect emissions from agriculture should be one of the two or three major issues in Brazil in 2024.

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