Petrobras seems to go against the tide in renewable energy – 5/1/2023 – Why? Economês in good Portuguese

Recently, I have been researching the evidence for systemic connections between energy choices, oceans and climate change, and assessing how the sustainability strategies communicated by some companies do not align with their practices. But after all, what are the relationships between energy choices, oceans and climate change?

Energy choices play a key role in climate change and, consequently, in the oceans. The burning of fossil fuels, such as oil, coal and natural gas, to generate energy for industries, transport and homes, is responsible for a portion of greenhouse gas (GHG) emissions, which contribute to climate change.

These emissions have a direct impact on the oceans, as the planet’s rising temperature causes the waters to warm and expand, contributing to rising sea levels. In addition, the increase in carbon dioxide (CO2) emissions in the atmosphere, a gas absorbed by the oceans, makes the water more acidic.

The impacts of ocean acidification include damage to marine biodiversity such as corals, molluscs and crustaceans, alteration of ecosystems, reduced oxygen production and damage to fisheries, tourism and oil and gas extraction.

An unprecedented survey, conducted in 2018 by Professor Andréa Bento, estimated that the Brazilian sea economy represented 19% of the national GDP in 2015, including segments such as oil, transport, fishing, submarine cables, leisure and tourism.

That is, the increase in GHG emissions contributes to ocean acidification, which contributes to the increase in atmospheric temperature, since the oceans play an important role in absorbing carbon. These processes are interconnected and are part of a phenomenon called “climate feedbacks”.

One strategy to reduce GHG emissions and limit climate change is to promote more sustainable energy choices, such as the use of renewable energies such as solar, wind and hydropower. These energy sources are cleaner and have a much smaller impact on the environment than fossil fuels.

In the case of the oceans, to limit the negative effects of human activities on their balance, it is essential to reduce GHG emissions, protect marine areas, control fishing and overfishing, reduce pollution, especially plastic, develop global governance to control maritime transport and the extraction of oil and gas in deep waters, in addition to promoting public awareness.

I would like to draw attention to one of the drivers of the imbalance of the oceans, which is the extraction of oil and gas in deep waters, an activity that significantly affects the balance of marine ecosystems and the biodiversity of the oceans, mainly due to the construction of platforms, spills of oil and chemical products used in exploration and production, in addition to improper waste disposal.

In short, our energy choices impact GHG emissions, the planet’s temperature and the balance of the oceans. The imbalance of the oceans, in turn, reinforces climate change.

To make clean energy choices viable and ensure the balance of the oceans, it is crucial to pay attention to critical sectors, such as oil and gas. In Brazil, Petrobras is the largest oil and natural gas company and has a mixed economy structure. This means that the company is publicly owned and its shares are traded on the Stock Exchange, with the participation of other private companies and the State. The State, in turn, holds most of the company’s shares, which gives the government an important role in the management of Petrobras.

Several sustainability reports from previous years and interviews with Petrobras executives mention the company’s commitment to investing in renewable energies. In its Business and Management Plan for the period 2021-2025, Petrobras established an investment of approximately US$ 220 million in renewable energies, which includes wind, solar and biomass energy generation projects. Despite representing a significant amount, this amount is equivalent to only about 0.5% of the total investments planned by the company for the period.

In the 2021 sustainability report, Petrobras reported investments of BRL 22.4 million in R&D in the advanced biofuels segment and BRL 36.1 million in renewable energy, totaling BRL 58.5 million. However, the company reported that it stopped operating in the wind and hydroelectric power generation segment.

The 2023-2027 Strategic Plan (SP) reinforces that the company’s strategy is focused on decarbonization, that is, on reducing emissions, through improvements in oil and gas extraction and production operations. The PE indicates that investments in clean energy production, around US$ 600 million, represent less than 1% of Petrobras’ total projected investments. If investments in reducing carbon emissions are included, this figure rises to just over 5%.

On the other hand, the company plans to allocate US$ 64 billion (83% of its capital expenditure, or CAPEX) in the Exploration and Production area in the next five years, especially in pre-salt projects, which will account for 78% of all Petrobras’ production in 2027, reinforcing a focus on non-renewable energy and extraction below the seabed. Despite the sector investing more and more in renewable energies, Petrobras seems to be going against the tide.

As a state-owned company in a country that has committed —according to Brazil’s Nationally Determined Contribution (NDC), published in March 2022— to reduce GHG emissions by 37% by 2025 and by 50% by 2030 in relation to levels of 2005, it would be expected that its investments and strategies would be aligned with this commitment. However, the company seems to have adopted a different strategy from that advocated by its main shareholder —the State.

In theory, as I’ve already written in this column, a complex problem requires systems thinking, as is the case with energy choices, ocean protection and climate strategy. It is necessary to be aware of systemic relationships to ensure coherence and consistency between public commitments and implemented strategies. This goes for private and state-owned companies.

In practice, in the case of the Brazilian government and Petrobras’ strategies, many of these definitions are influenced by the previous government and its low commitment to climate policies. My vote of optimism and hope is that the leadership position in the new government’s climate agenda will leave the world of public commitments and become the reality in the execution of investments and strategies.