Brazil seeks investment to speed green transition

The Brazilian government is moving forward with a series of initiatives that aim to expand investment in energy transition projects and the decarbonisation of its economy.

Brazil has approved new laws to boost investments in the energy transition, but the lack of available government funding for subsidies means that for these projects to move forward, private-sector financing will be necessary. Likewise, it is seeking support from developed countries to help protect and preserve its tropical forests.

As part of its efforts to attract foreign investment, the Brazilian government, together with several international partners, launched the Brazil Climate and Ecological Transformation Investment Platform (BIP) this week. The platform seeks to create a centralized forum for Brazilian energy-transition and conservation projects, with the goal of helping these projects to obtain financing. Partners in the program include Bloomberg Philanthropies and the Glasgow Financial Alliance for Net Zero.

The platform aims to identify high-impact projects and help them attract investment. It will target projects in three broad sectors, including nature-based solutions, which includes reforestation, regenerative agriculture and waste-management projects. It will also support green mobility and industry investments, specifically targeting hard-to-abate sectors, such as steel, aluminium, cement, fertilizers and urban electric mobility.

The new platform has already selected six projects, which could result in investments of roughly $10.8bn. These include Acelen Renewable’s green diesel and sustainable aviation fuel plant in Bahia state, Atlas Agro’s green fertilizer project in Minas Gerais state and Fortescue’s green hydrogen project in Ceara state. Other targeted projects include Australian mining company Meteoric Resources’ rare earth elements mine in Minas Gerais state, as well as mining giant Vale’s plans to build industrial hubs in Brazil for green hydrogen and hot-briquetted iron, seeking to reduce emissions from steel production.

Reforestation projects

The platform will also include the Corridors for Life ARR Project, which will restore 6,000 hectares of the Atlantic forest in Sao Paulo state and the Biomas project, which will restore 14,000 hectares of rainforest.

In addition to the new platform, the government also concluded the first round of its currency-hedging program targeting renewable and low-carbon projects, dubbed Eco Invest. The program, which was announced in February, will create currency hedge mechanisms to limit exposure to exchange rate volatility. Brazil’s finance ministry and central bank developed the program with the World Bank and the InterAmerican Development Bank.

The first round of the program offered R7bn ($1.23bn) in subsidized financing, with interest rates of 1pc per year. The subsidized loan will be used as collateral to bring capital from abroad for total investments of R45bn, according to finance ministry estimates.

Brazil is also spearheading other initiatives that could boost financing for the global green transition by helping developing nations to fund projects. Earlier this year, the finance ministry submitted a proposal to the G20 to implement a global tax on the super rich. Under the proposal, global billionaires would pay an annual tax of 2pc on their total wealth, which would raise up to $250bn/yr and could be used to fight climate change.

Brazil also proposed last year the creation of the Tropical Forests Forever Facility (TFFF), that would help pay some 79 developing countries — including Brazil — a $4 fee for each hectare of tropical forests they preserve. The goal is to raise roughly $125bn for the fund, to preserve roughly 1bn hectares of tropical forests globally.

Roughly 20pc of the fund’s resources would come from long-term loans from developed countries and philanthropic entities. The remaining 80pc would come from institutional and retail investors, who will be able to buy debt issued by the fund.

The Brazilian government is working to finalize the design of the fund by the UN’s Cop 29 climate summit and to have it running by next year.