Brazil at the G20 and leadership in the energy transition

ENERGY TRANSFORMATION

Encouraging other countries to transform the world’s energy matrix to make it cleaner is an important challenge for Brazil as the country holds the G20 presidency and will be at the forefront of COP 30 in 2025. Brazil is already leading by example: the Brazilian energy matrix it is already one of the cleanest in the world. According to data from the Energy Institute (2023), almost half of the energy used in the country (49%) comes from renewable sources. In terms of electricity generation, hydro, solar, wind, biofuels, biomass and geothermal energy dominate the Brazilian energy matrix. In an exclusive article published on the G20 Brasil website, André Leão, researcher at the Institute for Strategic Studies in Petroleum, Natural Gas and Biofuels (Instituto de Estudos Estratégicos de Petróleo, Gás Natural e Biocombustíveis – INEEP) and doctor of political science at the University of the Institute of Social and Policy at the State University of Rio de Janeiro (IESP-UERJ) is assessing the opportunities that Brazilian leadership in important global forums can bring to ensure that financing for the energy transition can reach countries in the Global South.

Brazil’s status as the current president of the G20 challenges the country to lead the discussion on a number of key issues for the future of global society: trade and investment, digital transformation, finance and infrastructure, food and nutrition security, and, above all, climate change and the energy transition.

These last two issues are particularly important for the foreign policy of President Lula’s government, which spared no effort in organizing COP 30, which will be held in 2025 in the city of Belém. Encouraging other countries to transform the world’s energy matrix to make it cleaner is an important challenge for Brazil. However, fulfilling this role will allow the country to make a significant contribution to the decarbonization of national economies and the fight against ongoing climate change.

Brazil’s ability to lead energy transition efforts relies on government programs and incentives, legislative projects, commitment to international agreements on clean energy production, and data on the country’s energy matrix. The New Growth Acceleration Program (Novo Programa de Aceleração do Crescimento – PAC) – an investment program coordinated by the Brazilian government with the support of states, municipalities, social movements and the private sector – for example, included an investment of BRL 417.5 billion (approximately USD 82 billion) for energy transition activities from 2023 to 2026, during which period BRL 20.9 billion (about $4.1 billion) is also expected to be spent on the development of low-carbon fuels.

The Brazilian government also provided the National Congress with a number of measures for the energy sector. For example, “E30” changes the maximum percentage of ethanol in gasoline from 27% to 30% and also includes provisions on carbon capture and storage. Also noteworthy is the Inova Energia Plan, which is an initiative of the Brazilian National Bank for Economic and Social Development (Banco Nacional de Desenvolvimento Econômico e Social brasileiro – BNDES), aimed at supporting the technological development of renewable energy production chains, such as solar and wind energy power.

Internationally, Brazil, together with India and the United States, has built the Global Biofuels Alliance, which aims to increase the consumption of this energy source by consolidating the global market. During the 2023 United Nations Climate Change Conference, COP 28, Brazil joined the Global Offshore Wind Alliance – founded by Denmark, the International Renewable Energy Agency (Irena) and the Global Wind Energy Council – to exchange good practices and policies and increasing the installed capacity in the sector.

The Brazilian energy matrix is ​​already one of the cleanest in the world. According to the Energy Institute (2023), although oil consumption still exceeds 30% of total consumption, the country consumes 49% renewable energy, compared to 51% non-renewable energy. When it comes to electricity generation, the numbers show Brazil’s leading position in the use of renewable sources. Currently, the electricity matrix is ​​dominated by hydropower, solar, wind, biofuels, biomass, geothermal and others, which constitute about 87% of the total, as seen in Figure 1 below:

The emphasis on biofuels is justified by Brazil’s extensive expertise in this industry. According to the Energy Institute (2023), the country is currently the second largest producer of biofuels in the world with a share of over 21% of the total, second only to the United States, which has about 38%. According to the 2032 Ten-Year Energy Expansion Plan (Plano Decenal de Expansão de Energia 2032), a briefing document from the Brazilian government, long-term expectations for the sector are positive. Forecasts show an increase in biofuel supply of 4.1% and demand of 6.6% over a ten-year period (2022-2032), which could stimulate the international market and benefit Brazil.

In the run-up to taking over the G20 presidency, Brazil signed an energy acceleration work plan with the International Energy Agency (IEA). As part of the group of the world’s largest economies, the country, through the Ministry of Mines and Energy (MME), has the mission of coordinating the Energy Transition Working Group, whose structure is based on three main themes:

i) accelerating efforts to finance the energy transition;

ii) emphasizing the social dimension to promote a just and inclusive transition;

iii) development of sustainable fuel markets.

These issues pose important challenges for Brazilian diplomacy, in particular the need to devote more resources to financing the transformation of countries in the Global South whose energy matrices are still largely dominated by fossil sources. Although investments in clean energy increased by 17% in 2023, reaching USD 1.8 trillion – according to the Bloomberg NEF report “Energy Transition Investment Trends 2024” – this amount must increase annually to USD 4.8 trillion in 2024-2030 , in order to adopt a trajectory that guarantees net zero CO2 emissions by 2050.

In other words, one of Brazil’s main missions will be to find solutions to deconcentrate investments. After all, a just and inclusive energy transition must take into account the heterogeneity of energy systems in different regions of the world. The transformation of the energy matrices of developing and less relatively developed countries depends on the support of developed countries and requires diversification of financing sources.

Brazilian experience in the biofuel sector could contribute to increasing the use of ethanol worldwide and lead to its transformation into sustainable hydrogen, which could also be produced from wind and solar energy, generating another source of clean energy. Finally, through its government, Brazil can lead the energy transition, leveraging its enormous potential for new technology pathways and diplomatic experience to support multilateral cooperation, promote sustainable fuel markets and ensure energy security.

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