Brazil can create an ‘unbeatable’ green hydrogen market, says energy transition secretary

With some of the cheapest renewables in the world, Brazil’s energy transition secretary says the country is committed to building a strong green hydrogen economy, which could be worth $200 billion.  

“When you combine all the complementarity of wind, solar, hydropower, bioelectricity, then you have unbeatable renewable resources for supplying hydrogen production,” said Thiago Barral, Secretary of Energy Transition for Brazil in an interview on Columbia Energy Exchange.

The country has the cleanest electricity mix in Latin America, and energy transition proponents want to use the renewable capacity to power electrolysis facilities. But they still have to figure out a policy framework for pairing hydrogen production with clean resources.

• The current take: Last year, 48% of the country’s total energy mix came from renewables. Some of the country’s energy companies, including the state-owned Petrobras, want to use that clean capacity to build a green hydrogen economy. 
• The market grounding: Earlier this month, Petrobras announced an $18 million investment to build a new electrolysis plant. The facility will use electricity from a solar PV plant, and will expand the capacity of the plant as the demand for the hydrogen facility grows. 
• The outlook: The project will help the company determine the economic feasibility of green hydrogen projects. According to Boston Consulting Group, Brazil could account for 10-15% of global green hydrogen exports by 2030. “We need to ensure…this potential is effectively becoming competitive projects,” said Barral.  

Without strong policy, Brazil could cede leadership to other countries for building out green hydrogen infrastructure. Brazil’s Congress is currently considering a bill that would create a tax incentive program for green hydrogen projects, hoping to draw more interest from private companies and drive down costs.

“We know that even with the most competitive renewable resources, the cost of hydrogen production is still above other resources, fossil resources for…industry,” said Barral. 

But who takes advantage of those potential subsidies is a concern. Over the past decade, Brazil has seen significant energy investment from the world’s biggest economies, like the EU and China. Barral explained that “how to balance incentives is the critical issue," as well as how to ensure "that any kind of incentive or subsidies are not being drained to other markets such as Europe or Asia."  

Barral does not expect green hydrogen to overtake investment in oil in the next decade. He says the country, which is the eighth largest producer in the world, will continue to invest in oil to maintain stability in energy markets: “Oil production is expected to grow until the beginning of next decade," he said. "Brazil's market share in the global oil market is expected to grow from 3% to 4%.”

He doesn’t believe increased investment in oil production will detract from the country’s commitment to renewables — and hopefully, green hydrogen. However, “there's still a gap in terms of competitiveness to be addressed” on hydrogen.

In its current form, the green hydrogen bill, which was passed by the lower house of Congress and is now in the Senate, would create the Low-Carbon Hydrogen Program. The program would provide incentives for the sale of low-carbon hydrogen that was produced in Brazilian territory. It defines low-carbon hydrogen as having “no more than four kilograms of carbon dioxide equivalent per kilogram of hydrogen produced.” 

Despite being a leader in clean energy, Barral says new clean energy and decarbonization policies are critical for meeting the net-zero by 2050 goal. “We still have 50% to decarbonize before 2050. So, we need to build, in this decade, the alternatives to fossil fuels so that we can scale them up in the next two decades,” he said. 

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Transcript

Thiago Barral: Climate variations are not new to Brazil's energy planning because Brazil has for decades been having had a hydro dominant power grid. So, as you can imagine, climate is at the core of energy planning and operation of the system. So, for many decades, we plan our system, the expansion and the operation of the system based on scenarios, climate scenarios.

Bill Loveless: Brazil is in a strategic ​​position when it comes to energy and climate issues. It holds a presidency of the G20 nations this year, and the UN Climate Talks, or COP30 in 2025. This comes as the nation sees a significant Reduction in deforestation in the Amazon rainforest under President Luiz Inácio Lula da Silva, and new commitments to pursue low carbon technologies such as hydrogen and establish a regulated carbon market. At the same time, Brazil, the biggest producer of oil in Latin America is planning to ramp up its output. So, how is the energy transition unfolding in Brazil? And how can the country balance environmental protection and energy security?

This is Columbia Energy Exchange, a weekly podcast from the Center on Global Energy Policy at Columbia University. I'm Bill Loveless. Today on the show, Thiago Barral. Thiago is the National Secretary of Planning and Energy transition of the Ministry of Mines and Energy for Brazil. Before his role as secretary, Thiago was the president of the Energy Research Company, a Brazilian institution responsible for energy planning studies and official state energy statistics. He joined the Energy Research Company in 2007 and also served as director of energy economics and environmental studies. Thiago joined me to discuss how Brazil plans to build up clean energy technologies and how geopolitics shapes that strategy. We also discussed the country's heavy ties to agriculture and what the implications are for rainforest preservation. Here's our conversation. Thiago Barral, welcome to Columbia Energy Exchange.

Thiago Barral: Thank you so much. It's a great honor to talk to you, Bill.

Bill Loveless: Well, it's an honor to talk to you as well, Mr. Secretary. You've been involved in government in Brazil for some years now in various positions. You have quite a bit of experience. And now of course you're the secretary of planning and energy transition. Tell us a bit about your role as the secretary and how you got this important job.

Thiago Barral: So, this is an interesting journey. And I think I've been pretty lucky to be at the right place at the right time many times. Going back in 2007, I stumbled upon this public recruitment process for EPE. And that's when I started my career in this organization as an energy planning analyst. EPE, for those who don't know, is the Energy Planning Office, and it's directly related to the Ministry of Mines and Energy of Brazil. And it's, let's say, basically a federal energy data and planning organization. But also, and I can relate that with the Energy Information Administration in the US kind of. But EPE also has some, let's say, executive roles such as executing the technical qualification process for project supplying for the energy auctions and a number of issues. So, it's basically offering the Ministry of Mines and energy technical consulting for the energy policymaking process, including power sector, including natural gas, fossil, and biofuels. All the energy plans are developed there. I've been at EPE for 15 years before coming to the Ministry of Mines and Energy.

Bill Loveless: You have a quite granular understanding of your country's energy economy.

Thiago Barral: But for these 15 years at EPE, I was very much at the, let's say, the technical perspective of the energy policymaking process. But now coming to the ministry as invited by Minister Alexandre Silveira at the beginning of last year, 2023, I became more connected to the, let's say, the political perspective of the energy policymaking process. And we all know that good policymaking requires a combination of both perspectives. And so, I think this balance between the political side and the technical side is what I'm trying to work on and ensure that we have a strong energy transition policy framework now.

Bill Loveless: It sounds like you're quite qualified for all that's on the nation's agenda today on energy as well as climate change. And of course, Brazil is in a strategic position globally when it comes to energy and climate issues. It holds the presidency of the G20 nations this year, and the UN Climate Talks or COP30 in 2025. How will Brazil take advantage of these leadership roles and what sort of goals will it set?

Thiago Barral: Well, let's say that now working on G20 presidency and also in preparation for COP30, it's really exhausting because it's basically extra work for us. But I do, and all our team is doing it with great enthusiasm. Brazil has been a champion for climate discussions for quite a long time in the past. And it's really exciting to have G20 followed by COP30 Brazil this year 2024, taking the presidency of G20. And hoping to deliver discussions and ensure that we build consensus that will also be useful for advancing the climate agenda under COP30 next 2025 also in Brazil. We are trying to connect the economic agenda, the social policy agenda, and the climate agenda, also with industrial and energy agendas.

But under the energy transitions working group that we have established three key priorities. One of them is financing the energy transition, particularly in emerging and developing countries. The second is the social dimension of the energy transition. It's becoming more and more an issue, and we need to address it and understand the policy guidelines that we should ensure there. And finally, developing advancing markets for sustainable fuels. That's a long way ahead and we're trying to push that forward. So, as you can see, all of the energy agenda fits into a wider agenda of social economic development with climate goals. So, this has been, let's say, the basic framework and we're hoping to engage as much partners in this quest.

Bill Loveless: Just recently, the executive director of the International Energy Agency, Fatih met with President Lula, as well as you and other Brazilian officials about the major opportunities ahead for Brazil. Birol called your country, a sustainability champion and a strong voice for emerging economies around the world at a crucial moment for international action on energy and climate. Take us inside those talks and tell us what happened.

Thiago Barral: So, the visit of Fatih Birol from the IEA, it was a very special timing for his visit. And he did really talk to various ministers, President Lula. And his voice is very well heard here in Brasilia. The IEA is completing 50 years of existence now. And it has reinvented itself so many times. And back in a few years ago, in 2017, Brazil was finally joining the agency as an association country. So, Brazil is not part of OECD, but is part of the group of countries that are non-OECD countries. But that joined the IEA as association, not full membership, but association countries including China, Indonesia, South Africa, Brazil and India, and a number of other countries. And that was really a turning point for the relations between Brazil and the IEA.

We, back in this past few years, we started building trust and building a valuable collaboration for both the IEA, and its member countries, and also Brazil. And we are happy with the visit of Mr. Birol, because it was the time when we finalized the next work, bilateral work program with Brazil and the IEA with a number of... It's expanding the scope of this collaboration, but having the energy transition as a core of its collaboration. And finally, Mr. Birol said he is offering his unconditional support for Brazil and Brazil's presidency under G20. So, we are very excited to use all the data and analysis, and expertise of the IEA to help push the agenda under G20 in both climate and energy policies.

Bill Loveless: And certainly when we are talking about climate and energy policies, the energy transition there in Brazil, unlike many economies, the emissions largely come from agriculture, forestry, and land use, mostly because the countries in agricultural powerhouse. So, the discussion about climate in Brazil inevitably it seems, is a discussion about deforestation. And there seems to have been some good news lately I've read where according to the country's National Space Research Institute, deforestation at the Amazon fell by 22% in year ending last July 31st. Why did that happen? And is that enough?

Thiago Barral: With regard to the Brazil's emissions sources of emissions, you're completely right. Land use and agriculture represented in the past few years, over 60% of emissions of Brazil's emissions energy-related emissions accounted for 30% of the total. We can compare with the world emissions energy represented 72 or 75% of total emissions, in Brazil 30%. So, there's quite a difference there because obviously also the very renewable mix that we have here, both in transport sector with the biofuels, but also in the power sector with hydropower, wind, solar, and bioenergy, bioelectricity as well. So, you're completely right. And some policies regarding the need for reduction of deforestation have been implemented and are delivering some very positive results in the Reduction. So, the goal is to reduce drastically the emissions from deforestation by 2030. That's the goal or even before that. But we also know that energy is a critical aspect to be addressed as well because the energy consumption per capita of Brazil is still much lower than those of the advanced economies.

The need for energy is growing fast. And so, we need to also build alternatives for continuing decarbonizing the mix. Last year, 2023, renewable energy accounted for forty-eight percent of the total energy mix. That's quite a lot, but we still have 50% to decarbonize before 2050. So, we need to build in this decade the alternatives to fossil fuels so that we can scale them up in the next two decades. So, that is quite a challenge. And the energy transition policy framework that we are building and implementing is also a critical aspect of Brazil's commitment in terms of decarbonizing and reducing emissions. And that is also something that we really hope to deliver as a lead by example when COP30 comes.

Bill Loveless: Is it President Lula's intention to drastically reduce deforestation or to absolutely end it more or less?

Thiago Barral: The commitment is to reach zero illegal deforestation. So, this is a commitment. Obviously the Amazon is the most important area for action. But other areas or other regions of Brazil are also having some specific policies to also address land use in those regions other 

than the Amazon forest. But the goal is zero illegal deforestation by 2030.

Bill Loveless: You mentioned biofuels and it's important to discuss this in terms of the transition in Brazil. One of the challenges of biofuels is exactly on land use and on the tensions between food and energy. How does Brazil guarantee a vibrant but sustainable biofuel industry? What are the challenges ahead for materializing and ramping up production of fuels, particularly sustainable aviation fuels?

Thiago Barral: Yeah, so two years ago we developed a very interesting project actually to build scenarios for net zero emissions by 2030. EPE, I was at EPE at that time in partnership with the IDB, the Inter-American Development Bank, and SABRIA Think Tank based in Rio. We build scenarios in collaboration with the private sector as well to model energy, model land use and water so that we could also have a visibility of the nexus of agriculture, land use and energy as well. And the results were very interesting because they were showing that we could increase significantly the production of biofuels with increased yield of the crops. But also ensuring that new production is focused on degraded areas, in areas that have been deforested in the past, and could be used to deploy, and just a fraction of that of those areas. So, we could dedicate huge areas, degraded areas to reforestation and reserve a small fraction of that to biofuels bioenergy. And that could be of huge impact with low cost offering decarbonization solutions.

In terms of policy framework, the RenovaBio policy framework, the National Biofuels policy, you can only get the decarbonization credits from biofuels if you are certifying your production in terms of environmental criteria. And so, with that, we are ensuring that all the biofuel production that is in Brazil today and benefiting from the policies, they are assessed independently and certified as not related to any deforestation or so on. So, we are very committed to that. And we hope that under G20 and the Biofuels Alliance that was launched by Prime Minister Modi, and President Lula, and Biden last year in India, that this alliance also supports the comprehensive sustainability criteria to ensure that all the biofuel production is addressing these criteria and ensuring sustainability of this production.

Bill Loveless: I mean, carbon credits is an important consideration there. Brazil is on track to create a regulated carbon market. It would be a cap and trade system. It won approval, as I understand in Brazil's Senate in October. And is expected to pass through the house and be signed by President Lula. It would be an important addition to an expanding network of cap and trade systems around the world. First, let me make sure I got that timeline in terms of where the bill stands in the government right now.

Thiago Barral: Yeah, absolutely. The government, and I was part of this effort to build consensus within the government about our, let's say, considerations to the carbon market framework. And it was very well received by the Senate and was approved there. And now it's at the house, lower house. And it's one of the priorities for the government to approve this legal framework and start implementing. We know how much effort needs to be put in the implementation. But the government is very committed to supporting that. So, there's still pending approval of the lower house, but the government is very dedicated to supporting that process this year. So, the timing is right, but we all know that all the complexity that is involved there. So, implementation, we see a long way ahead, but we are very excited to walk it through.

Bill Loveless: Yeah, you mentioned before that when it came to the biofuels opportunities and using degraded lands, you talked about the carbon emissions from those areas. As I understand it, and tell me if I'm wrong, there was when it seemed to be a relatively controversial decision to exclude the country's agricultural sector from this carbon market. And again, Brazil's emissions are largely produced by farms and industry linked to deforestation. Why that exclusion?

Thiago Barral: So, this is part of the political negotiation and building consensus. So, ideally, we should seek for a carbon market that has, let's say, the broadest or the widest scope in terms of sectors. But we also know that some sectors are more prepared and more ready to engage in that market. So, the thing is that the negotiations ended up with this exclusion of agriculture in the first place so that we could continue building the framework and the implementation, but continue the conversation with the agriculture sector to prepare their participation in the future. So, we have the ideal scope. But we know that some sectors are more prepared and that is the reality and agriculture. We see appetite to discuss, to continue discussing, but we may need some additional time to ensure that they are confident about the opportunities that they can harvest from carbon markets as well.

Bill Loveless: And of course, Brazil is not alone. Europe excludes farmers from its cap-and-trade system. And that of course in Europe is the world's largest program. Moreover, we've just seen strong protests in Europe over climate change proposals that would affect farmers. So, there's certainly a political consideration and there's also a certain amount of balance and political negotiation that needs to take place over these things. You mentioned the renewables and all. When I think of Brazil and it's grid, it's particularly green relying so heavily on hydropower. And yet with climate change, there's intense responses from mother nature. You've had droughts such as one we saw in 2021. How do you manage a green power grid in the context of climate change?

Thiago Barral: Yeah, that's very challenging actually. But climate variations are not new to Brazil's energy planning, because Brazil has for decades been having had a hydro-dominant power grid. So, as you can imagine, climate is at the core of energy planning and operation of the system. So, for many decades, we plan our system, the expansion and the operation of the system based on scenarios, climate scenarios, so that we can have a probabilistic approach to planning and decision-making. So, modeling climate change is quite challenging. But what we can do and what we have done is build some scenarios is stress scenarios to check the resiliency of the system. And meanwhile, what we did and what we continue to do is to manage the criteria, the risk aversion criteria for planning the system. So, we evolved in a number of additional criteria for managing the peak demand. It was never an issue, but now it's becoming more and more an issue in terms of reliability of supply and supply adequacy.

So, we are increasing the risk aversion when it comes to building those scenarios for decision-making in expansion and operating the system. And that's how we have managed. So, every time we become more strict, we are protecting being the system, but there is a balance there. And we continue evolving in terms of methodologies and so on. But the most immediate reactions were to after the water stress that we went through 2020, 2021, that was very critical. We evolved in stricter criteria for risk aversion.

Another aspect that I think it's interesting to mention here is that we evolved in regulation for imports and exports from our neighbor countries. When we went through water stress situation in Brazil, we imported a lot from Argentina and Uruguay for example. And that was of critical importance. And then two years later, Brazil was going through a lot of rainfall, all the reservoirs at the highest level in more than a decade. And Argentina and Uruguay were in need for imports to ensure that their supply. And we exported a lot of energy including not only thermal, but hydropower energy to our neighboring country. So, this is another way we are learning to manage resiliency to climate variations.

Bill Loveless: Is that sort of cooperation among the countries a relatively new development? Or has that sort of thing happened before?

Thiago Barral: It has had ups and downs in the past decades. But I think because of these stresses in supply in Brazil, in Argentina and Uruguay, I think we are moving towards more integration and some market mechanisms that are enabling more trade, electricity trade between countries. And that is a win-win. So, we hope to continue that pathway. We hope to also continue integration with our neighboring countries, including Bolivia for example. We are also integrated with Paraguay because of Itaipu Bi-National hydropower plant. So, this is a way our minister, Silveira, is really keen to walk in wider integration with our neighboring countries. That requires trust to be built and it takes time. So, we are taking step by step and I see a very positive prospect there.

Bill Loveless: As I recall, liquefied natural Gas or LNG was instrumental when that drought happened in 2021. It was very helpful to Brazil

Thiago Barral: And also because additional hydropower since 2000s, late '90s and early 2000s came without reservoirs. So, without storage of water to balance the dry season and the wet season or the rainy season. So, LNG came to help us address that valley in terms of hydropower generation. And so, it's very valuable for the managing seasonal variability of hydro, but also managing annual variability of energy supply. So, you're totally right. LNG infrastructure has proven a very valuable resource. And gladly, we didn't need to import too much in the past few years, but this is something that we extremely value.

Bill Loveless: Speaking of LNG, I saw a headline from Bloomberg earlier this week that Brazil's Petrobras is negotiating a long-term LNG contract with Qatar. My colleagues who follow markets tell me this is relevant because Brazil normally buys its LNG in the spot market where prices have been relatively low. It seems as though this is an opportunity for Brazil to secure supply in a long-term way.

Thiago Barral: Well, there's actually a very diverse various approaches to LNG contracts and procurement. And so, Petrobras in the past, as far as I'm concerned, was very much dealing in spot market. But because of the electricity auctions that we had in few years ago, a long-term contract is also required as a qualification criteria. So, we had long-term contracts also signed for filling the new gas fired power plants in the country. So, there is a very diverse approach. And gas distribution companies are also going to the LNG market to also try to balance their markets. Bolivian gas imports are reducing within time. Some production associated gas associated to oil production is also coming to the shore and complementing. And there is also the potential for integrating Brazil and Argentina as Argentinian supply increases. So, I think we are diversifying sources of natural gas. And also comes with diversification of contracts and a combination of spot and longer-term contracts. But each company has its own strategy. It's hard to say that everybody is going one way or the other. But Petrobras has a huge impact in that.

Bill Loveless: And of course Brazil is one of the largest oil producers in exporters. And oil production increases last year, helped global oil markets. Going forward, what is the role for oil in the energy transition there?

Thiago Barral: So, this is an ongoing discussion in Brazil as we talk about climate goals, about energy transition, and all of that. So, everybody is really try to understand the role of oil in Brazil's energy transition. First of all, Brazil has committed investment in additional production of oil in the coming years. So, the production of Brazil is expected to grow. Oil production is expected to grow until the beginning of next decade. As Fatih Birol mentioned a few days ago, Brazil's market share in global oil market is expected to grow from 3% to 4% or so. So, this is not negligible. What I can say is that our prospects show that if Brazil does not invest in additional exploration, and production, and deployment of oil production, then our production will start to decline in 2032 and on. And so, there is a discussion on will the country be ready to give up its oil production that soon, given all the uncertainties we have in terms of the competitiveness of the alternatives to oil, to fossil fuels such as hydrogen, such as a number of other technologies and solutions?

And I'm very cautious that the energy transition will not happen because we stopped oil production. We need to ensure that we balance the Reduction of oil production with provision of clean energy infrastructure and alternatives that are competitive enough. Otherwise, an unbalanced market may lead to inflation and vulnerability. And we all know all the social impacts and economic impacts of energy inflation. So, I believe that we still have a role in oil in Brazil's economy. It has a huge impact in fiscal results in GDP, in the Brazil's exports and so on. And I believe that the oil industry has also a role in financing, in funding the energy transition, new technologies, investment infrastructure. So, what we need to do is to ensure that policy is driving the oil industry to really deliver that and not helping to create the alternatives. So, that is the ongoing discussion. But I truly believe that oil industry has still a role to play in the coming decades in Brazil's economy.

Bill Loveless: Yeah, it sounds like the sort policy challenges that policymakers in much of the world, the United States including, are grappling with these days. The extent to which you continue to rely on domestic gas and oil production for energy security purposes, and to keep prices at a reasonable level at the same time as you acknowledge the need to transition at some point from fossil fuels. I'm sure that was a big discussion with when he was there in Brazil.

Thiago Barral: And one interesting thing is that the emissions related to oil production in Brazil, so scope one emissions in Brazil are much lower than the world average. So, for every barrel of oil produced in Brazil, it's actually reducing the carbon footprint of the oil industry globally speaking. So, we think this is an issue to also be considered when we think about Brazil's contribution to the oil supply and energy security worldwide, but also the carbon footprint of this industry.

Bill Loveless: Among the alternatives, looking long-term as you've noted, is hydrogen, green hydrogen. Recently I saw where you were quoted as saying that, "Current projections place Brazil as the country with the lowest cost of producing low carbon hydrogen and its derivatives." Why is that?

Thiago Barral: So, these numbers, these rankings are such as Bloomberg New Energy Finance and others have ranked Brazil as one of the potentially most competitive green or low carbon producers in the world. That is because of the great quality of our renewable resources. So, wind capacity factor in Brazil is incredibly high. Solar energy has had a huge also yield, a very good potential. And when you combine that with a national grid that is growing really fast over the territory, all over the territory of Brazil, when you combine all the complementarity of wind, solar, hydropower, bioelectricity, then you have unbeatable renewable resources for supplying hydrogen production. What we need to ensure is that this potential is effectively becoming competitive projects. And we know that even with the most competitive renewable resources, the cost of hydrogen production is still above other resources, fossil resources for the industry. So, there is still a challenge ahead.

We need to address some regulatory issues that we are discussing. And a legal framework is under discussion in Congress. It has also been approved in the lower house. Now it's in the Senate. So, we are discussing closely with the congressmen. But yeah, I mean there's still a gap in terms of competitiveness to be addressed. And how to balance incentives there is the critical issue. And ensuring that any kind of incentive of subsidies are not being drained to other markets such as Europe or Asia at the cost of Brazil's energy tariffs or so. So, we need to ensure a just and balanced allocation of costs and benefits in this emerging industry. And that is something that we are trying to build.

Bill Loveless: And of course there are global considerations there. As you note, Latin America is the largest economy. But it doesn't have a free trade agreement with the United States. At the same time, Brazil finds in China and other nations in what is collectively known as BRICS trade partners, and financing opportunities. BRICS of course is Brazil, Russia, India, China, South Africa, and more. How does Brazil see itself in an increasingly divided and polarized world?

Thiago Barral: Brazil is a country that has a tradition of... And President Lula is ensuring that it's really happening that way. Brazil talks to everyone, every group. It's a very open to dialogue. It's a very open country to collaboration. So, we have very strong collaboration with the IEA. We have a strong bilateral collaboration with Germany, with the US, with the UK, with China. China is Brazil's greatest trade partners for many years now. And with Japan. So, we are very open with Arab states. And Brazil needs to attract investment to infrastructure in the country. And we have received a lot of investment from Chinese companies, from Arab funds, from European companies as well, American countries. So, we are very open to collaborating in energy infrastructure, in collaborating in the energy transition as well. And that's the spirit of our policy and our dialogue with other countries.

With China, we have had a huge investment from Chinese companies in transmission sector, in distribution, in power generation, hydropower, renewables. But that's a very diverse range of opportunities for many countries and funds in every region of the world. So, whenever there is a space for dialogue, for collaboration, for economic partnership, Brazil has been very open. And that's the spirit of our participation in G20, in BRICS, in bilateral cooperation with the IEA, with a number of other organizations and institutions. So, that's how we see. We try to balance all of those partners in a way that we can identify with each of these partners a win-win opportunity as we have, I think successfully had with all these partners that I mentioned before.

Bill Loveless: How does Brazil see green industrial policies taking place in advanced economies like the Inflation Reduction Act in the United States and the Carbon Border Adjustment Mechanism in Europe? How does Brazil see those policies?

Thiago Barral: So, yeah, we have followed a lot and tried to understand any kind of opportunity we can have with these countries and to try to benefit from these industrial policies. So, the good side is that scaling up some of these clean energy technologies can benefit Brazil's own clean energy infrastructure, investment ambitions. On the other side, we know that there is a competition for attracting investment and such subsidies. Brazil is not in a condition to join this, let's say race, to attract all of that investment because we wouldn't have to be creative to try to be competitive and attractive to those investment. And we have very attractive renewable resources. We have a big domestic market. We have long-standing clean energy policies. We have, it's a solid democracy, stability, predictability for investors. We have respected contracts for many, many years. So, we are trying to offer also an attractive environment.

Just at the beginning of 2024, the government also announced a new industrial policy. A new industry Brazil as a translation. And it's mission-based. So, there are six missions there are driving this new industrial policy. And decarboniz ation energy transition and bioeconomy is one of these missions. So, we are now adjusting the targets, adjusting the incentive mechanisms, and try to ensure that we can also have an industrial policy that is able to ensure that Brazil is also part of these global markets for clean energy industry.

Bill Loveless: So, it sounds as though the government acknowledges these policies, industrial policies. And the US and Europe are something to contend with. But as a practical example, electric vehicles produced in North America with Brazilian produced battery components of critical minerals are not eligible for the Investment Reduction Act Tax Credits because of the lack of a free trade agreement with Brazil. So, I mean, it sounds as though there's challenges there for Brazil. But the hope there is that there's enough other opportunity in Brazil to compensate for any disadvantage those trade policies might present.

Thiago Barral: Yeah, you're right. We have discussed with the US government opportunities for Brazil to be part of those. We all know that the US won't be able to produce everything in the US. So, Brazil wants to be a partner in that. But we also acknowledge that trade agreements could... They are also an issue that may make other countries more attractive in some sectors for attracting those investments and integration with the US North America's industry investments, clean energy industry investments. Brazil has discussed for quite a long with the European Union trade agreement. Let's see how it evolves. But yeah, I mean we try to build to ensure that Brazil is attractive even without some of these trade agreements. And we have very interesting aspects to be considered as well.

Another aspect, if you may, Bill, allow me, is the issue regarding the cost of capital. The International Energy Agency has brought some data that shows the huge gap in terms of cost of capital comparing advanced economies and emerging markets. And there's this huge gap. And so, this is one of the priorities for us to discuss how to try to address that under G20 framework because. Investing in clean energy infrastructure will end up being much more expensive than in emerging countries or developing countries than in developed or advanced economies. And Fatih Birol, when he was here in Brazil a few days ago, he mentioned his concern that advanced economies in China are attracting, as far as I'm concerned, more than 70% of global investment in clean energy markets. So, in clean energy infrastructure. And we all know that for climate policy, for climate goals, that is not a good way to move forward because demand is growing, energy demand is growing in emerging and developing countries. And that should also be a priority that countries collaborate to ensure that we have a lower cost of capital for other countries as well.

Bill Loveless: Well, there's so much going on there in Brazil and so much new initiative, new policies, there's certainly challenges there. But it's interesting to see what has taken place in Brazil across the board, not only with the traditional fossil fuels, but perhaps just as importantly, more importantly, what the opportunities are for Green Energy going forward. Mr. Secretary, thank you for joining us to discuss this with us today on Columbia Energy Exchange.

Thiago Barral: Well, thank you so much, Bill. It's a great pleasure. And I'm really excited to be here at this moment in Brazil working on a number of policies to accelerate the energy transition concerning also security and reliability issues. And so, we are very open to continue this conversation anytime and collaborate. So, really happy to talk to you and the Columbia team.

Bill Loveless: That's it for this week's episode of Columbia Energy Exchange. Thank you again, Thiago Barral, and thank you for listening. The show is brought to you by the Center on Global, Energy Policy at Columbia University School of International and Public Affairs. The show is hosted by Jason Bordoff and me, Bill Loveless. The show is produced by Erin Hardick from Latitude Studios. Additional support from Lilly Lee, Caroline Pittman, Luisa Palacios, Diego Rivera Revota, and Kyu Lee. Roy Campanella is the sound engineer. For more information about the show or the Center on Global Energy Policy, visit us online at energypolicy.columbia.edu or follow us on social media @ColumbiaUEnergy. And you can rate the show on Apple or Spotify. You can also let us know what you think by leaving a review. And if you really like this episode, share it with a friend or a colleague. It helps us reach more listeners like yourself. We'll be back next week with another conversation.