The Brazilian Senate recently approved a bill establishing the legal framework for low-carbon hydrogen production and fiscal and financial incentives for the sector (PL 2.308/2023).
The bill aims to promote the production of low-carbon hydrogen, including hydrogen derived from non-conventional renewable sources such as ethanol, biofuels, and electrolysis of water. This initiative aligns with global efforts to transition to sustainable energy sources. However, the bill is pending further approval as several amendments proposed by various legislators are still under consideration. These amendments pertain to incentives for self-producers and hydrogen producers, licenses for offshore wind projects aimed at producing hydrogen, and expansions of processing and export zones (ZPE).
A notable feature of the bill is the creation of a Special Regime of Incentives for the Production of Hydrogen with Low Emissions Carbon (Rehydro), effective from 2025 to 2029. This regime includes tax exemptions on imports, raw materials, intermediate products, packaging, stocks, and construction materials for qualified low-carbon hydrogen producers. The exemptions also cover social contributions for the social integration program (PIS), the training program for patrimonial public servants (PASEP), and the contribution to the financing of social security (COFINS).
While these incentives aim to stimulate investment in the hydrogen sector, the financial impact exceeds R$18.3 billion over five years. The government will need to ensure that these incentives are balanced against the country’s fiscal constraints and other economic priorities.
When comparing Brazil’s hydrogen strategy to global benchmarks, it becomes evident that while Brazil has significant potential, there are challenges to overcome. Countries like Germany, Japan, and Australia have already made substantial investments in hydrogen infrastructure and technology. For Brazil to compete effectively, it will need to expedite the implementation of regulatory frameworks, attract substantial investment, and foster technological innovation.
The approval of this bill is a step in the right direction for Brazil’s hydrogen sector. However, to fully capitalize on this opportunity, Brazil will need to address the pending amendments, streamline regulatory processes, and ensure that the financial incentives are sustainable. The collaboration between the Brazilian government, industry stakeholders, and international partners will be crucial in driving the growth of the hydrogen sector.
As Senator Jaques Wagner pointed out, Brazil has enormous potential for green hydrogen production, whether for domestic use or export. The successful implementation of this framework could position Brazil as a significant player in the global hydrogen market, contributing to the global transition to sustainable energy.
