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Research Article • BAR, Braz. Adm. Rev. 20 (01) • 2023 • https://doi.org/10.1590/1807-7692bar2023220087 copy

Oil and Gas Companies - Are They Shifting to Renewables? A Study of Policy Mixes for Energy Transition in Brazil

Authorship SCIMAGO INSTITUTIONS RANKINGS

ABSTRACT

We argue that there is a need to advance further research that strengthens the analysis of policy mixes for the energy transition in major emerging economies. In this context, this article aims to answer the following question: How do Brazil’s policies favor or hinder an energy transition of oil and gas companies (O&G) to renewables? To achieve this purpose, we conducted literature and archival research and interviews with experts to analyze (a) Brazil’s energy policy mixes that address O&G and renewables issues; and (b) major O&G companies’ activities and perspectives that influence the energy transition. Results demonstrated that though some of the O&G companies have made significant renewables investments in the last years, they continue focusing on O&G activities. We discuss the main policy mix features that hinder the prioritization of renewables by these O&G companies and that can undermine a sustainable energy transition in Brazil.

Keywords:
oil and gas; fossil fuel subsidies; energy transition; policy mix; sustainability

Energy source	Share in the energy matrix
Petroleum products	33.1%
Sugar cane derivatives	19.1%
Hydropower	12.6%
Natural gas	11,8%
Wood and charcoal	8.9%
Other renewables	7.7%
Coal	4.9%
Nuclear	1.3%
Other non-renewables	0.6%

Dimensions	Values
Time frame:	Present
Geographical scope:	Brazil
Impact domain:	O&G industry, in the E&P segment; and renewable energy production (except for hydropower)
Governance level:	Federal policies
Policy field:	Energy production, related to O&G and renewables

Brazil’s energy policy objectives	Consistency with the transition’s goals
Increase the share of sustainable bioenergy in the Brazilian energy mix to approximately 18% by 2030 by expanding biofuel consumption, increasing ethanol supply, including by increasing the share of advanced biofuels (second generation), and increasing the share of biodiesel in the diesel mix	Consistent
Achieve 45% of renewables in the energy mix by 2030	Consistent
Expand the use of renewable energy sources other than hydropower in the total energy mix to between 28% and 33% by 2030	Consistent
Expand the use of non-fossil fuel energy sources domestically, increasing the share of renewables (other than hydropower) in the power supply to at least 23% by 2030, including by raising the share of wind, biomass, and solar	Consistent
Achieve 10% efficiency gains in the electricity sector by 2030	Consistent

Brazil’s energy principal plans	Consistency with the transition’s goals
Ensure the supply of petroleum products in all the territory	Neutral
Ensure the supply of biofuels in all the territory	Consistent
Increase the use of natural gas	Inconsistent
Increase the share of biofuels in the energy matrix	Consistent
Use alternative energy sources	Consistent
Encourage biomass energy production, as it complements hydropower	Consistent
Promote R&D for renewable energy sources	Consistent
Mitigate GHG emissions, including the use of biofuels	Consistent
Promote a free market and draw new investment for energy production	Neutral

Instrument	Instrument description	Desired effect	Type	Purpose
PROINFA	Feed-in tariff program for wind, biomass, and small hydropower plants. 60% local content obligation for participants.	Demand generation for renewables and development of local industry.	Economic	Demand pull
Net metering	Allows consumers to generate their own electricity and connect it to the grid, generating credits and bill reduction. Mostly used with solar energy.	Promotion of renewable energy and increase of total energy production through small and medium players.	Economic	Demand pull
Tax incentives for solar, wind, and biomass	Tax incentives for the use of the energy grid, purchase of equipment and infrastructure.	Promotion of investment in solar, wind, and biomass energy production.	Economic	Demand pull
BNDES Finem	Federal financing program for renewable energy projects.	Promotion of investment in renewable energy.	Economic	Demand pull
INOVA Energia	Funding for R&D renewables programs.	Promotion of R&D investment in renewables.	Economic	Technology Push
EnergIF	Offers training for professionals in renewable energy.	Increased availability of trained professionals.	Information	Technology Push
Blend mandates	27% of ethanol blend in gasoline and 15% of biodiesel in diesel.	Increased of demand for ethanol and biodiesel.	Regulation	Demand pull
Tax incentives for bi-fuel and ethanol cars	Importation tax for industrialized products is reduced for ethanol and bi-fuel vehicle parts.	Promotion of the production of bi-fuel (flex) vehicles.	Economic	Demand pull
Tax incentives for production of ethanol	Some taxes, like ICMS (for services and goods), are reduced in the end price of ethanol, in comparison with gasoline.	Increased competitiveness of ethanol against gasoline.	Economic	Demand pull
ABC program	Government financing program for ethanol production.	Promotion of investment in ethanol production.	Economic	Demand pull
RenovaBIO and carbon credits	Carbon credit’s trading system for biofuel producers, with annual targets of trading volume.	Promotion of biofuels and predictability for energy investments.	Economic	Demand pull

Instrument	Description	Desired effect	Type	Purpose
Repetro	Importation tax exemption for O&G goods.	Increase the volume and feasibility of local E&P projects.	Economic	Demand pull
Local content obligations	O&G companies have minimum quotas of local content in E&P projects for goods and services.	Protection and development of local industry.	Regulation	Demand pull
Act No. 13,586/2017	O&G companies can have a tax reduction based on depreciation of their machines (accounting).	Increase the volume and feasibility of local E&P projects.	Economic	Demand pull
BNDES financing	Financing program from federal government (BNDES).	Promotion of investment in the oil and gas industry.	Economic	Demand pull
Promar	Promotion of studies to increase the O&G production of brown offshore fields.	Increased production and income from brown offshore fields.	Information	Systemic
REATE³ 3 . REATE stands for Programa de Revitalização da Atividade de Exploração e Produção de Petróleo e Gás Natural em Áreas Terrestres, or Program for the Revitalization of Oil and Natural Gas Exploration and Production in Onshore Areas.	Program to review taxation of onshore brown fields.	Increased production and income from brown onshore fields.	Economic	Systemic
New gas market	Committee to implement changes in the gas market and review of law and regulations.	Increased private investment, competition, and production; harmonization of regulations.	Economic	Systemic
R&D mandates	O&G companies have a mandatory budget to be spent locally in R&D.	Development of technologies in oil and gas in Brazil.	Economic	Technology push

Factor	Comments / Quote
Lack of integrated planning for energy in the government	“We are missing a high-level plan. All public policies would be created from this plan. With that, the government can organize financial incentives, innovation instruments, infrastructure, and things will happen because you know the priorities. Today, the government is talking about hydrogen while they haven’t even finished the New Gas Act. They have offshore wind farms requisitions, and they don’t have its regulatory framework ready. This happens because the federal institutions are uncoordinated.” (Interviewee, petroleum politics researcher).
Lack of regulations for new energy sources, for example, offshore wind	O&G companies are especially interested in offshore wind due to their know-how in maritime and subsea operations, which is an advantage against traditional energy companies (Pickl, 2019Pickl, M. J. (2019). The renewable energy strategies of oil majors - From oil to energy? Energy Strategy Reviews, 26, 100370. https://doi.org/10.1016/j.esr.2019.100370 https://doi.org/10.1016/j.esr.2019.10037... ).
Lack of infrastructure	“In the case of offshore wind, transmission lines will be needed in the coast, which involves expropriation. On top of that, public construction in Brazil takes too long.” (Interviewee, O&G company VP).
Lack of balance among different energy sources with regard to tributes and financial incentives for different energy types	Different energy sources have different levels of maturity and different cost of production, so politicians must work to create policies that favor a fair market for renewables in terms of taxes and incentives. “Policymaking takes too long in Brazil and renewables are not a priority in the congress.” (Interviewee, petroleum politics researcher).

	Petrobras	Shell	Galp	Repsol S.	Total	Equinor	bp
Activities in renewables	Hydro, wind, and solar	Ethanol 1^st and 2^nd gen., biogas	None	None	Onshore wind, solar	Solar	Biofuels, solar
Planned activities for renewables in Brazil	Develop HBIO diesel technology	Achieve 1.8 GW of solar, ethanol production 3.75 bi liters per year	Start solar energy production	None	2 onshore wind plants under construction	Start offshore wind, increase solar cap.	2 GW of extra solar power capacity planned
Estimate of renewable power capacity in Brazil	Onshore wind 52 MW, solar 5 MW (includes participations)	2,5 bi liters/year ethanol; 21 MW biogas	None	None	Solar 140 MW; onshore wind in construction 160 MW	Solar 70 MW (joint venture with Scartec)	3.2 GW solar and biomass; 1.8 bi liter/year ethanol (joint ventures)

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