Brasil: Why The World's Green Engine Is Stalling

Why the world’s green engine is stalling Ana Lankes Brazil bureau chief A few weeks ago I visited the port of Açu, which lies 320km north-east of Rio de Janeiro. There were no containers piled up in warehouses or big gantry cranes hanging over terminals. Instead, the site looks almost like a nature reserve—including a sanctuary for baby loggerhead turtles and a broad-leaf forest—with most of the action concentrated on the distant horizon. The port was built to provide offshore logistical support to oil platforms that pump crude out of nearby basins, as part of a plan to establish Brazil as a global oil-and-gas hub. Now, though, the current owners have different plans. They are ploughing billions of dollars into turning it into a hub for green industry, including factories to build wind farms, make clean steel and produce ammonia. The transformation of the Açu is representative of Brazil’s broader aspirations. The country has everything it takes to become a green powerhouse. It has huge potential sources for clean energy, thanks to mighty rivers in the Amazon basin, consistent sunshine in the north-east and strong winds from the Atlantic. It is also an agricultural behemoth, producing much of the sugar, soyabeans, cotton, coffee and oranges the world consumes. The waste from these products can be converted into fuel. All this could make Brazil one of the cheapest places to produce green hydrogen (which requires vast amounts of renewable electricity to replace the power usually provided by coal) as well as biofuels, which are needed to decarbonise heavy industries like steel, shipping and aviation. Investors should be flooding in. Brazil has attracted some foreign direct investment in renewables, but it will need much more to realise its green ambitions. Why is the cash slow in coming? There are several reasons, but an important one is Brazil’s volatile economy. Even in more stable countries there are dangers to investing in big decarbonisation projects. The German government has ploughed $525m into a green-steel plant owned by ThyssenKrupp. It was set to open in 2027, but may be cancelled due to escalating costs. Now think of Brazil: last year the real was the world’s worst-performing major currency. The interest rate is expected to reach 14.25% in March, compared with 4.25-4.5% in the United States and 6.25% in India. Many investors worry that President Luiz Inácio Lula da Silva is a spendthrift and that their investments could eventually get caught up in a wider economic crisis. The president has also sent mixed signals. Even while pursuing green ambitions, he is pressuring the environmental regulator to grant Petrobras, the state oil firm, a licence to drill for oil near the mouth of the Amazon. That is a bad look for a country that will host the COP30 climate summit in November. Brazil has everything it needs to be the world’s green engine. It just needs the right driver. Thanks for reading this edition of the Climate Issue. Do you think Brazil can become a green superpower while still pursuing oil? Should it push ahead with big green investments regardless of the risks? We’re always interested to hear our readers’ views. Write to us at climateissue@economist.com. .