Brazil today published a decree implementing the country's low-carbon hydrogen framework, providing operational details for tax incentives and a future tax-credit programme approved by lawmakers in 2024.
The decree regulates Rehidro, a tax incentive scheme for low-carbon hydrogen projects, and a subsidy programme that will allocate 18.3bn reals ($3.5bn) in tax credits in 2030-34. It establishes a certification system for low-carbon hydrogen, which in Brazil is defined as hydrogen with lifecycle emissions of up to 7kg CO2e/kg of hydrogen produced.
The text largely expands on two laws approved in 2024 that created the low-carbon hydrogen framework, but also introduces a dedicated framework for natural hydrogen exploration and production. Hydrogen projects, including natural hydrogen, will be regulated by Brazil's national petroleum, gas and biofuels agency ANP.
Natural hydrogen projects may also be eligible for federal incentives, although only if production receives certification as low-carbon hydrogen under Brazil's new certification system. The decree defines natural hydrogen as potentially, but not necessarily, low-carbon.
Projects seeking Rehidro benefits must certify that the hydrogen produced qualifies as low-carbon, regardless of production pathway. Rehidro suspends some taxes on the purchase or import of equipment, machinery, construction materials and services used in approved projects. The programme also classifies low-carbon hydrogen initiatives as priority infrastructure investments, making it easier for developers to access financing through debentures, a special bonds mechanism to promote infrastructure projects.
The decree introduces local-content requirements for projects participating in Rehidro. Electrolysis projects must commit to at least 15pc local content in production systems and electrolysers, while other production pathways face a 40pc threshold for production systems. Transport and distribution equipment and services will be subject to a 60pc local-content requirement. ANP will establish the methodology used to calculate compliance.
Companies receiving Rehidro support will also have to invest at least 1pc of total project spending in research and development activities and a further 1pc in sustainable development and energy-transition initiatives in Brazil.
The decree also provides additional detail on the PHBC tax-credit programme, which aims to support domestic production and consumption of low-carbon hydrogen. It confirms the programme will operate from 2030-34 and maintains the R18.3bn fiscal allocation established in the legislation.
Under the programme, tax credits may be awarded to both producers and consumers of low-carbon hydrogen through competitive tenders. The decree identifies fertilisers, steel, cement, chemicals, petrochemicals and heavy transport as priority sectors for projects supporting industrial decarbonisation. It also states that preference should be given to projects that use hydrogen within industrial processes in Brazil.
But the decree stops short of establishing the detailed rules for future auctions through which PHBC tax credits will be allocated. The finance ministry will develop the tender criteria and submit them to public consultation before implementation.
Projects awarded tax credits may face penalties of up to 20pc of the value of the incentive if they fail to meet implementation milestones or do not enter operation as planned, except in cases of force majeure or government action.
Brazilian Hydrogen Association ABH2 welcomed the decree, saying it will give greater predictability to the sector and that it "reinforces the importance of a technological neutrality strategy" that allows Brazil to leverage "its diverse resources and regional vocations".
Brasilia also approved decrees regulating sustainable aviation fuel (SAF) and carbon capture and storage (CCS) activities. The SAF decree establishes blending mandates for 2027-37 and creates a book-and-claim system, allowing compliance through the trading of environmental attributes. The CCS decree establishes rules for carbon storage and use activities, which will also fall under ANP oversight.
