Brazil CCS sector calls for carbon market framework

Stakeholders in Brazilian carbon capture and storage (CCS) projects are calling for a clear regulatory framework to make the market commercially viable.

The federal government must lay out a strategic vision for CCS to decarbonize the country's industrial sector at home and reach net-zero emissions by 2050, according to market participants, as a first project bill is working its way through Brasilia.

"To have results in the future, we need a legal basis established," power research bureau Epe's fuels chief Heloisa Esteves said at an industry conference last week in Sao Paulo state. "That is why it is so important to regulate CCS activities and the entire framework, such as the carbon market."

The draft bill aimed at creating a regulated carbon market would require all entities with emissions above 10,000 metric tonnes (t) of CO2e/yr to report reductions to an emissions trading system (ETS) similar to that used in the EU, referred to as the Brazilian emissions trading system (SBCE).The bill was recently approved by the senate's environment committee but has yet to be approved by other the full congress, which is required before going to President Luiz Inacio Lula da Silva.

If approved, the legislation would have a similar role to national biofuels policy Renovabio in the decarbonization credits (Cbios) market formalization, said Alexandre Calmon, a lawyer specializing in the energy sector, on the event's sidelines last week. "Renovabio served as an embryo to the Brazilian carbon market, which aims to provide more liquidity," he told Argus.

Others at the event pointed to the importance of quickly implementing CCS rules in Brazil to boost investments and research, as discussions on the matter grow. The draft bill also sparked controversy as it excludes Brazil's agricultural sector from its scope.

In August, the senate also approved a draft bill that assigns CCS regulation to oil regulator ANP, set up an authorization system and allows the creation of trading storage projects in Brazil. The bill has yet to be voted on by congress and will also need to be ratified by Lula.

Expectations are high as the country can store and capture up to 190mn t/yr of CO2, according to a study published by CCS Brasil, a think-tank focused on the sector. Brazil could generate up to $20bn/yr from CCS projects, according to CCS president Isabela Morbach.

In the wake of the framework progress, Epe's biannual report to map national energy resources — to be published in December — will introduce a new chapter about the carbon storage potential in Brazil's sedimentary basins.

Bioenergy route

Brazil's biofuels industry has also started considering its own version of carbon capture and storage projects (BECCS), which could represent the second-largest area for potential projects.

Corn-based ethanol producer FS is investing R350mn ($67mn) in a project at its Lucas do Rio Verde Plant, in Mato Grosso state, to generate "carbon-negative" ethanol which involves capture and storing more CO2 than is generated in the fuel's production.

Sugar alcohol company Uisa also announced BECCS plans to inject carbon from ethanol production at its Nova Olimpia unit, also in Mato Grosso.

Sao Paulo is also pondering new initiatives. The state's agriculture and supply department coordinator Alberto Amorim told Argus that the government wants to invest in CCS through the sugar and alcohol industry.

State-controlled Petrobras, which reinjects gas and CO2 in its oil fields, is also keeping an eye on renewable solutions.

"Petrobras has interest in transporting and storing carbon through partnerships with other companies, which could be bioenergy industries," the company's accounting and tax manager Savana Fraulob told Argus. "It's a very expensive structure. So, for those who want to embark on this with us, we are actually studying this possibility."

By Laura Guedes