Hydrogen in Brazil: Between Innovation and Regulation
Hydrogen, the most abundant element in the universe, is gaining increasing attention in the energy sector, promising a sustainable revolution. Its journey, from the first identification of its properties such as flammability by scientists in past centuries to its current role as a potential solution to the energy crisis, is marked by continuous innovations. Although it is ubiquitous, hydrogen rarely exists in a free form in nature and requires specific extraction processes. These characteristics make it an attractive option for the future of energy, especially as a “forever fuel” with no carbon dioxide emissions when used.
In the energy economy, hydrogen is classified into various categories, such as green, blue, and gray, based on its production process and environmental impact. Green hydrogen, produced through water electrolysis using renewable energy, is seen as a significant advancement in sustainability. However, it faces notable economic challenges, primarily because electricity costs represent a significant portion of operational expenses. Optimistic projections suggest that by 2030, green hydrogen may become more economically viable than the blue and gray variants, underscoring the importance of technological advancements and production efficiency.
The electric sector must remain attentive to this transforming landscape. Public policies focused on sustainable solutions and the growing global interest in clean energy signal a promising future for green hydrogen—especially for Brazil. However, the development of this sector is still in its early stages, and the balance between production costs and demand will be a crucial aspect for its success.
Brazil’s Hydrogen Legislation
Brazil’s legislation on hydrogen is still evolving. Proposals such as PL 1808/2022 and PL 2308/2023 (among others) seek to create a regulatory framework for hydrogen production and use, outlining the responsibilities of regulatory bodies and establishing standards for licensing, quality, and safety. Stakeholders in the energy sector need to closely monitor these regulatory changes, as they will directly influence business opportunities and market conditions in the hydrogen sector.
PL 1808/2022 primarily focuses on the production and use of green hydrogen. This bill stands out by attempting to define and regulate hydrogen production from renewable sources, with no direct carbon dioxide emissions. Its main points include:
- Defining green hydrogen as hydrogen generated through water electrolysis using electricity produced by renewable sources.
- Structuring a specific regulatory framework for green hydrogen production and use, including measures to incentivize research and development, as well as credit lines.
- Assigning regulatory and oversight responsibilities to specific bodies to ensure compliance with environmental and technical standards.
On the other hand, PL 2308/2023 has a broader scope, extending beyond green hydrogen to include hydrogen as a fuel in general. The key aspects of this bill are:
- Defining hydrogen as a fuel and green hydrogen, covering a variety of processes and technological routes, including water electrolysis, biomass gasification, among others.
- Incorporating these definitions into the Petroleum Law (Law No. 9,478/1997), integrating hydrogen into the existing legislation related to energy resources.
- Creating a regulatory framework that covers the production to the use of hydrogen in various sectors, including transportation, power generation, and industrial applications.
The existence of different bills—each addressing hydrogen in different ways—can lead to a somewhat uncertain regulatory environment. There is a clear interaction between the proposed policies and the context of regulatory and legal uncertainty in Brazil’s hydrogen sector. The Economic Analysis of Law, which emphasizes efficiency and the practical consequences of legal norms, provides a particularly relevant lens for evaluating these bills, considering both the economic incentives and legal barriers they might create.
PLs 1808/2022 and 2308/2023 are initial attempts to provide a legal framework for the emerging hydrogen industry in Brazil. The innovative nature of hydrogen as an energy source and the lack of clear legislative precedents create an uncertain landscape that may result in challenges for industry stakeholders, who will need to navigate a potentially fragmented and complex regulatory environment.
Regulatory Uncertainty and Economic Implications
Regulatory uncertainty arises not only from the lack of specific legislation but also from discrepancies and potential conflicts between the presented bills, which may lead to divergent interpretations and hinder uniformity in sector practices. This regulatory uncertainty has direct economic implications. Uncertainty in regulation can discourage investment and innovation, as economic agents, faced with legal and regulatory risks, may hesitate to allocate resources in activities with unpredictable legal and regulatory outcomes. This hesitation can be particularly detrimental to an emerging industry like hydrogen, which heavily relies on significant upfront investments in technology and infrastructure.
Despite this uncertainty, the trajectory of hydrogen—from the discovery of its fundamental properties to its emerging role as a potential game-changer in the global energy crisis—is a testament to humanity’s continuous evolution and capacity to innovate in search of sustainable solutions. As legislation evolves to keep pace with technological advancements and meet the demands of a transforming market, a path will open for a more structured, secure, and economically viable hydrogen sector in Brazil. In this context, hydrogen could play a crucial role not only in reducing dependence on fossil fuels but also in driving a new energy paradigm.
