The recent legislation on the Legal Framework and National Policy for Low Carbon Emission Hydrogen – the newly enacted Law No. 14.948/2024, formerly Bill No. 2308/2023 – introduced significant measures to promote the development and production of sustainable hydrogen in Brazil. This law provides for the establishment of incentives, sets up the Special Regime of Incentives for Low Carbon Emission Hydrogen Production (ReHIDRO), and creates the Low Carbon Emission Hydrogen Development Program, outlining a regulatory framework that aims to position Brazil as a leader in the global energy transition.
The legislation presents a comprehensive structure, starting with general provisions and moving to the second chapter, which specifically addresses the National Policy for Low Carbon Emission Hydrogen. This chapter defines the principles, objectives, and key concepts of this legal framework. The third chapter then outlines the instruments of the National Hydrogen Policy, including the National Hydrogen Program, risk management guidelines, activities related to hydrogen production, the so-called Brazilian Hydrogen Certification System, the Special Regime of Incentives for Low Carbon Emission Hydrogen Production (ReHIDRO), and amendments to Law No. 9.427/1996, adding the respective responsibilities of the National Petroleum Agency (ANP).
The aim of this article is to provide a detailed examination of the main provisions outlined in this long-awaited legal framework and, on the other hand, to analyze some of its key provisions with a view to anticipating its application in the practical reality of companies that will potentially participate in the hydrogen production chain. After all, several questions remain regarding the recent legislation: What does the law define as low carbon emission hydrogen? What is established as green hydrogen? What incentives will be provided for its production and commercialization? How will its certification be carried out? Will it be mandatory or voluntary? Which regulatory agency will oversee the hydrogen topic?
With the necessary patience required for the analysis of any new legislation, we will now outline some of its key provisions. Much is expected from this new legal framework, but, above all, we hope that the regulatory body will only regulate what is necessary. It’s that old saying: sometimes the best path for a regulatory body is not to regulate – and let negotiations and the private market play their role as the main agents.
Among the established principles, we highlight technological neutrality in defining incentives. According to Article 2, item I, of Law No. 14.948/2024, incentives and regulations should not favor or discriminate against any specific technology in hydrogen production. This principle promotes innovation and competitiveness, allowing the most efficient and sustainable solutions to prevail in the market. Adopting technological neutrality is crucial to ensure that advancements are not limited by regulations that favor certain technologies over others. By allowing different technologies and methods to compete on equal terms, it encourages the development of new techniques and processes that can significantly contribute to carbon emission reduction and energy sustainability.
The competitive insertion of hydrogen (item II of Article 2) is another priority, ensuring that hydrogen produced in Brazil can compete on equal terms in both domestic and international markets. Predictability in the formulation of the respective regulations will be fundamental to attract investments and, above all, to reduce regulatory uncertainty that could discourage the participation of new actors in the market. Furthermore, the use of existing infrastructure and the promotion of research (items IV and V) are essential for the rapid implementation and development of the necessary technologies.
The objectives of the National Policy (Article 3) are broad and encompass everything from preserving national interests to promoting sustainable development and expanding the labor market. Encouraging various hydrogen production routes is essential to ensure the flexibility and adaptability of Brazil’s energy matrix. By promoting energy applications of hydrogen, Brazil can diversify its energy mix, reducing dependence on fossil fuels and contributing to the reduction of greenhouse gas emissions. This initiative, it should be noted, aligns with international commitments to mitigate climate change and helps meet the targets set in the Paris Agreement.
In the export realm, the valorization of hydrogen positions Brazil as a strategic supplier of clean energy in the international market. With the growing global demand for sustainable energy sources, particularly in the European Union and Asian countries such as Japan and South Korea, Brazil can leverage its competitive advantages, such as the abundance of natural resources (sun and wind) and its installed renewable energy production capacity, to become a leader in the hydrogen market. This could result in significant export revenues, contributing to the balance of trade and strengthening the national economy.
The law also establishes key concepts for the regulation of the hydrogen sector. For example, the chain of custody is a model of minimum requirements for tracking the attributes of hydrogen throughout its entire supply chain. Imagine a company that produces green hydrogen using electrolysis powered by solar energy. From the extraction of water to the use of electricity generated by solar panels, all data will be recorded. When the hydrogen is transported to a distributor, the conditions of transportation, storage, and delivery will be monitored and documented. The end consumer, when purchasing the hydrogen, will have access to a detailed report demonstrating that the product meets the green hydrogen criteria, with all stages of the process certified and audited according to established standards.
And what did the law define as hydrogen? Three categories emerge: a) low carbon emission hydrogen; b) renewable hydrogen; and c) green hydrogen.
Low carbon emission hydrogen is defined as hydrogen fuel or industrial input collected or obtained from various production process sources, with greenhouse gas emissions of no more than 7 kgCO2/kgH2. This definition sets a clear standard for sustainable hydrogen production, promoting practices that minimize the product’s carbon footprint – although international standards are stricter, typically ranging around 4 or 5kgCO2/kgH2. Renewable hydrogen is low carbon emission hydrogen, collected as natural hydrogen or obtained from renewable sources, including hydrogen produced from biomass, ethanol, and other biofuels, as well as electrolytic hydrogen, produced through water electrolysis using renewable energy sources like solar, wind, biomass, hydropower, biogas, and geothermal energy. Finally, green hydrogen refers to hydrogen produced via water electrolysis using renewable energy sources as mentioned above, and “without prejudice to others that may be recognized as renewable.”
At this point, it is important to emphasize that low carbon emission hydrogen is the parent category. That is, the subcategories of renewable hydrogen and green hydrogen fall under it. All renewable hydrogen falls under the low carbon emission hydrogen category. Furthermore, it seems that green hydrogen is a subcategory of renewable hydrogen, specifically referring to production via water electrolysis, without limiting the form or source of energy, such as solar or wind.
Other concepts introduced by the law include hydrogen carriers, which are substances or materials used for the storage and stocking of hydrogen. These carriers play a role in hydrogen logistics, enabling its safe and efficient transportation and storage.
How will the certification of low carbon emission hydrogen take place? Who can function as a certifying institution?
Law 14.948/2024 created the Brazilian Hydrogen Certification System, and we can say that its corresponding legal provisions are a central component of the new legal framework. The goal of the system is to inform the emission intensity related to the hydrogen product chain. Participation in the system will be voluntary for hydrogen producers, and it can be used for reporting and marketing purposes. The specific regulation will address the recognition of certification for imported hydrogen, establishing standards and minimum requirements for obtaining the certificate.
The issued certificate must contain, at a minimum, the contractual characteristics of the raw materials used, the location of production, information about the lifecycle, and the amount of CO2 emitted. This transparency will ensure traceability and product integrity, ensuring that consumers have access to detailed information about the origin and environmental impact of the hydrogen they are purchasing.
The so-called “accrediting institution,” to be appointed by the regulatory authority, will be responsible for accrediting certification companies and overseeing certification procedures, through its own administrative act or specific instrument. Only private institutions that meet the requirements set by the regulatory authority and are accredited by the accrediting institution will be able to function as certification companies.
Certification companies must send each issued certificate and its respective information to the manager of the System’s records. The manager will be responsible for managing the national public database of hydrogen certificate records, which will be publicly accessible. Hydrogen certificates must ensure environmental integrity, preventing double counting. Double counting refers to the practice of certifying the same volume of hydrogen more than once for carbon credits or incentives, which could distort emission data and compromise the effectiveness of environmental policies.
It is expected that the regulatory authority will foresee interoperability mechanisms and harmonization with international hydrogen certification standards. This will be crucial to ensure that hydrogen produced in Brazil is recognized and accepted in global markets, promoting the competitiveness of Brazilian hydrogen and strengthening Brazil’s position as a leader in clean energy.
And what is risk management?
Risk management is another interesting aspect of the policy, with instruments like the Risk Analysis Study (EAR), Risk Management Plan (PGR), and Emergency Action Plan (PAE). These documents outline actions to be taken in case of an emergency, ensuring safety and mitigating risks associated with hydrogen production and handling. Hydrogen production can be carried out by companies or consortia formed under Brazilian law, with headquarters and administration in the country, and with authorization from the competent regulatory body, the National Petroleum Agency, Natural Gas, and Biofuels (ANP).
It is worth noting that the transfer of the authorization holder is permitted by the law, subject to prior and express approval by ANP, provided the new holder meets the requirements set by the regulation. This flexibility is likely to allow the hydrogen market to adapt to changes and new opportunities, while maintaining safety and regulatory compliance.
Special Regime of Incentives for Low Carbon Emission Hydrogen Production: ReHIDRO
The Special Regime of Incentives for Low Carbon Emission Hydrogen Production (ReHIDRO) was created with the goal of fostering technological and industrial development, competitiveness, and value-added in Brazil’s hydrogen production chains. The program will be regulated by the Executive Branch, which will establish the requirements for eligibility, including the minimum percentage of domestic goods and services used in the production process and the
necessary technological innovations. For those eligible for the regime, there will be the possibility of enjoying tax incentives and financial support, such as tax exemptions and preferential rates for hydrogen production.
ReHIDRO aims to strengthen the industrial base, create jobs, and encourage the use of Brazilian technologies and services in the hydrogen value chain. The program will be crucial for positioning Brazil as an exporter of hydrogen technologies and a major global player in the low carbon emission hydrogen sector.
Final Remarks
The creation of this legal framework represents a major step forward for the hydrogen sector in Brazil. The law provides a solid foundation for the growth of hydrogen production and commercialization in the country, with an emphasis on environmental responsibility, technological innovation, and market competitiveness. With the appropriate regulations and active participation from the public and private sectors, Brazil could become a leading exporter of clean hydrogen, contributing to global efforts to combat climate change and transition to renewable energy sources.
The coming years will be crucial for the implementation and development of this framework, with close attention needed to ensure the smooth operation of the certification system, the effectiveness of the incentives, and the efficient management of risks. As Brazil moves forward in its hydrogen journey, it will be essential to maintain a balance between regulation and market dynamics, fostering innovation while ensuring that sustainability and environmental integrity remain at the forefront of the industry’s growth.
