Brazil has positioned itself as a leader in the global energy transition. Its vast renewable energy resources, strong biofuels sector and ambitious climate commitments offer distinct advantages in the low-carbon economy. The country has introduced a comprehensive National Energy Transition Policy (PNTE) aimed at achieving net zero greenhouse gas (GHG) emissions by 2050, supported by the Energy Transition Plan (PLANTE) and the Energy Transition Forum (FONTE). In 2024, the country also launched the Low-Carbon Hydrogen Law, the Brazilian Greenhouse Gas Emissions Trading System Law, the Fuel of the Future Law and the Energy Transition Acceleration Program, further boosting momentum for the energy transition. These initiatives seek to balance economic development with sustainability while ensuring energy security, social inclusion and technological advancement.

Brazil’s energy transition is guided by long-term planning frameworks. These include the 30-year National Energy Plan (PNE) and the Ten-Year Energy Expansion Plan (PDE), which provide a structured roadmap for integrating clean technologies, expanding grid infrastructure and enhancing energy efficiency. However, Brazil would benefit from a more unified and overarching energy strategy that consolidates existing policies to ensure coherence, better co-ordination and investment certainty. Likewise, Brazil will need to re-evaluate its spending priorities and sources of funding across all energy areas to ensure that they properly align with the government’s core objectives for the energy transition.

Brazil has prioritised achieving a people-centred clean energy transition. It has already made significant strides in improving energy access and affordability, notably through the Light for All Program (Programa Luz para Todos) and targeted subsidies for electricity and natural gas. Looking ahead, a key challenge for the government will be to design policy to ensure that the benefits of energy transitions are widespread for all citizens and can be leveraged to accelerate economic opportunities and reduce inequalities. As part of this effort, the jobs potential from the energy transition could be considerable, but it is not fully understood in terms of the number of jobs, sectors and skills requirements. A comprehensive jobs planning and workforce mapping exercise would help maximise opportunities, building off successful local programmes. Brazil should also look to identify opportunities to expand clean cooking access to all families, including exploring the inclusion of electricity into clean cooking options. 

A successful energy transition in Brazil will require massive amounts of economically viable investments across clean energy technologies and infrastructure. The government estimates that BRL 3.2 trillion (Brazilian real; EUR 0.5 trillion) will be required over the next decade for energy-related investments (including supporting infrastructure), from both public and private capital. Of this amount, 78% will be allocated to the oil and natural gas sector, 19% to electricity supply, and 3% to liquid biofuel supply. However, Brazil has a relatively high cost of capital, which can impede its investment potential. Funding from the Brazilian Development Bank, BNDES, was instrumental in supporting the strong growth in renewables the country has experienced over the past decade. A recently established investment platform and the Energy Transition Acceleration Program will further help bridge the gap to attract more private finance. However, to mobilise additional capital according to energy transition objectives, Brazil could also consider implementing a national investment fund directing a portion of government oil revenues to finance the energy transition and expand green finance mechanisms. The government has also taken the bold decision to establish a carbon market in Brazil, which will help direct investment into low-carbon areas. Revenues from the system can also be an important source of capital for energy transition investments as well as for offsetting the negative impacts on energy prices for low-‑income populations.

Brazil benefits from end-use sectors that already have high shares of bioenergy and electricity. While industry is the largest energy-consuming sector, transport is the largest emitting sector. Energy efficiency has the potential to bring considerable benefits for Brazil, from lowering energy bills to cutting emissions and managing energy demand growth. In industry, energy audits could help identify energy savings measures and support the implementation of energy efficiency measures. Ramping up energy performance standards for industrial equipment could likewise support more ambitious outcomes. Similarly, voluntary energy audits in buildings would also help identify low-cost energy-efficient solutions. The government should also ensure that energy efficiency and thermal comfort solutions are systematically considered in social housing programmes to reduce energy costs. Meanwhile, though Brazil has enjoyed tremendous success with biofuels and flex-fuel vehicles, it also has a chance to expand the role of electric vehicles (EVs), including flex-fuel hybrids, to lower emissions and seize an important opportunity for domestic manufacturing. Brazil would also benefit from discrete policies to support demand for lower-emissions heavy-duty vehicles given a heavy reliance on fossil diesel in the freight sector.

Brazil is already endowed with a low-emissions and highly renewables-based power system. However, several important trends are creating challenges to the system that need to be addressed in the coming years. These include massive growth of wind and solar photovoltaic (PV) generation that has outpaced the growth of grids and flexibility solutions, more challenging dispatch scheduling of hydro generation based on the impacts of climate change, and an influx of distributed PV. Therefore, Brazil would benefit from a stronger holistic assessment of its electricity frameworks to ensure a system that is reflective of these structural shifts. Importantly, to support grid balancing and system stability, Brazil should incentivise all flexibility of existing resources, including hydropower, along with new solutions such as demand response and storage. Equally important will be ensuring a smooth assimilation of distributed PV resources into the system, including reform of the net metering scheme. Crucially, electricity prices need to be contained to support electrification, household affordability and industrial competitiveness. A reassessment of cost and subsidy allocations on retail tariffs should, therefore, be undertaken with an eye to creating a regulatory regime that ensures fair and accurate prices and avoids regressive effects on low-income households.

Brazil remains a major oil producer and exporter as well as a natural gas producer, led by state oil giant Petrobras. The upstream sector is a critical economic driver for the country, generating sizeable fiscal revenues that support the federal budget and social programmes. Based on the known resource base, Brazil’s oil production is projected to peak in the coming decade, which will require increased investments in technology and innovation to enhance productivity, reduce costs and maintain the sector’s competitiveness over the medium and long term. A balanced approach is essential to ensure economic stability while transitioning to a low-carbon economy. A key priority is reducing emissions from upstream activities by implementing carbon capture and storage (CCS), methane reduction strategies, and stricter flaring regulations to minimise environmental impacts. Additionally, it is important to maximise the value of oil and gas production for Brazil, including consideration of broader participation in upstream activities to increase efficiency and free up domestic capital for other priority areas that face more difficulty soliciting private investment. The oil and gas sector can also be an important source of capital and know-how to bolster research and development (R&D) investments. The government could – in addition to establishing a national investment fund using oil and gas revenues for low‑carbon investments – consider incentivising oil and gas companies to allocate a greater share of their investments to R&D in low-carbon technologies and clean energy innovation. Together, these actions would strengthen Brazil’s position in the global energy transition.       

Oil and gas consumption also plays an important role in the Brazilian economy, highlighting the importance of security of supply and fair pricing. As a major oil producer, Brazil is a net exporter of crude oil but remains dependent on refined product imports, suggesting that additional efforts could be considered to ensure access to all fuels in a crisis situation. Brazil is a net importer of natural gas and has taken steps in recent years to diversify its gas imports through liquefied natural gas (LNG). However, prices for industrial consumers remain high, eroding competitiveness. The New Gas Market Reform passed in 2021 will go a long way to improve price discovery and shift pricing to more accurately reflect supply and demand fundamentals, but implementation of the law needs to be accelerated to realise the benefits. Brazil should also clarify the role of natural gas in the energy transition by developing a clear strategy that ensures its efficient use while supporting higher shares of renewables over time.

Biofuels have been an enormous success story for Brazil. Policies since the 1970s have significantly expanded both the production and consumption of ethanol and biodiesel. Today, the RenovaBio programme, which sets annual decarbonisation targets for fuels that incentivise biofuels blending, continues to drive sector growth. Moreover, the recently passed Fuel of the Future Law is a comprehensive piece of legislation that provides a demand pull for ethanol, biodiesel, biomethane, green diesel and sustainable aviation fuels (SAF) and sets regulatory frameworks for other sustainable fuels. The opportunity can be maximised by undertaking and disseminating detailed analysis on land-use impacts and land-use change from biofuels production across feedstocks, including through an ongoing assessment of RenovaBio. Brazil’s expertise in first-generation biofuels can be further leveraged through the RenovaBio programme to develop advanced biorefineries that can produce advanced biofuels and SAF. Overall, the country’s strong agricultural base provides ample feedstock for next-generation biofuels, reducing dependence on fossil fuels while enhancing energy security.

Another major opportunity lies in leveraging a highly renewables-based electricity sector to scale up low-emissions hydrogen. The Low-Carbon Hydrogen Strategy positions Brazil to be a leader in low-emissions hydrogen production, both for domestic use and potential exports, and its implementation should start in a timely fashion. Hydrogen can be used to decarbonise hard-to-abate sectors, such as steelmaking, fertilisers, shipping and aviation, not only helping reduce the fertiliser trade deficit but also creating new revenue streams through international trade. Demand creation and infrastructure development will be key market enablers and should be early focus areas for the government. Leveraging experience in the biofuels sector, an agri-industrial, cluster-based approach for both hydrogen and other sustainable fuels and products would support the development of localised markets through a measured infrastructure buildout that could subsequently be scaled up.

Over the past years, Brazil has strengthened its capabilities on energy data gathering and dissemination, a prerequisite to a successful energy transition. The effort has been spearheaded by the Energy Research Office (EPE), which also integrates the data into the preparation of 10-year energy plans as well as a 30-year plan that forecast the development of the energy sector over time. Building off these achievements, Brazil could look to develop a mid-term energy data strategy and further strengthen the institutional set-up for data collection in line with high policy ambitions in PLANTE. The collection of policy-relevant data will also need to evolve to keep up with a fast-changing energy landscape.

Overall, Brazil has a unique opportunity to become a global leader in clean energy sectors. Notably, its renewables-based electricity system and world-leading bioenergy sector offer rare competitive advantages that can be leveraged to build new industries, create millions of jobs and improve living standards for all citizens. The country is off to an excellent start, and policy actions over the past year have further positioned the country well to realise its immense opportunities. Success will require concerted efforts across the macroeconomic and energy landscape, including to mobilise finance, lower prices, increase efficiency and optimise resources. It will likewise require a balanced approach to oil and gas resource development. By aligning its energy transition with economic development, industrial transformation and social inclusion, Brazil can set a global benchmark for sustainable growth in the 21st century.