Brasilia - In a year shortened by the election calendar and with a global war scenario, the government is rushing to get the country's first low-carbon hydrogen auction off.
According to sources consulted by NeoFeed , the expectation is that the auction will take place in the last months of this year due to current market uncertainties. At stake are R$ 18.3 billion in federal subsidies that will be injected by the government through these auctions over four years.
The idea is to kickstart the development of this industry, which is still non-existent in Brazil. And to promote the national production of this input, designed to replace fossil-based hydrogen — it can be used in fertilizers, as a raw material for synthetic fuel, and also in cargo, maritime and aviation transport.
On the other hand, the private sector believes that initially the main focus should be on exports to foreign markets, especially the European Union and Asia, where the greatest potential demand lies, while the domestic industry develops and takes its first steps.
After Congress approved the legal framework for green hydrogen in 2024, the ball is now in the Executive's court, which has begun a race to regulate the contracting of this demand and hold the first auction as early as 2026.
Before that, the Ministries of Finance and Mines and Energy expect to publish in the coming weeks the first decrees that will dictate the general rules on the design of the auctions, according to NeoFeed . It is still being discussed, for example, whether the auctions will be separated by product (ammonia, green fertilizer, green hydrogen or methanol) or by region.
Last week, officials from the Ministry of Finance were even in Vienna, Austria, at an event on energy and hydrogen, to seek international partnerships in structuring the auctions. The World Bank, for example, is also expected to support the auctions.
“The Brazilian government is finalizing a partnership with UNIDO, the UN's arm for industrial development. They are supporting us in structuring the auction,” says Rafael Dubeux, the special secretary of the Ministry of Finance, to NeoFeed .
The policy to encourage domestic production of green hydrogen is part of a broader government environmental agenda, which had been promoted by former Finance Minister Fernando Haddad and also includes the carbon market and the framework for offshore wind energy.
The law, which came into effect just over a year ago in Brazil, also provides tax incentives for the production of low-carbon hydrogen, such as zero PIS and Cofins taxes for five years (starting in January of last year) for the purchase of raw materials, intermediate products, packaging, inventory, and construction materials made by qualified low-emission hydrogen producers. It also created a certification system for this hydrogen.
Market overview
According to Fernanda Delgado, president of the Brazilian Association of the Green Hydrogen Industry (ABIHV), Brazil will still face an initial challenge in developing this industry, which is complex, similar to the structure of a refinery, requires high added value, and will demand many adjustments in the first years, and even probable "errors".
Regarding the auctions, she considers that the expectation is that a first, small, and more "niche" auction will take place by the end of this year, possibly focused on just one product, to gauge market appetite and ensure prompt service. She also notes that the most likely scenario is that the first auction will cover green fertilizer, but she estimates that only one company is currently operating in that area.
"It's a tumultuous year for everyone, with wars and our own fiscal issues as well, but we expect the decrees to be issued in the first half of the year," says Delgado.
“But today there is no priority for the national market, because there is no appetite for hydrogen purchases in the domestic market, even because there are no greenhouse gas emission targets yet. And no project has yet left the drawing board,” he adds.
She explains that there is no national production of low-carbon hydrogen in the country because regulatory frameworks for the industry are still lacking. And the National Petroleum Agency (ANP), which will be responsible for oversight, is still working on this.
And for now there are only experimental projects, funded by companies or universities. Such is the case of an initiative by Neoenergia, an electricity distributor in Brasília, which has been testing green hydrogen in the city's public transport buses. And a green hydrogen industrial plant by Tramontina has already been announced in Rio Grande do Sul.
There are also advanced projects for the production of ammonia and methanol for marine fuel. But those on a commercial scale have not yet left the drawing board, awaiting government decrees and auctions, she points out: "These projects are waiting for a regulatory signal from the government to finally make the investments viable."
A source in the electricity sector who is following the discussions with the government told NeoFeed that the Brazilian market understands that the development of the industry will bring about a paradigm shift in the future. But in the short term there are "uncertainties" and the private sector prefers to wait before it becomes a reality. "There is no clarity on how it will evolve yet."
