Brazil is taking significant steps toward a low-carbon economy, with recent regulatory developments establishing a safer and more attractive environment for international investors. The recent passage of laws governing offshore wind power generation and the advancement of green hydrogen mark a new phase in the country's energy policy, as the establishment of a regulated carbon market broadens the range of opportunities in the environmental sector.

Approved in January 2025, the offshore wind energy framework establishes clear rules for the assignment of maritime areas under federal jurisdiction.  The new model provides predictability and legal certainty while enhancing synergies with the oil and gas industry, which already possesses expertise in offshore operations. The Brazilian Petroleum Institute (IBP, in its Portuguese acronym) estimates investments of USD 2 billion in the sector by 2026, with the first auctions of maritime areas expected between 2026 and 2027.

Building on these advances, the Brazilian government sanctioned the legal framework for green hydrogen in August 2024 and, in the subsequent month, introduced the Low Carbon Emission Hydrogen Development Program (PHBC, in its Portuguese acronym), which anticipates BRL18.3 billion in tax credits between 2028 and 2032. Brazil holds significant competitive advantages in the green hydrogen sector, including abundant renewable resources and access to ports hosting existing infrastructure, enabling offshore wind energy to be seamlessly integrated with green hydrogen generation.

“The regulatory frameworks for offshore wind and green hydrogen open up a new frontier for oil and gas companies, which already possess the know-how required to operate in maritime environments and can now diversify portfolios as part of the broader energy transition”, says Paula Padilha, partner in the Energy & Natural Resources practice at Vieira Rezende.

The growth of renewable energy sources in Brazil is also driving the development of battery storage solutions, which are critical for enhancing the electrical grid's reliability. Given the intermittency of solar and wind energy, storage solutions enable the temporal distribution of energy generation and reduce reliance on thermoelectric plants during periods of lower renewable output. Although battery technologies do not fully replace conventional energy sources, they are emerging as a strategic element for maintaining system stability and supporting the country’s continued growth of clean energy.

These advances are taking place alongside the strengthening of the carbon market. The recently approved legislation of 2024 seeks to establish a regulated market with sector-specific emission reduction targets and aims to stimulate the voluntary market. The regulation provides greater legal and operational clarity for credit issuers and buyers in a market with substantial growth potential. Currently, most voluntary carbon projects in Brazil are concentrated in the Amazon, focusing on reforestation and conservation efforts. Since approximately 80% of national emissions are linked to deforestation, initiatives to preserve standing forests are strategic for Brazil’s climate policy.  In addition to their environmental impact, these projects generate direct benefits for local communities and Indigenous peoples, who now have legal backing to develop their own initiatives to create economic returns.

“The regulation of the carbon market represents a decisive step toward providing legal certainty for projects and attracting investments, while also creating a tangible mechanism for companies to contribute to the decarbonization goals of the economy,” explains Lúcia Aragão, an expert in carbon credits and partner in the Real Estate practice at Vieira Rezende.

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Tax Incentives

Despite Brazil’s recent regulatory advances supporting environmental causes, tax measures aligned with this agenda remain relatively modest. Currently, the main initiatives in this area have emerged primarily at the state and municipal levels. One example is the Neutral ISS program, adopted by cities such as Rio de Janeiro, which allows companies to offset part of the municipal service tax (ISS) by acquiring certified carbon credits. At the state level, the Ecological ICMS is another positive policy, rewarding municipalities that implement measures to reduce emissions and preserve the environment. At the federal level, although the recently established selective tax is not yet linked to climate policy, it represents a concrete opportunity to incorporate environmental criteria into the national tax system in the near future.  

As COP30 approaches, there are rising expectations that the federal government will advance a more ambitious regulatory and incentive framework for the green economy. Although the regulated carbon market has already been legally established, clear guidelines on taxation and potential tax incentives for sector participants are still lacking. “By reducing the tax burden on carbon credit trading, for example, Brazil could unlock a promising market and better align itself with global climate commitments,” emphasizes Tiago Severini, partner in the Tax and Customs practice at Vieira Rezende.

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Authors:

Lúcia Aragão | Partner

Paula Padilha | Partner

Tiago Severini | Partner