Grupo de Economia da Energia

The inexorable interdependence of Brazilian energy policies

In energy on 30/08/2010 at 00:30

By Helder Queiroz

The discussion on energy issues has been guided, at international and national level, about the future of the production and use of energy sources, which can not be any longer dissociated from policies that aim to achieve 3 goals simultaneously: security of energy supply, decreasing of energy dependence by Brazilian states and mitigation of impacts of climate changes caused by greenhouse gases, especially from the burning of fossil fuels. There is nothing trivial in reconciling these objectives, and they indicate probably an increasing importance of the binomial Energy-Technology in the process of finding solutions.

In the case of the energy industries, there are negative externalities, in variable degrees, regarding the production and use of all means of energy. For this reason, the State plays a fundamental role in both establishment of energy policy guidelines and application of economic and tax instruments required to mitigate externalities and securing energy supplies.

In Brazil, for decades, the guidance for energy policies, since the first oil crisis, implemented by many governments, was the attempt to achieve self-sufficiency in oil. This is an outstanding aspect of government guidelines for the Brazilian energy sector. The results are widely known. Although Brazil has to import light oil to balance its refining process, the degree of dependence in oil imports is now close to zero. And the possibilities unveiled with the important findings of the Pre-salt, even with major technological and institutional challenges to address and overcome, set the country in a privileged position regarding the allocation of energy resources.

Thus, in the Brazilian energy sector, the expectations regarding Brazilian consolidation as a net oil/oil byproducts/natural gas/biofuels (especially ethanol) exporter establish sector investment trends in short, medium and long term.

It should be noted, however, that the Export Condition is not given and must be built, due to risks, and should be negotiated in the political and commercial areas. Its construction thus depends on the different means of international integration, and also the international dynamics of the global energy industry.

These risks are associated with a series of questions about the evolution of the energy sector over the coming decades, both in terms of business strategies and effectiveness of the Brazilian energy policy, as well as new energy policies in different countries, aiming at reducing the emissions.

In this sense, we highlight two crucial aspects related to this subject involving a greater interdependence of policies:

  1. Internationally, it seems obvious that there will be a trend to increase the degree of interdependence of Brazilian energy policies. The alternatives to replace fossil fuels in different countries reduce the possibility to enable in full the export opportunities of coal, oil and its byproducts from countries with the largest allocations of energy resources. Investment decisions to expand the supply capacity of energy nowadays involve greater risks than in the past, when uncertainties were limited to price and income elasticity of demand, determining the expected rates of growth.
  2. Nationally, given the magnitude of expected reserves, the advent of the Pre-salt discoveries develops on the need for coordination of energy policy with macroeconomic, environmental, technological, industrial, foreign, human resources policies, among others. Such coordination has to be established from an entirely new basis. In the past, as aforementioned, reduction of dependence guided energy policies. The search for a relevant participation in the international energy scenario will require institutional arrangements, regulatory mechanisms and energy policy instruments other than those used in the past and appropriate to the new objectives related to the desired status as a net energy exporter.

Thus, in the long-term, the evolution of the energy sector in Brazil is an important task in terms of technical, economical and institutional complexity regarding concept and development of expansion projects. This arises from the different dimensions (technological, financial, environmental, etc.) that influence investment decisions and from the growing number of economic players involved (operating companies, financial institutions, Executive, Legislative and Judiciary bodies at federal, state and local levels).

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