Green Hydrogen in Brazil: Fiscal Opportunities and the Future of the Energy Transition

Green hydrogen has been gaining prominence as a sustainable and innovative alternative in the energy sector, and Brazil is welcoming this market with an eye to its great economic potential, for the development of the country, and socially, with the creation of tax incentives designed to stimulate its production and use.

With the recent Laws 14.948 and 14.990, Brazil took an important step by establishing the legal framework for low-carbon hydrogen, creating the National Hydrogen Program (PNH2) and the Special Incentive Regime for Low-Carbon Hydrogen Production (Rehidro).

Its text also provides for the granting of progressive tax credits totaling around R$18.3 billion between 2028 and 2032, with the aim of boosting a market that combines energy efficiency and reducing carbon emissions. Companies or consortia of companies that produce or use low-emission hydrogen may be entitled to this credit, respecting criteria such as:

• Approval of the project in a selection process, with analysis of the contribution to regional development, technological innovation and reduction of greenhouse gas emissions.

• Annual limit on the amount of credits, defined by the government according to the importance and impact of each project.

• Validity of the credits for operations between 2028 and 2032.

It is also planned that the tax credit will be calculated based on the difference between the cost of low-emission hydrogen and the price of traditional fuels, and can be used to offset taxes or even reimbursed in cash, provided that the project conditions are met.

Benefits for Companies and Additional Incentives

By investing in low-emission hydrogen, companies can reduce costs and increase their competitiveness through tax credits. This incentive also contributes to the transition to a sustainable economy and the reduction of greenhouse gas emissions. Other benefits under discussion for regulation include:

• Tax exemptions for the purchase and sale of machinery, equipment and building materials intended for hydrogen projects.

• Benefits for the provision of services and leasing of machinery.

• Credits on the Social Contribution on Net Profits (CSLL) for investments in the production and sale of green hydrogen.

• Suspension of PIS and Cofins for the sale of infrastructure equipment and services.

• Financing through incentivized debentures for hydrogen-related projects.

The PNH2 also defines incentives for decarbonization, with the aim of accelerating the energy transition. Beneficiary projects must contribute to regional development, climate change adaptation and mitigation, stimulate technological development and diversify the Brazilian industrial park.

Why is Green Hydrogen Sustainable? Unlike fossil fuels, green hydrogen does not generate polluting emissions in its production or use. Its versatility and ease of storage make it a strategic option for sectors such as heavy industry and transportation.

It should be remembered that, according to the new legislation, low-carbon hydrogen must emit up to 7kgCO2eq/kgH2 over the life cycle of its production, and must be certified by the Brazilian Hydrogen Certification System (SBCH2), which will attest to the product's compliance with emissions targets.

Progression of Tax Credits and Bill

Although the direct granting of the R$18.3 billion in tax credits was vetoed, Bill 3.027/24, approved by the Chamber of Deputies, rescues these incentives in a progressive manner, distributing the amounts over the years. The Bill now goes to the Senate for consideration, where it should gain momentum to make the development of this market possible.

Supervision by the ANP

The National Agency for Petroleum, Natural Gas and Biofuels (ANP) will be responsible for authorizing, regulating and supervising the production and sale of green and low-carbon hydrogen in Brazil. With this, the country is taking a fundamental step towards guaranteeing the safety and integrity of the processes and products offered to the market.

Future prospects

This legal framework represents an opportunity for Brazil to position itself as a global leader in sustainable energies, consolidating a greener and more innovative energy matrix. Low-emission hydrogen is essential for this transformation, reflecting the country's commitment to decarbonization and sustainability.

With this government support and Brazil's commitment to decarbonization, the country has the opportunity to stand out in the green hydrogen market.

The future of sustainable energy is in our hands, and green hydrogen is one of the most promising pillars of this journey.