Why export processing zones are key in developing Brazil’s green hydrogen

Why export processing zones are key in developing Brazil’s green hydrogen

Tempo de leitura: 2 minutos

The so-called export processing zones (ZPEs, in the Portuguese acronym) will be fundamental for the development of green hydrogen production projects in Brazil, according to Cláudio Köhler, partner at the Schmidt, Valois, Miranda, Ferreira & Agel Advogados law firm.

ZPEs are free trade areas in which industries send most of their production to foreign markets, with the benefits of tax exemption and exchange rate freedom; in other words, these companies don’t have to convert the proceeds of their exports into Brazilian reais.

“Green hydrogen depends a lot on this guarantee given to investors who are betting on the legal tax framework of ZPEs,” Köhler tells BNamericas.

Brazil has potential domestic demand for green hydrogen, as large industrial sectors such as the steel and fertilizer industries look to decarbonize, but Köhler believes that the big opportunity lies abroad. “We need to look at this great window that is opening up for Brazil as an exporter of energy through green ammonia and hydrogen, especially to Europe.”

Brazilian ports that have signed memorandums of understanding to install green hydrogen plants, such as Suape in Pernambuco, Pecém in Ceará and Açu in Rio de Janeiro, all have ZPEs.

For geographical reasons, Pecém and Suape, located in the northeast region, are considered strong candidates to ship green hydrogen to Europe.

Köhler believes that the country’s tax reform proposal currently in congress will not a”ect legislation guaranteeing tax benefits to EPZs, as the local association of export processing zones (Abrazpe) lobbied to protect it.

In November, the lower house approved a bill to regulate Brazil’s low-carbon or green hydrogen market. The senate will now analyze the text. Köhler cites the definition of green hydrogen and the rules for fuel certification as positive factors in the bill.

“It’s important that they are in line with the rules abroad, especially in Europe. Otherwise, we’ll create a product that can’t be sold,” he says.

According to the lawyer, the US market also considers low-carbon hydrogen as made from natural gas. “But this is highly debatable. In Germany, for example, green hydrogen is made only from wind and solar energy, and in the future, hydroelectric energy will also be accepted.”

He adds: “A big question for Brazil is whether biomass and biogas will also be accepted in Europe as an energy source for producing green hydrogen.”

Another key issue for the country is defining which regulatory agencies will be in charge of oversight.

“In addition to the ANP [oil and gas] and Aneel [electricity], we need to know to what extent the ANA [water agency] will also be competent and what the rules will be for collecting water,” says Köhler, pointing out that the electrolysis process requires large quantities of water.

Fonte: BNamericas | Foto: Divulgação

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