The New Legal Framework for Hydrogen in Brazil

On 6 August 2024, Law nº 14.948/2024 was published in Brazil, establishing a new legal framework locally for hydrogen (“the Hydrogen Act”).

The Hydrogen Act establishes, inter alia, a national policy for hydrogen, and creates a special incentive regime for the production of hydrogen (Rehidro) and the hydrogen development program (PHBC).

Key Provisions under the Hydrogen Act

The Act introduces fiscal incentives for companies investing in hydrogen technologies and simplifies regulatory processes for the installation of hydrogen production and distribution facilities/infrastructure. 
The Act also encourages partnerships between the public and private sectors for the development of innovative solutions. 

The framework also focuses on the development of adequate infrastructure for hydrogen production, storage, and distribution, and promotes investments in hydrogen pilot projects for various sectors, including maritime transport. 

We highlight some of the relevant provisions under the Act below.

Production of Hydrogen

Pursuant to Article 11 of the Hydrogen Act, the activities of production of hydrogen and its derivatives shall be carried out by companies or by consortia of companies established under the laws of Brazil, with headquarters and administration in the country.

To undertake these activities, the players must obtain authorisation from the Brazilian National Agency of Petroleum (ANP).

In addition to production, the activities related to the loading, processing, treatment, import, export, storage, transportation, transfer, resale and marketing of hydrogen, shall also be performed by Brazilian companies, authorised by the ANP (Article 14).

The ANP is the Governmental body responsible for regulating and monitoring the exploration and production of natural hydrogen in the national territory (Article 13).

Creation of “Rehidro”

The Hydrogen Act creates a program called Rehidro which offers a Special Regime of Incentives for the production of low-carbon hydrogen, by providing tax exemptions and other financial incentives to investors.

For example, companies engaged in the production of hydrogen can benefit from certain tax exemptions over the sale and importation of new machinery, equipment, and construction materials which may be necessary for their operations. 

This financial relief aims to reduce the initial capital expenditure for hydrogen producers, encouraging investment in this emerging sector.

To qualify for these incentives, hydrogen producers must meet certain criteria. 

One of them is to limit the proportion of their hydrogen output which is destined for exportation, in order to prioritise domestic consumption. They are also required to invest in research and innovation for the Brazilian hydrogen sector. 

Infrastructure and the “Reidi” Program

The Hydrogen Act includes hydrogen companies under the Special Regime for Infrastructure Development Incentives (Reidi). This Regime currently supports sectors such as transport, ports, energy, sanitation and irrigation. The Program allows companies to obtain tax exemptions on sales or importation of new machinery, equipment and construction materials.

Hydrogen Development Program (PHBC): 

This program aims to support the energy transition by promoting the use of low-carbon emission hydrogen. The Program sets objectives for developing the domestic market and incentivises the use of hydrogen in hard-to-decarbonize industrial sectors, such as fertilizers, steel, cement, chemicals, and petrochemicals, as well as in heavy transport.

Opportunities

The Legal Framework for Hydrogen in Brazil presents an opportunity for investors wishing to foment new businesses in the hydrogen sector locally. This is also a significant step towards integrating hydrogen as a clean energy source, bringing environmental, economic, and technological benefits to the country.

For further guidance on the New Hydrogen Act, please do not hesitate to contact the Authors below.