Brazil’s Economic Future Hinges on Fossil Fuels

By Vijay Jayaraj

Brazil’s prosperity hinges on its capacity to harness the foundational element of any economy: energy. However, for millions of Brazilians, the path to economic advancement is complicated by the hypocritical “green” agendas of leaders in developed economies that have benefited from fossil fuels since the beginning of the industrial era.

As an Indian and someone with shared developmental interests in the BRICS economic bloc, I have been gratified by the hydrocarbon-driven growth of India to a $3.7 trillion economy over the past two decades. Other developing countries like India have transformed their economic despair to promising futures through the unhindered use of fossil fuels. Brazil’s future — now clouded by pressures to abandon coal, oil and natural gas — should be no different.

Fossil Fuels are the Keystone of Flourishing Economies

The wealth of Europe and North America is undoubtedly linked to the strategic use of fossil fuels. Since the 1950s, the transformative power of oil, gas, and coal has propelled manufacturing industries into a new era, culminating in the elevated quality of life enjoyed in the modern world.

With an estimated gross domestic product (GDP) of around $2.1 trillion, Brazil’s economy is on par with those of Russia and India — two other founding members of BRICS. In the context of Brazil’s policy planning, India is particularly relevant because of the countries’ similar challenges with poverty.

India’s GDP has undergone a meteoric rise, increasing from a modest $470 billion in 2000 to a staggering $3.7 trillion today.

How did this remarkable growth come about? The answer lies primarily in India’s bold approach to energy utilization, fully harnessing local coal reserves and becoming one of the world’s largest importers of oil and gas. In addition, with a deadline of 2070, India has the longest timeline of any country for achieving the Net Zero commitment of moving away from fossil fuels. And the country has made no categorical promise of meeting the objective.

Brazil’s Energy Pathway Should Be No Different

Brazil must adopt a similarly pragmatic approach. Currently, about 60% of the country’s electricity comes from Brazil’s abundant hydroelectric sources. Coal, oil, and gas together constitute only 10% of electricity. However, when it comes to total primary energy consumption, fossil fuels constitute about half and hydroelectric just under a third.

These are significant contributions from reliable sources, but Brazil is far from achieving universal access to affordable energy.

A 2022 study found that “11% of households still live in conditions of energy poverty, and in rural areas this number reaches 16%.” Households with adequate energy supplies had incomes at least twice of those in energy poverty. Clearly, energy will be critical not just for growth of national GDP but also for the socio-economic improvement of individual families.

When Lula Da Silva became President in 2023, he declared that he would reverse his predecessor’s cuts to Brazil’s ambitious climate targets, renewing an emphasis on reducing greenhouse gas emissions and signaling a rejection of fossil fuels. Brazil’s 2016 plan was to have 2030 emissions be 43% of 2005 levels. This has now been increased under Lula to 51%.

Lula’s new policy has not had a major impact on the nation’s oil sector yet. Petrobras, the state-controlled oil company, may ascend to the position of the third-largest oil producer globally by 2030, only behind Saudi Arabia and Iran. In December, Brazil auctioned off more than 602 lots for oil and gas exploitation. Experts believe it would be impossible for Lula to reduce fossil fuel dependency without missing goals to alleviate poverty.

For Brazil, the plan for economic growth is straightforward: Improve existing hydroelectric power systems, continue with expansion of the oil sector, and remove obstructions to the free flow of reliable and dependable coal supplies.

President Lula and future Brazilian leaders must resist the pressure of influential anti-fossil fuel lobby groups located in Washington, D.C., New York and Brussels if the country is to make any meaningful economic progress. The nearly 61 million Brazilians living on less than $6.85 a day deserve nothing less.

This commentary was first published at Real Clear Markets on May 27, 2024.

Vijay Jayaraj is a Research Associate at the CO2 Coalition, Arlington, Virginia. He holds a master’s degree in environmental sciences from the University of East Anglia, U.K.