Message from Ambassadors

Decarbonizing Brazilianand Japanese economies:
Four ideas for the energy sector
Eduardo Paes Saboia
Ambassador of Brazil to Japan
Ambassador Eduardo Paes Saboia joined the Brazilian Foreign Service in 1990. He served in the Brazilian Mission to the United Nations inNew York; in the Permanent Delegation to ALADI; as well as in the Brazilian Embassy in La Paz. He also served in the World Bank and the IMF,
in both cases as an advisor to the executive director of Brazil. At the World Bank, he was involved in several discussions related to environmentaland climate issues, including the Climate Investment Funds. In Brazil, he worked in the MERCOSUR Division, the Directorate-General for Latin
American Integration, the Department of Financial Affairs and Services, and the Cabinet Office of the Minister of State. He was also diplomaticadviser to the Federal Senate’s Foreign Affairs and National Defense Commission, senior adviser in the government’s leadership office in theFederal Senate and chief of staff to the Minister of Foreign Affairs. He has been Ambassador of Brazil to Japan since March 2019.

Climate change is an international challenge thatwill require quick paradigm shifts in the global
economy. In this sense, some of the world’s largest
economies such as Japan and Brazil are taking
concrete measures today to achieve carbon
neutrality by mid-century. As the executive directorof the International Energy Agency (IEA), Fatih
Birol, pointed out in a recent article in the Financial
Times, this is a Herculean undertaking that will
require “nothing short of a total transformation of
our energy infrastructure”1.
It is exactly this transformation of the energy
infrastructure that will also present the benefits ofcreating meaningful economic opportunities. In
fact, in its latest “Global Renewables Outlook”, theInternational Renewable Energy Agency (IRENA)
estimates that “the envisaged transformation would
effectively pay for itself, with every dollar spentbringing returns between three and eight dollars”,
while quadrupling the number of jobs in therenewable sector2.
Prime Minister Yoshihide Suga highlighted
the economic benefits of the future carbon neutral
economy in his Policy Speech to the Diet in Octoberlast year: “addressing climate change is no longer a
constraint on economic growth. […] proactiveclimate change measures bring transformation ofindustrial structures as well as our economy andsociety, leading to dynamic economic growth.”3Brazil and Japan have recently announced
ambitious goals to curb climate change. As ourcountries take on this challenge of historic
proportions, I believe we have the right set ofcircumstances to boost our bilateral agenda onenergy, creating fresh prospects for increasing
trade, investment, and joint research.
Last October, Prime Minister Yoshihide Sugaannounced that Japan will aim to reduce greenhousegases (GHG) emissions to net-zero by 2050. Last
December, Brazil submitted its NationallyDetermined Contribution (NDC) to the Paris
Agreement, not only confirming its previous
intended NDC commitment to reduce its
greenhouse gases emissions in 2025 by 37%,
compared with 2005, but also going beyond that bycommitting to reduce its emissions in 2030 by
43%, compared with 2005.
The Brazilian government also stressed that
its NDC is compatible with an indicative long-term
objective of reaching climate neutrality by 2060,
leaving open the possibility of adopting an evenmore ambitious long-term objective at theappropriate time4.
I would like to emphasize how ambitious theBrazilian commitments are. Brazil’s NDC
surpasses similar commitments by all nonEuropean members of the G20, as well as those of
all other developing countries with large territories
or populations. Another noteworthy aspect is thesetting by Brazil of an intermediate target in 2025,
which increases the responsibility for implementing
mitigation efforts throughout the decade, and not
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just at the end of the period.
As Brazil and Japan pursue the common goalof decarbonizing our economies, it is important torecognize that the two countries come fromdifferent energy profiles. Yet, exactly because ofthat, there are many complementarities to beexplored. It is well known that Japan is one of theworld’s largest energy importers. According toJapan’s most recent Strategic Energy Plan,published in 2018, “Japan depends on imports foralmost all of its energy resources”5.
The main feature of Brazil’s energy profile is
its reliability on renewable sources. It is surprisinglyFigure 1. Renewable energy country rankings

little known that Brazil has one of the cleanest
energy profiles in the world. According to the latest
National Energy Balance, renewables represent
83% of power generation, 46% of automobile fuelconsumption, and 41% of the total primary energy
mix. In fact, even today, no other country withmore than 60 million people has more than 40% of
its primary energy composed of renewables.
It is no exaggeration to say that Brazil is arenewable energy superpower. According to IRENA,
Brazil is the third largest producer of electricity
from renewables, behind China and the UnitedStates of America6. (Figure 1) Also, according todata from the International Energy Agency,
Brazil is the world’s fourth largest producer ofrenewable energy as a primary source, behind
China, the US and India7. (Figure 2)
Having in mind our goal to decarbonize
our economies and our energy profiles, I would
like to present four non-exhaustive areas inwhich I see opportunities for Japanese andBrazilian businesses.

1. Bioenergy

Source: IRENA. Country rankings.

Figure 2. World’s largest producers of renewable energy

Source: prepared by the Embassy with data from the International Energy Agency (2020). World Energy Balances Highlights (2020 edition). Production(ktoe, 2018). Renewables and waste.
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One such area is bioenergy. Modern bioenergy
is responsible for half of the generation of all
renewable energy today. It is, to use an
expression from IEA, the “overlooked giant” ofrenewables8. According to both IEA andIRENA, bioenergy in final energy consumption
needs to double by 2030 and biofuels intransport needs to triple to keep global warmingin check.9Brazil and Japan already have a successful
collaboration in the field of bioenergy, but thereis scope – and need – for much more. Brazilian
biofuel made of sugarcane is currently exported
to Japan in the form of ethyl tert-butyl ether(ETBE). ETBE is then mostly blended to thegasoline at the rate of 3%. This is still a low
percentage, which means there is ample room
to increase the participation of ETBE andBrazilian ethanol in Japan’s transport sector.
Sugarcane ethanol reduces carbon dioxide
emissions by 90% on average compared to特集：商機を広げる再生可能エネルギー

gasoline10. The industry is working hard to make it
carbon neutral. This biofuel also contributes to thereduction of local air pollution. Compared togasoline and diesel, it brings almost to zero theemission of suspended particulate matter,
considered an aggravating factor for respiratory
diseases, including COVID-19.
This advanced biofuel can be added to thegasoline at a high percentage without any
modification to conventional engines. Furthermore,engines that function entirely with ethanol arerelatively cheap and assimilated by all major
Japanese carmakers. Biofuels can be transported
using tankers and other infrastructure we alreadyspent billions to build, which frees up resources toother sectors.
Given these characteristics, I am convincedthat increasing the use of Brazilian sugarcane
ethanol is probably the single most powerful policy
to reduce emissions in the short-term for thetransport sector.
I believe this biofuel is an alternative that canincrease energy security in Japan, by diversifying
its sources of fuels. It contributes to Japan’senvironmental goals, by reducing 90% ofemissions when compared to gasoline (with thepossibility of becoming a carbon neutral fuel, given
the growing accountability of emissions across thesupply chain). It is economically effective, as its
price is competitive and, in some cases, cheaper
than gasoline, depending on market conditions.
And it is a safe source of energy. It addresses all
the key elements of the principles of the 3E+S
(energysecurity,economicefficiency,environmental performance, and safety).
In my view, there is an opportunity forJapanese companies to invest in this sector both inBrazil and Japan, expanding the infrastructure andindustrial processes. Should Japan increase its useof this biofuel, I see also an opportunity for theJapanese industry to absorb some key links of thesupply chain. Just as important: the development ofsugarcane biofuel to be used in airplanes isadvancing fast. This is a sector hard to electrify. I
see many opportunities for Japanese and Brazilian

companies in this segment.
Also in the field of bioenergy, the use ofbiomass is another promising area for Brazilianand Japanese companies. The sector is set to growstrongly. In a recent publication, IRENA predicts
that biomass participation in the electricity mix
will have to increase from 4% to 16% by 205011.
A Brazilian and a Japanese company are on
the forefront of this technology. Cosan/Raízen and
Sumitomo Corporation formed a joint venture todevelop sugarcane bagasse pellets. It is ideal for
repurposing coal power plants. As a versatiletechnology, it can substitute mineral coal, natural
gas and fuel oil in the generation of electricity andheat, with minimal or no need to make changes inpower plant equipment at all. A major advantage:
greenhouse gases emissions are reabsorbed within
a year with this technology, whereas emissions
from wood pellets take 10 to 100 years to bereabsorbed, according to data from the companies
involved in the project.
Many experts, including the Intergovernmental
Panel on Climate Change, have recognized theimportance of combining bioenergy and carbon
capture and storage (CCS) to achieve carbon
neutrality12. In a recent seminar, IEA’s Fatih Birol
said that bioenergy associated with CCS is themain technology available for delivering negativeemissions. The combination of bioenergy and CCS
contributes much more to reducing emissions thanthe combination of coal and CCS.
I believe sugarcane bagasse pellets have a lotof upside potential for Japan as a source of energy
and as a tool to achieve net-zero emissions. Brazil
is well positioned as a partner to conduct joint
research, provide supplies, and receive investments.
Japanese and Brazilian companies could have afirst-mover advantage in this segment, shaping therepurposing of coal and natural gas power plants
across the world for years to come.

2. M arket for renewable electricity
generation, transmission, anddistribution in Brazil
A second area in which I see potential for an2021.325

renewables.
There has been a surge in the participation ofinternational firms in electricity in Brazil in the last
few years. This is evidence of the attractiveness ofthe sector to investors. As an emerging market witha large territory and a growing population, Brazil
has increasing needs for energy, which means ahealthy demand for investments in the sector.
Importantly, asset prices in the electricity sector in
Brazil remain relatively low for investors,
Figure 3. Nationalities of generation concessionaires (MW)
while similar assets are reaching bubblelike valuations in other corners, diminishingreturns. One example: currently, 10 out of
the 18 companies that compose the Indexof Electric Energy at the B3 stock exchange
are trading at prices that represent 5 to 10years of earnings.
The largest shares of the electricity
market in Brazil were taken by Chinese,
French, Spanish, American and Italianfirms14. The participation of Japanesecompanies is still relatively small, although
Figure 4. C ountries’ percentage of the transmission sector
one Japanese company is involved in a(km of transmission lines)
large project in the sector. Mitsui & Co.
Ltd has a 20% stake in the hydroelectric
plant of Jirau. This project was recognized
by United Nations Clean Development
Mechanism as reducing CO2 emission by 6
million metric tonnes of CO2 equivalent
per annum, which represents more than
one month of emissions in Tokyo15. Japanis a champion of energy efficiency. Should
more Japanese companies enter the sector,Figure 5. C ountries’ percentage of the distribution sector(number of consumer units)
the impact for the Brazilian grid would bepositive.
The electricity sector is organizedaround regular bidding rounds for differentsources of energy generation, as well as forenergy transmission. The first bidding
round of this year for wind, solar, hydro andbiomass generation is due to take place inJune 25 for contracts to start delivering
energy in three and four years. The following
Source: Pedro Henrique Batista Barbosa. New Kids on The Block: China’s Arrival inbidding round will take place in September
Brazil’s Electric Sector. Data from the Brazilian Electric Energy National
30 (for contracts to start delivering energy
Agency (Aneel).
increased partnership between Brazilian andJapanese companies is the market for renewableelectricitygeneration,transmission,anddistribution in Brazil. The country is one of thelargest wind energy producers in the world, holds
second place in investments in hydroelectric energy
and boasts excellent conditions for solar energy
development13. Keep in mind that 83% of theelectricity generated in the country come from26

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特集：商機を広げる再生可能エネルギー

in five and six years). The first bidding round fortransmission will take place in June 30.

3. Nuclear Energy
A third area for cooperation is nuclear energy. The
Brazilian government is interested in attracting
investments to the supply chain of nuclear energy.
This is an area in which Japan excels. Brazil isdetermined to complete its third nuclear power
plant – Angra 3. In 2019, through Decree 9.915/2019,
the project was included in the Investment
Partnership Program (IPP), which is responsible formanaging concessions and privatizations ofinfrastructure projects considered as priorities for
the Brazilian government. In 2020, a study on themodel for the completion of Angra 3 was approved
by IPP, representing an important milestone. I see
opportunities for Japanese investors here16.

technological challenges of decarbonizing oureconomies, I believe the need to transform ourenergy infrastructure will also create great
economic opportunities. Together, Brazil and Japanare well positioned to seize them.
1.

https://www.ft.com/content/6c5e29e1-283e-4df8-a402-ce09fcec3bda

2.

https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2020/
Apr/IRENA_Global_Renewables_Outlook_2020.pdf

3.

https://japan.kantei.go.jp/99_suga/statement/202010/_00006.html

4.

https://www4.unfccc.int/sites/NDCStaging/Pages/Party.
aspx?party=BRA

5.

https://www.enecho.meti.go.jp/en/category/others/basic_plan/5th/pdf/
strategic_energy_plan.pdf

6.

https://www.irena.org/Statistics/View-Data-by-Topic/Capacity-andGeneration/Country-Rankings7.

https://www.iea.org/subscribe-to-data-services/world-energybalances-and-statistics

8.

https://www.ieabioenergy.com/wp-content/uploads/2018/11/103-IEAFrankl.pdf

9.

https://www.ieabioenergy.com/wp-content/uploads/2018/11/103-IEAFrankl.pdf

4. Hydrogen
A fourth area in which I see positive prospects forbilateral cooperation is the nascent sector ofhydrogen. Hydrogen is enjoying unprecedentedmomentum, with many countries pledging toincrease its use. At this point, according to IRENA,“around 95% of all hydrogen is generated fromnatural gas and coal [...]. Currently there is no
significant hydrogen production from renewablesource”17. For this reason, the “production ofhydrogen is responsible for CO2 emissions ofaround 830 million tonnes of carbon dioxide peryear, equivalent to the CO2 emissions of the United
Kingdom and Indonesia combined.”18
However, hydrogen can also be made fromclean primary sources and there are meaningful
developments in this field. For example, Nissan, inpartnership with the University of Campinas andthe University of São Paulo in Brazil, is developing
an electric fuel cell car based on hydrogen produced
from ethanol. Besides being much cleaner, it canalso benefit from already existing infrastructure forethanol. This is an example of the avenues that
Brazilian and Japanese firms could explore in thesector of hydrogen.
Without underestimating the political and10.	http://english.unica.com.br/faq/
11.	https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2020/
Apr/IRENA_Global_Renewables_Outlook_2020.pdf
12.	https://www.iea.org/news/speeding-up-carbon-capture-and-storageneeded-to-meet-climate-goals
13.	https://portal.apexbrasil.com.br/a-area-de-energias-renovaveis-euma-das-prioridades-da-apex-brasil-na-captacao-de-investimentos/
14.	https://www.bu.edu/gdp/files/2020/12/GCI_WP_012_Pedro_
Henrique_Batista_Barbosa.pdf
15.	The data on emissions from Tokyo come from the 2019 report “Final
Energy Consumption and Greenhouse Gas Emissions in Tokyo”, by
the Tokyo Metropolitan Government:		https://www.kankyo.metro.tokyo.lg.jp/en/climate/index.files/Tokyo_GHG_2016.pdf
16.	More information in English about the Angra 3 project can be foundin the following link:		https://www.ppi.gov.br/thermonuclear-plant-angra-3-nuclear-powerplant-almirante-alvaro-alberto-cnaaa-itaorna-beach-angra-dos-reis-rj
17.	Report “Hydrogen: a renewable energy perspective”, prepared in2019 by the International Renewable Energy Agency (IRENA) for the
2nd Hydrogen Energy Ministerial Meeting that took place in Tokyo:		https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2019/
Sep/IRENA_Hydrogen_2019.pdf
18.	https://www.iea.org/fuels-and-technologies/hydrogen
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