Diminished Use of Coal but Imports Still High

Spotlight Activity: Diminished Use of Coal but Imports Still High

Coal has a relevant role within the Brazilian energy matrix. With a steady share of around 6% of the country’s total primary energy supply throughout the last 10 years, coal is the 7th most explored energy source in the Brazilian economy. Accounting for non-renewable sources only, it is historically the third, behind Oil and Natural Gas.

The available Brazilian coal is known as being low quality, with low heating power (due to a low carbon concentration) and generating a high amount of ashes when burned. The totality of Brazilian coal reserves is located in the country´s South region, whereas the state of Rio Grande do Sul accounts for 90% of the 32.3 billion tons of coal available for extraction. The remaining is divided between the states of Santa Catarina and Paraná.

Brazil faces a high level of imports and a coal trade deficit: around 98% of the consumed coal in Brazil comes from the U.S., Australia, South Africa and Canada and it represents 81% of the country’s total external dependence on energy, given by the difference between domestic energy demand and domestic production. A vast majority of the total demand for coal, 85%, comes from thermo-electrical power plants and energy generation. In second comes the cement industry, with 6%, followed by a 4% for pulp and paper and the remaining 5% due to ceramic, food and grains drying.

Brazil has used coal as an energy source since late 1800´s. According to the National Energy Balance (Boletim Energético Nacional) publication from the Ministry of Mines and Energy, which presents data regarding the Brazilian energy matrix since 1970, coal has seen an intensification of its use as a source of energy during the period from the 1980´s to the mid-1990´s, when it reached a level of more than 7.5% of total energy supply. Since then its use has been decreasing, mainly because of two factors: (1) necessity of importing and the price risk it brings and (2) development and intensification of cheaper renewable sources, such as hydroelectricity, biofuels and wind power. From 2017 to 2016 its demand decreased by 4.4%.

However, coal still has a relevant role to play in the local economy of the southern states of Brazil. In 2017 the industry’s revenue reached more than R$ 1 billion and generated more than 5,500 direct jobs. Class entities such as the Coal Brazilian Association (ABCM – Associação Brasileira de Carvão Mineral) have been lobbying for government coal-enhancing policies, aimed at increasing coal’s share in the national energy mix and making it easier to secure environmental licenses. Such entities claim that the coal supply-chain has a high economic value component and enhancing local extraction may reduce the risk of trading the commodity at global markets and its transportation costs.

It seems that the reasons for using coal are diminishing in Brazil. Brazil offers low quality coal for which the economic yield is not sufficient for covering its costs and risks. Moreover, the country is developing cost-efficient renewable sources of energy and is becoming a leader in renewable energy production (especially bio-fuel). Even though the government has not yet shown whether it is for or against coal, it is possible to infer that coal, as a large-scale energy source, is facing its twilight years in Brazil.

Status: Standing Still

Because class entities (e.g. the Brazilian Coal Association) have been lobbying for an increasing relevance and share of coal within the Brazilian energy matrix, claiming that would diversify the country’s energy supply sources, and the composition of a recognized anti-green government, Brazil may face a steepening of coal use and weakening environmental requirements for both coal extraction as well as coal power generation process through thermos-electrical power plants. It remains to be seen how it will affect the market and how investors react to that, as coal has been proven to be a low cost-benefit source of energy within the Brazilian scenario.   

Take Action

Dear Mr. Bento Albuquerque,

Brazil is recognized as a world leader for alternative renewable sources of energy, specifically bio-fuel. We do see, however, increasing pressure from entities aiming at strengthening the use of coal within the Brazilian energy matrix, although it has proven to be a lower cost-efficient energy source. It is important that the government and its representatives, including the Ministry of Mines and Energy, take action in order to phase out coal production, especially in Southern states, where its use is more widespread. This in turn will contribute and meet the commitments taken with the signature of the Paris Agreement.

Send Action Alert Message to:

Mr. Bento Albuquerque, Ministry of Mines and Energy

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