26 January, 2010

Brazil still has to enable climate change law

After approving the climate change law the Brazilian government now has yet to approve the rules that will allow its enactment.

Sergio Abranches

It is an extensive and complex law with many stakeholders. During the legislative process a few amendments have improved it to some extent. One of them, for instance, has included the emissions reduction targets as a “voluntary contribution” from Brazil to the global fight against climate change.  There were also a few important setbacks, however. President Lula has vetoed three articles. One on constitutional grounds, the other two conceding to pressure from his Minister of Energy.

Lula vetoed the provision that the country should gradually abandon fossil fuels. As there was no time frame, nor any description of actions that should be taken to that end, it amounted to no more than a future policy indication. But the Minister feared that by maintaining it, an enabling decree could make provisions that would do harm to the fossil energy industry. He only accepted that priority should be given to renewable energy sources.

The Minister of Energy has also persuaded President Lula to veto article 10, that restricted government incentives to small hydropower plants, wind, solar, biomass and other alternative sources. He argued that it would impede incentives to large hydropower plants.

The veto damaged the economics of the new law, by removing the structure of incentives to promote non-fossil energy.

There is some room, however, for improvement and correction through carefully drafting the enabling decree. The law can only be enacted after this enabling legislation is published. It can de done through a series of presidential decrees. Presidential decrees are not reviewed by Congress and can be enforced immediately.

The battle around the enabling decree is about to begin. An official source has told me today that they will not try to write all enabling rules at once. They’ll selectively pick the issues and areas they deem to be the most important and try to set the rules to allow their prompt enforcement. Some issues are almost certain to be in this first batch, because they are instrumental to the implementation of the emissions reduction targets that will be offered as the Brazilian contribution to the Copenhagen Accord.

This strategy of partial enablement aims at reducing the scope of conflict of interest and infighting to prevent a decision-making paralysis.

Another source told me they’ll also work on other parts of the enabling legislation with a longer-term perspective, leaving the groundwork done for the next Administration, to take office on January 1st ,2011.

People at the Environment and Science and Technology ministries want to expedite the approval of the enabling decree, because ministers and higher officials who will run for elective office on October elections will have to leave the government within the next two months. They want the same people who negotiated the Law of Climate Change to lead the deal on the enabling legislation. It is very likely that Lula will replace his political ministers by technical and managerial people who lack the political savvy to tackle the complex and contentious issues the decree will have to address.

A source told me the ideal timing would be to have the enabling legislation approved by right after Carnival.

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