Brazil sees surging demand for I-RECs as firms vowing net zero


As more Brazilian companies seek to minimize their carbon footprint, the country has seen a considerable increase in demand for international renewable energy certificates (I-RECs) this year, according to Argus media. 

I-REC transactions reached 13.2 million from January 1 to May 10, up from 9.2 million in all of 2021, said Fernando Lopes, director of Instituto Totum, which certifies I-RECs in Brazil. He forecasts that demand will remain robust this year as businesses strive to meet sustainability targets.

Without I-RECs, a company’s carbon footprint increases by 100kg of carbon dioxide per MWh utilized, stated Lopes. Demand coming from a board range of industries has thus pushed up transaction volume.

According to Lopes, demand could rise further after the European Union implements the carbon border adjustment mechanism, which aims to reduce the risk of enterprises shifting manufacturing to regions with laxer emissions standards.

The European Parliament is debating whether to let enterprises that demonstrate the origin of their electricity through I-RECs to reduce their carbon tax payments. If the bloc agrees to lower the levy in exchange for renewable energy certification, demand from Brazilian steel and aluminum industries is likely to rise.

Since Brazil is abundant in renewable energy, enterprises only pay 1-2% of overall energy expenditures for an I-REC, or about US$0.50 per MWh, according to Lopes, much lower than the price of US$10-20 per MWh in the United States.

Engie Brazil, the Brazilian subsidiary of the French energy corporation Engie, recently entered the I-REC market. Earlier this month, the company launched Energy Place, a digital platform that allows businesses to purchase I-RECs when they buy energy on the wholesale market.

According to Lopes, the recovery of Brazil’s hydroelectric reservoirs and increased renewable power means that emissions probably have peaked in 2021, with an amount of 20kg carbon dioxide per MWh. In addition, as thermal generation decreases, the emissions are likely to decrease to 70-80kg carbon dioxide per MWh.

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