BNDES, the largest development bank in Brazil, announced this week it will significantly reduce the financing of power plants using coal or oil for generating electricity.
The announcement this Monday is part of a growing effort to discourage carbon-intensive energy projects.
BNDES released a new set of guidelines for public financing in the power sector. The bank decided to reduce credit to gas-fired power plants to 50% of its total investment, down from 70%. For solar developments, it increased financing to 80% of project values, up from 70%.
“The measures aim to contribute to increase alternative energy sources in the Brazilian power mix, directing investments to projects with high social and environmental returns,” the bank said in a statement.
“The Brazilian Economic Development Bank (BNDE) was established on June 20, 1952, under Law 1628, as a government agency, with the aim of developing and carrying out national economic development policies. Subsequently, according to Law 5662, of June 21, 1971, BNDE was converted into a state-owned company under private law, which resulted in more flexibility to raise and invest funds, besides less political interference.
“Integrating social concerns with the development policy in the beginning of the 1980s was made evident when the Bank changed its name to The Brazilian Economic and Social Development Bank (BNDES), in 1982.”
Public financing for carbon-intensive projects such as coal-fired power plants has long drawn the ire of environmental groups across the globe, even more so now that most countries have agreed to reduce carbon emissions to limit global warming.
As reported by The Washington Post, this new strategy prioritizes renewables as part of Brazil’s effort to fight climate change on an expanded basis. Brazil has set a goal of getting 23% of its energy from clean power by 2030.
“We have more limited resources now, so we must make choices,” Ramos said during a conference call with reporters Monday. “The bank wants to privilege projects with environmental, social return. We are choosing power sources that don’t emit pollution, given that we have a pledge in the Paris agreement.”
Brazil has financed big coal projects in the past, including a large 300-megawatt (MW) plant built by one of the companies controlled by former billionaire Eike Batista.
BNDES also said on Monday it will finance up to 80% of energy efficiency projects, such as cities switching to LED street lighting.
Barbara Rubim, campaign coordinator of climate and energy from Greenpeace Brazil, welcomed the BNDES decision as a key first step towards meeting Brazil’s Paris goals in the energy sector.
“In general, this is great news; a strong signal to improving financing for solar power and discouraging investment in fossil fuels,” she said. “We truly hope that this is well received by other sections of the government, especially in planning. It is also a signal to the private sector.”
BNDES said it wants to encourage the nascent solar energy industry in Brazil by giving the sector better credit conditions.
Images via Shutterstock and BNDES