Next Steps in Energy Policy for Unions in Brazil

Latin America  •  March 23, 2023  •  Trade Unions for Energy Democracy

TUED: How would you summarize Lula’s energy policies so far and his positions on a just energy transition in Brazil?

CUT Brazil: Lula’s agenda has explicitly prioritised just energy transition, energy sovereignty and the environment at the national level but also at the regional level, namely with Chile, Uruguay, Colombia, and Argentina, as well as with the European Union.

During the transitional government period between Lula’s electoral victory and the beginning of his governance, our team participated in the Energy and Environment working groups, helping shape the orientation of the incoming administration’s policies. There, we completed an assessment of the impacts of the Temer and Bolsonaro years, evaluating the extent to which state capacities were debilitated and how to restore them. An important outcome of this process was the creation, once in government, of the “Social Participation Council” to communicate and coordinate policy demands between trade unions, social movements and the incoming administration.

While energy policies are still taking shape, some positions are very clear, mainly in relation to halting the privatization processes of Eletrobras and Petrobras. Petrobras was the hardest hit by Bolsonaro, with the privatization of entire companies previously owned by Petrobras, leading to large tariff hikes and widespread disinvestment. The privatization of Eletrobras took a different path, with the entire company now in private hands (although the government still holds some shares). Petrobras must be reclaimed as a public energy company. As trade unions, we are putting significant pressure on Petrobras to invest and participate in the sectors of fertilisers, renewable energies and regional participation in Latin American energy markets. In Lula’s government and also as CUT Brazil, it will be very important to look at successful international experiences and case studies that Brazil can learn from and incorporate into Lula’s political programme.

We anticipate a return to “publicness” in the Lula government in the form of public investment in social energy programmes that fulfill the public mandate. The Lula government will also have to work to recover the privatizations carried out under Bolsonaro’s provincial and state governments in the transmission and distribution sectors. In many states, Brazilians had “access” to energy, strictly speaking, but tariffs rose precipitously until they became unaffordable for the working class.

TUED: How does CUT Brazil view the state of publicly-owned energy in Brazil? What demands do trade unions have to strengthen public energy in Brazil? Is there a trade union strategy to help reverse privatization, specifically of Eletrobras and Petrobras?

CUT Brazil: An important demand is to recover the bargaining power of public sector workers. There was a labour reform that weakened the unions, especially financially. This marginalised the unions in the bargaining processes. Strengthening and recentering workers’ demands in political debates is a first step.

Workers are strongly opposed to privatization. Under the new administration, our members are organizing to reclaim public ownership and diversify power generation from public energy companies. Production remains in the hands of the private sector. We must reclaim state-owned enterprises and support the development of public company investment in renewables, biomass and biofuels.

The renegotiation of SOEs will look different from company to company. Eletrobras was privatized mainly through shareholding. Therefore, public sector shares must be reclaimed in order to renationalise. In Petrobras, the private sector bought entire companies that were previously dependent on Petrobras. For example, some of the petrochemical, wind and biofuel companies.

There is currently no plan to renationalise as traditionally understood. Instead of reclaiming privatized companies, we are prioritising extending public ownership to new energy sectors. We see this as a different approach to nationalisation. Importantly, this public expansion of Petrobras and Eletrobras aims to recover the coordination and planning powers of the state through greater vertical integration of public energy into the electricity sector and the national grid. This integrated coordination capacity is important both for the energy transition and for the Lula government’s social justice agenda with respect to electrification and fair energy tariffs.

The politicization of energy prices stems in part from the Temer government’s decision to link domestic consumption prices to international dollar prices. Between January 2019 and November 2021, the national currency lost 49 per cent of its value, causing fuel and cooking gas prices to soar. Meanwhile, Petrobras shareholders made historic profits (including an additional dividend of $560-million), further polarising the issue.

TUED: What are the main challenges on the road to a just energy transition in Brazil?

CUT Brazil: The recovery of Eletrobras will require a two-pronged strategy: legal action in the courts and popular mobilization in the streets. The legal strategy is fraught with challenges in the form of “legal protections” designed to prevent the renationalisation of the company. The protections include a corporate charter provision that would oblige the government to pay a 200 per cent premium. According to Eletrobras CEO Wilson Ferreira, “renationalising [Eletrobras] would cost three times its value.”

We know that it is not enough to take back public ownership; we will have to go further and engage in discussions with these state-owned enterprises to ensure that they fulfil their public mandate. We need to take back the process of effective public control of the companies, and for this we need a lot of legislative regulation to reposition the state as the main owner and controller of SOEs. We must build worker participation and social movement power, as well as workers’ councils within SOEs and ministries, and push for the public mandate.

TUED: One of the priorities of the new president and board of Petrobras is to expand into renewable energies. What is the current landscape of ownership of renewable energies and what strategies are in place to defend public and democratic control of renewable energies?

CUT Brazil: Renewables make up almost 45% of Brazil’s primary energy demand (our energy sector is one of the least carbon-intensive in the world), and our national grid is almost 80% renewables. Hydropower accounts for around 55-65%, depending on the year. The largest state-owned dam is, of course, Itaipu, jointly owned by the Brazilian and Paraguayan governments, with each country owning 50% of the project. The Lula government is in the process of renegotiating the Itaipu contract to correct previous closed-door negotiations and the betrayal of the Paraguayan people under the Bolsonaro and Abdo Benítez governments. Lula has appointed economist and PT sympathiser Enio Verri to the presidency of the Brazilian side of Itaipu and will work to restore energy sovereignty for the working class in both countries, driving private sector interests out of the negotiations.

In terms of Petrobras’ expansion into renewable energy, the most important element is to ensure public ownership of these expansions, whether in solar, wind, biomass, biofuels or any other energy source. In this context, offshore wind generation can represent a promising opportunity for Petrobras and other public companies, provided that it is subject to careful impact studies and dialogue with communities and workers.

As CUT Brazil, we are also working on a strategy to assess the economic, environmental and labour impacts resulting from the transformation process of the Brazilian energy system, with a special focus on the expansion of renewable energies. The result of this research is being published in our reports, including Changes in the Energy Sector in Northeast Brazil and their Impacts on the World of Work.

TUED: Brazil has the potential to produce one of the world’s cheapest green hydrogen from its onshore wind sources alone. How does CUT Brazil approach the debates around green hydrogen?

CUT Brazil: We have seen that European companies are very interested in making initial investments in Brazil’s green hydrogen sector, which is concentrated in the Northeast region. While we recognise the opportunities, we also see the risk of embarking on a kind of new neo-colonial process in Latin America. We have seen this, for example, in Chile. This increased demand for green hydrogen can be seen in a number of countries in the region and across the Global South. The problem lies in the loss of domestic access to energy. Wind and solar energy will be invested in large green hydrogen projects, which are demanded by Europe. In other words, renewable energy projects will supply Europe and drive out electricity generated in Brazil for domestic use, causing prices to rise.

It is important to note that green hydrogen projects are not even integrated into the national grid. Instead, projects are concentrated near large ports where ammonia is produced and exported. There are also a number of social and environmental risks that need to be considered, such as farm workers losing access to land, which affects food sovereignty, or increased violence in the territories where mega-projects are implemented, along with other problems characteristic of the operation of private multinational projects in rural regions. •

This article first published on the Trade Unions for Energy Democracy website.