Brazil’s clashing goals: protect the Amazon and pump more oil

The head of Brazil’s state oil company looked out at the cluttered landscape of Rio de Janeiro through his office window. Looking back, he saw, on the other side of the city’s dilapidated apartment buildings, the looming statue of Christ the Redeemer. Hawks circled an overflowing garbage dump. Plumes of smoke rose from a fire in a hillside slum.

His company, Petrobras, plans such a rapid increase in oil production that it could become the world’s third-largest producer by 2030, a transformation he believes could play a role in reducing the poverty he sees lies on. This, even as his country positions itself as a leader in the fight against climate change, which is of course primarily driven by the burning of oil and other fossil fuels.

Petrobras pumps about as much crude oil annually as ExxonMobil, according to market research firm Rystad Energy. Oil is expected to surge past the national oil companies of China, Russia and Kuwait in the coming years, leaving only Saudi Arabia and Iran to surpass Petrobras by 2030.

It’s a huge predicament for Brazilian President Luiz Inácio Lula da Silva, better known as Lula, who has molded himself into the pre-eminent global leader on climate issues. By all accounts, Mr. Lula has come to believe in recent years that climate change is a major cause of poverty and inequality, which he has vowed to eradicate in his decades-long political career.

Since his election in 2022, Mr. Lula has dramatically reduced deforestation in the Amazon and overseen a significant build-out of renewable energy. But he will also preside over Petrobras’ oil boom and a period of growing gas imports, both of which will facilitate Brazil’s growing appetite for cheap flights, meatier diets and air-conditioned homes.

As counterintuitive as that may seem, it’s only fair, said Petrobras CEO Jean Paul Prates, high up in his company’s gleaming headquarters.

“We will not give up that privilege,” he said, “because others do not also make their own sacrifices.”

It’s an argument that’s hampering global efforts to reduce dependence on fossil fuels. Industrialized countries such as the United States, which have become economic superpowers by emitting enormous amounts of greenhouse gases, are still the world’s largest producers and consumers of fossil fuels per capita.

And if they don’t want to stop, why would Brazil?

Lula’s chief adviser on climate change, Ana Toni, a longtime director of several nonprofits, said Petrobras would ideally cut oil production and invest more heavily in renewables, essentially transforming itself into a new kind of company. But she echoed Mr Prates, saying developing countries would hesitate to make their own sacrifices until the whole world stood together, with the richest leading the way.

Like many in Brazil, Ms. Toni pointed to the cautionary example of neighboring Colombia, whose president laid out an ambitious plan, the first for any oil-producing country, to phase out fossil fuel production.

“Colombia’s courageous decision is being interpreted by the market as creating economic uncertainty. It really is the worst-case scenario,” she said. “I wish countries richer than ours would have a real conversation about taking such steps, and not leave it to us vulnerable ones.”

That tension has dominated years of climate negotiations and will take center stage again this year at the United Nations-sponsored summit to be held in Azerbaijan in November. There, negotiators from almost every country in the world hope to tackle the thorny issue of how richer countries can funnel more money to poorer countries to help them adopt cleaner energy sources and adapt to the effects of climate change.

After Azerbaijan, Brazil itself will be the next host of the UN climate summit. The summit will take place in Belém, a city on the edge of the Amazon, near a place where Petrobras had proposed to explore for oil. But in one of the few cases where the Brazilian government restricted the oil industry, this idea was blocked. Mr Prates said Petrobras was appealing the decision.

Meanwhile, Petrobras plans to spend more than $7 billion over the next five years exploring potential offshore drilling sites along other parts of Brazil’s coast to boost its already growing output.

Petrobras, like many other oil and gas companies, internally expects demand for its products to remain stubbornly high. Accordingly, the company is making a very different set of assumptions than those of the International Energy Agency and others who say oil demand has already peaked or is close to peaking.

That leaves countries like Brazil in a kind of do-it-all gray area, says Mercedes Bustamante, a professor and ecologist at the University of Brasilia, and a member of the Climate Crisis Advisory Group, an independent group of scientists.

Brazil grows both renewable energy sources and fossil fuels. This year it joined OPEC, the global oil cartel, as an observer, while next year it also plans to host the UN’s global climate negotiations. According to Rystad data, the country will become the world’s fifth largest oil producer by 2030.

This dynamic is also reflected in forests, Ms. Bustamante said. Land clearing in the Amazon has been restricted, but at the same time it is increasing in the Cerrado, a vast savannah that covers much of central Brazil.

“Working both ways is very much part of Brazil’s policy DNA,” says Oliver Stuenkel, professor at the Fundação Getulio Vargas School of International Relations in São Paulo. “We are becoming a green superpower, yes, but we are not going to take unnecessary risks. This means that we must prepare for a world in which oil will play an important role for a long time and the transition will take longer than expected.”

Mr. Prates said he spoke to Mr. Lula every two weeks and pushed him to understand that a transition away from fossil fuels must be “sensibly slow.”

“That doesn’t mean slow because we don’t want to make a transition, but slow because we have to meet the expectations of the market for oil, gas and its derivatives,” he said. “Petrobras will rise to the end of the last drop of oil, just as Saudi Arabia or the Emirates will do the same.”

Petrobras has some serious long-term upside, even if oil demand peaks. The cost of producing oil from Brazil’s offshore locations near Rio and São Paulo is roughly $35 per barrel, well below the international benchmark of $90. That’s partly because its production is less energy intensive, making it marginally cleaner and more desirable for some emissions-conscious buyers.

Lula’s government also faces a polarized electorate that, according to recent surveys, generally does not view climate change as a voting issue. “Half the population does not have access to treated sewage,” Mr. Stuenkel said. “Brazil has very different public demands than richer countries. There is still a long way to go to convince Brazilian voters that a painful reorganization of society is needed to avert climate change.”

Nevertheless, Mr. Lula is deeply concerned, said Ms. Toni, his climate adviser.

The world is looking to Brazil for leadership in this area, and the country has made ambitious pledges to reduce greenhouse gas emissions. Those promises are more ambitious, she noted, than those of the United States or many other countries that have higher living standards than Brazil.

She believes it is a good sign that Brazil is under pressure to reconsider its oil expansion. To her, this means that they have been so successful at deforestation that people are holding them to a higher standard.

But it’s all in vain if the biggest players don’t match that ambition. “Even if Brazil stops oil production tomorrow,” she said. “The US, Russia and others will not stop.”