By Marina Grossi*

The debate surrounding oil exploration in the Amazon River mouth basin, on the Equatorial Margin, continues to resonate as we approach the beginning of 2025. On one hand, there are discussions about the potential environmental impacts of oil and gas exploration in a sensitive ecosystem that is still poorly understood by science; on the other, there is talk about the benefits and economic impact that the activity will bring to the region, generating jobs and foreign exchange. Amidst technical, economic, and political arguments for or against future exploration in the area, which is being called "the new pre-salt," one fact is undeniable: the world faces the immense challenge of energy transition and has committed to taking steps towards the gradual replacement of fossil fuels, the so-called 'phase-out,' as agreed in the document that emerged from COP28 in Dubai in 2023.

Many critics of opening new oil exploration fronts point to the contradiction of Brazil discussing the issue on the eve of COP30, the main conference on climate change, which will be held in Brazil, specifically in Belém, in the heart of the Amazon. Among the major themes of the meeting, the energy transition is central – with the expectation that countries will advance more tangible commitments regarding the 'phase-out' of fossil fuels. It will therefore be an opportunity for Brazil to host a more in-depth discussion on the topic, putting forward a proposal for the signatory countries of the Paris Agreement to coordinate the trajectory for replacing fossil fuels.

The COP28 conference in Dubai highlighted the need for a "fair, orderly, and equitable" transition away from fossil fuels, and it is undoubtedly necessary to assess which countries are in a position to take the lead in this technological crusade. There are already clear signs that investment in the energy transition is here to stay – in 2024, the world reached, for the first time, an investment of US$2.1 trillion in technologies related to the energy transition. The volume of resources more than doubled compared to 2020. Despite this, this movement is uneven among countries and is proceeding at a pace far below what is needed to achieve carbon neutrality – 'net zero' – by 2050. For this, investments need to triple between 2025 and 2030, reaching US$5.6 trillion/year during that period, according to BloombergNEF. 

Today, the replacement of fossil fuels faces obstacles that are still difficult to overcome, such as global dependence on these sources and the economic strength of the sector, which accounts for approximately 3% of global GDP and generated US$$ 3 trillion in 2023. The world's appetite for oil, natural gas, and coal continues to push the energy transition into an uncertain future, even though it is known that the production and consumption of fossil fuels account for more than 70% of global emissions.  

Since it's not possible to abandon them overnight, how then can the wealth generated from fossil fuel exploitation fund a realistic energy transition plan? This is an argument frequently invoked by governments and companies, and in the Brazilian context, it has been used in favor of oil exploration in the Amazon River estuary. 

Considering oil and natural gas as key components in the energy transition, however, requires decarbonizing the production of this energy – that is, improving its efficiency and, above all, reducing its carbon intensity. Brazilian oil is considered highly productive and with low CO2 equivalent emissions, especially in the pre-salt fields – the National Agency of Petroleum, Natural Gas and Biofuels (ANP) estimates emissions of 11.9 kg CO2eq/barrel in the Santos Basin. Brazil, which aims to jump from its current position as the eighth largest oil producer in the world to fifth by 2030, needs to increase investment in decarbonization technologies and continue its strategy of diversifying its energy mix, directing part of the revenue from fossil fuels to biofuels and renewable energies. 

Investing in the exploration of new oil wells also requires considering the fuel's inflection point – various projections, including those from the IEA, indicate that peak production will occur around 2035 – that is, in a decade – and, from then on, its decline. However, accurately estimating this date depends on many variables, such as supply, demand, final consumption, and the opening of new wells and the closure of others. Even if Petrobras receives a license to prospect for oil in the Equatorial Margin – and these fields prove to be productive and efficient – it will be necessary to assess whether the investment is strategic for Brazil, given that the new wells are only expected to begin producing at a time when demand for fossil fuels may be on a downward trajectory. 

Another factor that complicates the game is the pricing of externalities from oil production, the main one being carbon. Today, there are already 110 mechanisms implemented worldwide that have advanced in regulating taxes on greenhouse gas emissions or in the carbon market – this is the case in Brazil, which sanctioned the bill that regulates the issue nationally, establishing the Brazilian Emissions Trading System (SBCE). The topic also advanced at COP29 in Baku, Azerbaijan, with the approval of articles 6.2 and 6.4 of the Paris Agreement, which had been under negotiation for nine years, paving the way for an international market for buying and selling carbon credits, with clear rules and the endorsement of the United Nations. This brings a new element to the fossil fuel price scenario, beyond short-term fluctuations linked to geopolitical issues. 

The key element in this game is the valuation of biodiversity, ensuring that our forests are more valuable standing than felled, and that their sustainable use is consolidated as a thriving economic activity, anchored in the concept of Nature-Based Solutions. Just like the implementation of the phase-out of fossil fuels, this is a long-term commitment that requires investment, clear rules, transparency, and direction to become viable. Brazil, possessing the world's greatest biodiversity and host of COP30, is a key player in leading this discussion with other countries around the world.

Organizing the steps taken by Brazil and the world in the gradual replacement of fossil fuels and the transition to a low-carbon economy involves many complexities. However, it will be necessary to establish a plan for this to happen, with a start date, involvement of the various links in the value chain, and maximum transparency in the process. The severe climate crisis is claiming lives and causing economic losses, so it will be necessary, more than ever, to price in externalities and shift regulatory and financial incentives towards low-carbon activities. In a world that is already 1.5°C warmer, defining these steps is crucial for the survival of economies and people. 

Marina Grossi is the president of CEBDS (Brazilian Business Council for Sustainable Development), an organization with 27 years of experience and more than 110 large member companies.