The tax credit incentive program benefiting the sector was vetoed and will be established by another bill

On August 2, 2024, Law No. 14,948/2024 was signed, establishing the regulatory framework for low-carbon hydrogen production and incentive mechanisms for the sector. The basic text was approved by the Senate on June 19, 2024, and by the House of Representatives on July 11, 2024.

Key Changes to the Bill

During Senate debates, significant changes were made to the definitions of hydrogen categories, the structure of the tax benefit regime, and the creation of a tax credit program. However, proposed changes to Export Processing Zones (ZPEs) and other regimes were not approved.

A crucial point was the accidental removal of the classification of tax credits as CSLL credits during the bill’s consolidation in the House. This led Congress to agree with the government to partially veto the bill and submit the tax credit incentive program (Low-Carbon Hydrogen Development Program – PHBC) as a separate bill (Bill No. 3,027/2024).

Hydrogen Classification

The new law establishes three distinct classifications for hydrogen:

• Low-carbon hydrogen: Emissions of up to 7 kg of CO2e per kg of H2.
• Renewable hydrogen: Low-carbon hydrogen derived from natural or renewable sources.
• Green hydrogen: Produced by water electrolysis powered by renewable energy sources.

National Low-Carbon Hydrogen Policy

The law creates the National Policy for Low-Carbon Hydrogen, with guidelines set by the National Hydrogen Program Management Committee (Coges-PNH2). The Brazilian Agency of Petroleum, Natural Gas and Biofuels (ANP) will be the authority responsible for regulating hydrogen production and movement.

Brazilian Hydrogen Certification System

The law also establishes the Brazilian Hydrogen Certification System (SBCH2), which will certify the level of greenhouse gas emissions associated with hydrogen production. The Rehidro incentive regime suspends certain taxes on local acquisitions and imports for hydrogen projects.

Low-Carbon Hydrogen Program (PHBC) – Vetoed

The PHBC tax credit program, originally included in the bill, was vetoed and will be regulated separately through Bill No. 3,027/2024. This program aims to grant tax credits to projects that contribute to regional development, climate change mitigation, and diversification of Brazilian industry.

The PHBC could grant up to BRL 18.3 billion in tax credits for low-carbon hydrogen sales between 2028 and 2032, with credits allocated through a competitive process yet to be regulated.

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