Brazil - S Sustainable Infrastructure Market Assessment - Sept 2020

Brazil Green Finance Programme
Brazil’s Sustainable
Infrastructure Market
Assessment
September 2020
Brazil’s Sustainable Infrastructure Market Assessment
Authors
Gina Hall, Investment Director and Global Head of Sustainable Finance, Carbon Trust
Simon Retallack, Director for Latin America, Carbon Trust
João Lampreia, Senior Manager for Brazil, Carbon Trust
Lindsey Hibberd, Manager, Carbon Trust
Raquel Costa, Independent Consultant
Luca Degrandis, Independent Consultant
Acknowledgements
The authors would like to thank the interviewees listed in Annex 1 for their contributions to
preparing and evaluating the research presented in this report. Authors would also like to thank
Suzanne Woodman and Georgia Plank in IMC Worldwide, as well as Sabrina Frizzo and Livia Frias
in EY-Brazil, for sense-checking this report and including a section on infrastructure’s impact on
women and socially disadvantaged groups.
Brazil Green Finance Programme – Brazil’s Sustainable Infrastructure Market Assessment | 2

Contents
List of Acronyms ..................................................................................................................4
Executive Summary .............................................................................................................4
Introduction and purpose .................................................................................................. 13
Why focus investment on sustainable infrastructure?......................................................... 15
Factors holding back investments in Brazilian infrastructure ............................................... 16
Low carbon energy infrastructure ...................................................................................... 21
Efficient Public Lighting ...................................................................................................... 31
Sanitation.......................................................................................................................... 34
Solid waste ........................................................................................................................ 40
Clean urban transport ........................................................................................................ 45
Telecommunications.......................................................................................................... 51
Ports and waterways ......................................................................................................... 54
Railways ............................................................................................................................ 59
Annex 1. Interviewee List ................................................................................................... 64
References ........................................................................................................................ 65

List of Acronyms
ABDE: Brazil’s Association of Development Banks
ABSOLAR: Brazil’s Solar Photovoltaic Energy Association
ANA: Brazil’s Water and Sanitation Regulatory Agency
ANATEL: Brazil’s National Telecommunications Agency
ANEEL: Brazil’s Power Sector Regulatory Agency
ANP: Brazil’s Oil, Gas and Biofuels Regulatory Agency
ANTAQ: National Agency for Waterway Transportation
ANTP: National Public Transport Association
ANTT: Brazilian Land Transportation Agency
CAGR: Compound Annual Growth Rate
CNT: Brazilian Transport Confederation
DENATRAN: Brazilian National Traffic Department
EPE: Brazil’s Energy Research Office
ESG: Environmental Social Governance
EU: European Union
FCO: Foreign Commonwealth Office
FI: Financial Institution
FTTH: Fibre to the Home
GIH: Global Infrastructure Hub
GVA: Gross Value Added
IBGE: Brazilian Institute of Geography and Statistics
IDB: Inter-American Development Bank
IFC: International Finance Corporation
IPGC: Institute for Cities’ Governance and Planning
IMF: International Monetary Fund
MDR: Regional Development Ministry
MME: Ministry of Mines and Energy
MVA: Megavolt-ampere
OECD: Organization for Economic Cooperation and Development.
PDE: EPE’s 10-year energy plan
PERT: Plan for Networks Communication
PIL: Logistics Investment Program
PIGRS: Intermunicipal Solid Waste Management Plan
PLANSAB: Brazil’s National Sanitation Plan
PNRS: Brazil’s National Policy on Solid Waste
PPI: Investment Partnership Programme
PPP: Public Private Partnership
SIMOB: Urban Mobility Information System

Executive Summary
Brazil’s infrastructure gap represents a vast opportunity for new investment in sectors where
financial returns come with significant social and environmental co-benefits. This report gathers
evidence from a wide range of public and private sources as well as sector specialists, to estimate
Brazil’s sustainable infrastructure investment opportunity between 2020 and 2040 in two
scenarios: (i) a baseline, based on announced governmental and private plans; and (ii) a
sensitivity analysis, based on the calibration of key variables to account for specialists’ views of
latest developments. The result is a projected investment need in Brazil’s sustainable
infrastructure of BRL 3.5 trillion – BRL 3.6 trillion (~GBP 530-544 billion) between 2020 and 2040.
Sustainable infrastructure projects are those that are planned, designed, constructed, operated,
and decommissioned in a manner to ensure economic and financial, social, environmental
(including climate resilience), and institutional sustainability over their entire life cycle (IDB,
2018). For the sake of this report all investment within the following sectors are considered as
sustainable infrastructure: low carbon energy (including power generation, transmission,
distribution, and biofuel refineries); efficient public lighting; sanitation; solid waste
management; telecommunications; clean urban transport; ports; waterways; and railways. This
is based on the premise that they can lead to positive environmental, economic and social
impacts, contributing to Brazil’s NDC goals1 and sustainable development goals2.
This report presents a detailed assessment of determinant factors driving investment in each
sustainable infrastructure sector; discusses key uncertainties and barriers; provides insights into
solutions to enable increased investment; and sheds light into potential benefits resulting from
investment in terms of job creation and Gross Value Added (GVA). Whilst it must be
acknowledged that over-arching factors such as the country’s BB- rating; currency risk and
liquidity risks; complexity and lack of stability of the regulatory environment and surging
deforestation rates may hinder Brazil’s attractiveness to investors, this report presents sectors
in a comparable way. It aims to serve as a first step for the Brazilian government, investors and
other stakeholders to better understand the opportunities, risks and high-level benefits of
sustainable infrastructure in Brazil. Sector assessments are summarized directly below. All
figures, barriers and solutions presented below are summarized at the end of this executive
summary.
Low carbon energy infrastructure

Comprising centralized renewable power generation3; decentralized solar PV generation;
electricity transmission and distribution assets; and biofuel production sites, this sector is
responsible for 27% (BRL 968 billion) of Brazil’s sustainable infrastructure investment
opportunity between 2020-2040 in the baseline scenario. This level of investment translates into
an average 0.6% of Brazil’s projected GDP; could create over 1.2 million additional jobs; and
result in a GVA of BRL 490 billion over the period.
Beyond the fundamental barriers listed above, several sector-specific barriers hold back
investment in this sector. These are namely: limited local supply chains for key technologies;
1 All such sectors have a role to play in the achievement of Brazil’s NDC:
https://www4.unfccc.int/sites/ndcstaging/PublishedDocuments/Brazil%20First/BRAZIL%20iNDC%20english%20FINAL.pdf
2
All such sectors have a role to play in the achievement of Brazil’s SDG goals: http://www.odmbrasil.gov.br/o-brasil-e-os-odm
3 Large and small hydropower plants, wind, solar, biomass and biogas.

lack of incentives to invest in system improvements; limited capillarity (reach) of transmission

networks; tax burden on key components of solar and wind technologies; lack of short and long-
term governmental targets; substantial upfront capital costs for innovative technologies; and a
lack of competitiveness of biofuels against fossil fuel alternatives.
The extent to which these barriers are addressed will determine whether the baseline scenario
materializes. An alternative, slightly more pessimistic scenario assumes low carbon energy
investments remain close to the past decade’s average of 0.4% of Brazil’s GDP, adjusting specific
sub-sectors according to insights from specialist interviewees, and results in BRL 897 billion to
be invested between 2020-2040. As a result, the sector could create 800,000 additional jobs and
a GVA of BRL 453 billion over the period.
Efficient Public Lighting

Based on proven technologies, such as LED lighting and sensors, efficient public lighting is a low-
hanging fruit in terms of sustainable infrastructure investments and represents a small share of
the baseline investment opportunity projected herein (0.2% – or BRL 6.7 billion) between 2020-
2040. This level of investment could enable the retrofit of over 12 million lighting spots, creating
over 12,000 temporary jobs and saving municipalities BRL 1.6 billion in public expenses.
The key factor determining the level of investment in this sector is the extent and speed at which
municipalities are able to forge PPP agreements with the private sector. Considering a modestly
more optimistic outlook in terms of the speed at which PPP contracts materialize, investment
could rise to BRL 7.9 billion between 2020-2040, creating over 15,000 temporary jobs and saving
BRL 1.9 billion in public energy expenses.
Sanitation
Comprising services and infrastructure for drinking water supply, waste-water collection,
treatment and disposal, and rainwater drainage, this inherently capital-intensive sector
accounts for 14% (BRL 507 billion) of Brazil’s sustainable infrastructure investment opportunity
between 2020-2040 in the baseline scenario and could create 142,000 jobs and a total GVA
increase of BRL 563 billion.
Investment needs are exacerbated by the fact that four million people still lack access to safe
water and 24 million people lack access to improved sanitation (Water.org, 2019), but are held
back by barriers such as the fact that current legislation allows existing contracts with public
service providers to be renewed without the need for new tenders; system inefficiencies; human
and technically resource-constrained municipalities to produce sanitation plans and tenders;
and limited profitability prospects for private investors.
Prospects for overcoming barriers are positive on the basis of law PL 4,162/2019’s4 likelihood to
attract new investments and incentivize greater performance; ongoing efforts to deliver new
concessions in FEP Caixa; and a recent boost in sanitation debentures. Altogether, this justifies
more optimistic assumptions on services reach expansion, resulting in investment of BRL 595
billion over the next 20 years – which could lead to 167,000 jobs and a total GVA of BRL 660
billion.
4
Approved in June 2020, this law reviews Brazil’s sanitation legislation to enhance the sector’s attractiveness to private players,
accelerate service expansion, and introduce mandatory performance metrics to concession contracts.

Solid waste
Public assets and services for urban cleaning and solid waste management are projected to
require BRL 53 billion in CAPEX over the next 20 years – 2% of the baseline investment
opportunity – and could create over 15,000 jobs and a total GVA of BRL 41 billion.
Essential variables determining solid waste investments are total waste generated, collection
service reach and waste destination choices. Investor attractiveness is however limited due to a
lack of incentives for adequate waste sorting and destination - undermining the viability of
recycling facilities and waste-to-energy plants and translating into the fact that 45% of Brazil’s
collected solid waste is still directed to dumpsites. At the same time, human and technically
resource-constrained municipalities are limited in their capacity to produce solid-waste plans
and tenders and the lack of direct taxation for waste management activities forces municipalities
to operate the sector in deficit.
Based on expert views that a more positive, yet realistic, outlook is justified on collection
services’ reach and phasing out of dumpsites, the sector’s investment opportunity can reach
BRL 81 billion over the next 20 years, creating over 23,000 jobs and a GVA of BRL 45 billion.
Clean urban transport

Cycling lanes, electric and hydrogen bus fleets, and all forms of subway and urban train
infrastructure are projected to account for 14% (BRL 475 billion) of Brazil’s sustainable
infrastructure investment opportunity between 2020-2040 in the baseline scenario – potentially
creating 86,000 jobs and a total GVA of BRL 599 billion.
Holding back investments in the sector are human and technically resource-constrained
municipalities to produce urban mobility plans and public private partnerships (PPPs), which are
mandatory to receive federal funding; difficulties to adjust and integrate fares of intermodal
transport as these are regulated by different levels of government agencies; difficulties for small
municipalities to access federal funding; and limitations around PPPs in law 13529/2017, which
rules out small municipalities.
Assuming barriers can be partially addressed, e.g. easing small municipalities’ access to federal
funding, investments in cycling lanes and clean bus fleets are most likely to increase. This could
increase the investment opportunity in the period to BRL 490 billion, leading to 88,000 jobs and
a total GVA of BRL 607 billion in the period.
Telecommunications
Telecoms infrastructure is projected to require BRL 939 billion between 2020-2040 in the
baseline scenario – 27% of Brazil’s sustainable infrastructure investment opportunity – and
could create 469,000 jobs and a GVA of BRL 2.2 trillion. Although investment is highly
concentrated in five corporations, the trend is for increased importance of small and medium-
sized companies focused on optical fiber broadband network expansion in small municipalities.
Factors deterring such investment are primarily: tax burdens; last-mile costs for broadband
universalization; burdensome municipal laws for licensing and occupying urban land; and the

fact that existing concession contracts oblige companies to invest in obsolete technologies, such
as landlines.
Assuming a reduction in the sector’s tax burden may be enabled by the enactment of a Special
Taxation Regime for National Broadband, an alternative scenario is tested with 10% tax
exemptions from 2020 onwards, enhancing investment capacity and broadband penetration
rates. In this scenario, BRL 986 billion could be invested over the period, leading to 493,000 jobs
and a total GVA of BRL 2.3 trillion.
Ports and waterways

On the basis of governmental plans, public and private ports and waterways are projected to
require BRL 389 billion between 2020-2040 in the baseline scenario – 11% of Brazil’s sustainable
infrastructure investment opportunity – potentially leading to 397,000 new jobs and a GVA of
BRL 210 billion.
Key variables determining this projection are cargo movement; port utilization capacity; and the
extent to which waterways and coastal shipping are utilized to move cargo as an alternative to
ground transport. Limiting these variables (other than macro factors such as international trade
deals) are: contractual hurdles that hinder investment in maritime access retrofits (e.g.
dredging); management inefficiencies that increase costs related to customs clearance and
cargo release; and non-prioritisation of inland waterways as an alternative to ground transport
to date.
Assuming a more realistic outlook for cargo movement in which governmental targets are
achieved 10 years later, and a more optimistic growth rate for waterway transport, an
alternative scenario projects BRL 379 billion to be invested in the sector, which could create
387,000 new jobs and a GVA of BRL 204 billion.
Railways
Rail freight transport and all related CAPEX and OPEX accounts for 5% of Brazil’s sustainable
infrastructure investment opportunity between 2020-2040 in the baseline scenario –
BRL 181 billion – based on governmental plans for eight new concessions to be auctioned this
decade. Although the sector has been historically de-prioritised, a growing demand to transport
mining and agricultural outputs seems to be on track to be addressed by the federal
government’s investor partnership programme. Considering the government’s optimistic
auction calendar, this sector could see 43,500 new jobs and a GVA of BRL 338 billion over the
next 20 years.
Nonetheless, delays witnessed in priority railway auctions reveal that barriers such as hurdles
for network sharing, and low attractiveness for foreign investors are likely to slightly push back
auction plans until 2029. Even so, in this scenario BRL 179 billion are expected to be invested in
existing and new railway concessions between 2020-2040 – potentially creating 43,000 new jobs
and a GVA of BRL 335 billion.

Key takeaways
Brazil’s infrastructure gap represents a vast opportunity for new investment in sectors where
financial returns come with significant social and environmental co-benefits. Between
BRL 3.5 trillion and BRL 3.6 trillion (~GBP 530-544 billion) are estimated to be needed between
2020 and 2040 to materialize the country’s sustainable infrastructure plans.
The country’s attractiveness to foreign investors is hindered by over-arching factors such as

Brazil’s BB- rating; currency risk and liquidity risks; complexity and lack of stability of the
regulatory environment; and surging deforestation rates hinder. Among local financial
institutions, few have the capabilities, size and exchange-rate-risk hedging capacity to raise
capital in foreign markets toward sustainable infrastructure. Furthermore, specific barriers are
identified across selected sectors as summarized in Table 1 along with proposed interventions
discussed with interviewees.
Table 1. Summary of priority barriers per sector and proposed interventions.
Sector Key barriers Proposed interventions
Low carbon • Limited local supply chains for key • Industrial policies to focus on supply chain gaps
energy technologies. that can produce most primary benefits and
• Power utilities are not incentivized to enhance cooperation among players developing
invest in system improvements. the supply chain, e.g. PROCEL, innovation labs,
and R&D initiatives.
• Tributary burden on key components of
solar PV systems and inputs to • Design incentives for utilities’ financial efficiency
manufacturers. and innovation, e.g. based on the delivery of
public benefits.
• Second generation biofuels incur
substantial upfront capital costs and lack • Updating ICMS convention 101/1997 to include
competitiveness against fossil key components
alternatives • Re-consider fossil-fuel industry subsidies and
deploy comprehensive innovation policy including
technology-push support; market-pull incentives;
and enabling regulation.
Efficient • Municipalities are technically and • Support municipalities to model and tender PPPs
Public financially constrained to invest and to to catalyse private investment.
Lighting forge PPP agreements. • Design incentives for utilities’ financial efficiency
• Power utilities are not incentivized to and innovation, e.g. based on the delivery of
invest in system improvements. public benefits.
Sanitation • Existing concession contracts are limited • Support municipalities to institute performance-
in their capacity to induce better based compensation in concession contracts and
performance and service expansion PPPs.
• Most municipalities lack technical and • Support the formation of intermunicipal
human resources to produce sanitation consortium solutions where possible.
plans, tenders, ToRs, PPPs and hence to • Build specific capacity and/or provide technical
attract investors or access federal assistance to municipalities.
funding.
• Ease access to federal funding.
Solid waste • Lack of incentives for adequate waste • Incentivise sorting, e.g. via Building Tax Breaks.
sorting and destination. • Support the formation of intermunicipal
• Most municipalities lack capacity to consortium solutions where possible.
design solid waste management plans, • Provide technical assistance around performance-
tenders, ToRs, PPPs and hence to attract based concession contracts, rather than fixed
investors or access federal funding. price solutions.
• Lack of direct taxation for waste • Ease access to federal funding.
management activities

• Consider solid waste tariffs for end-users.

Clean urban • Most municipalities lack capacity to • Support Regional Development Ministry
transport design clean transport plans, tenders, (Secretariat of mobility and urban regional
ToRs, PPPs and hence to attract investors development) to build specific capacity
or access federal funding. within municipalities.
• Difficulty in readjusting and integrating • Support municipalities to institute performance-
fares of intermodal transport. based compensation in concession contracts and
PPPs.
• Support the formation of intermunicipal
consortium solutions where possible.
• Ease access to federal funding.
• Support government levels to produce
comprehensive intermodal fare strategies.
Telecom • Tax burden limits the ability of operators • Support policy makers to assess benefits of
to invest. changing to authorization model
• Last mile costs for broadband • Support co-investment partnership between
universalization holds back investments. Brazilian and international companies.
• Concession contracts signed in the past • Support ANATEL and MCTIC to assess and design
two decades oblige companies to invest regulatory incentives.
in fixed phone lines and other obsolete • Support updates in current regulation to avoid
technologies. similar lock-ins in the future.
Ports and • Maritime access retrofits to enable larger • Support Brazil's Waterway Transport Agency
waterways vessels are held back by contractual (ANTAQ) to create incentives to stimulate
hurdles. maritime accesses improvements.
• Management inefficiency in most ports • Support ANTAQ to increase participation of
increase costs related to customs private companies with higher efficiency
clearance and cargo release. standards in the sector.
• Non-prioritisation of in-land waterways • Support the government to assess the multiple
as an alternative to ground transport benefits of developing in-land waterways and
translates into lack of incentives and design a deployment roadmap.
planning for this modal. • Decrease, or exempt ICMS taxation on water
transport fuel as a market pull incentive for
waterways.
Railways • Investment responsibility for shared • Support Brazil’s Land Transports Agency (ANTT) to
stretches is undefined by law. review railway concession resolutions.
• Low demand decreases incentives to • Increase railway capacity to raise interest for
invest in some railway stretches. commodity transportation through railways.
Table 2 summarizes the differences between the baseline scenario and the sensitivity analyses
in terms of this report’s estimates for investment needs, jobs and GVA potential.

Table 2. Summary of baseline vs. sensitivity analysis across sectors.

Baseline (2020-2040) Sensitivity analysis (2020-2040)
Sector Investments Jobs GVA Investments Jobs GVA
(BRL billion) (# ,000) (BRL billion) (BRL billion) (# ,000) (BRL billion)
Low carbon 968 1,221 490 897 800 453
energy
Efficient Public 6.7 15 1.7 7.9 18 1.9
Lighting (short term) (cost savings) (short term) (cost savings)
Sanitation 507 142 563 595 167 660

Solid waste 53 15 41 81 23 45
Clean urban 475 86 599 490 88 607
transport
Telecom 939 469 2,203 986 493 2,314
Ports and 389 397 210 379 387 204
waterways
Railways 181 43.5 338 179 43 335
Total 3,520 2,389 4,445 3,616 2,019 4,621
KEY: Greater optimism Less optimism
Despite the recession witnessed in Brazil during 2015-2018, it is realistic to be conservatively

optimistic about the investment prospects of sustainable infrastructure sectors – primarily due
to the Federal government’s emphasis on unlocking such projects within this presidential
mandate; falling prices of renewable power; and market opportunities to expand services that
have not reached the entire population or market demand in sanitation, solid waste, telecom,
port and railway sectors. Although the impact of COVID-19 is largely unaccounted for, there are
early indications of a government-led stimulus plan that would still justify this conservative
optimism.
Differences in projected investment between the baseline and sensitivity analyses are relatively
small, due to caution in calibrating key variables as recommended by interviewees. The sectors
where the main differences occur include: (i) low carbon energy, where Brazil’s 10 year energy
plan is deemed optimistic, and the extent to which wind and solar PV plants are deployed will
largely depend on overcoming existing barriers, and will determine the investment expectations
– given the difference in the cost/kW installed capacity varies from ~BRL 5,000/kW for wind to
~BRL 3,230/kW for solar PV; (ii) sanitation, where the speed at which infrastructure expands to
reach the population that still lacks such basic services will determine the amount of
investments in the period. The recent approval of law 4,162/2019 in June 2020 indicates this is
likely to happen sooner than expected in the baseline scenario, hence the sensitivity scenario;
(iii) solid waste, where although current policies have been unable to eliminate dumpsites and
foster investment in sites that generate value from waste, future prospects look brighter with
support programmes such as the FEP-Caixa justifying the sensitivity analysis; and (iv) telecoms,
where consistent investment is relatively certain due to the advance of fibre optic technologies
and can be boosted by reducing current tax burdens (as shown in the sensitivity analysis).

The ratio of jobs/BRL investment lies between 240-1,000 jobs/BRL billion across sectors, with
the exception of the following outliers: (i) low carbon energy5; (ii) efficient public lighting6 and
(iii) clean urban transport7 where evidence suggested different figures. The ratio of GVA/BRL
investment varies between 0.5-2.2/BRL of investment primarily due to the authors’ intention to
use the most conservative values found in the literature unless there was local evidence to
justify larger multipliers8.
5 Where 1,261 jobs/BRL billion is assumed maintaining the current proportion of jobs per output of power and biofuels
6 Where 6,571 short-term jobs/BRL billion is assumed on the basis of IEA’s indication that every 1 million lighting spots produce
1,181 short-term jobs (IEA, 2020);
7 Where 185 jobs/BRL billion is assumed considering the mass transit jobs multiplier indicated in “A Jobs Centric Approach to
Infrastructure Investments” (BCG, 2017).

8 For example, 0.5/BRL invested is assumed for the low carbon energy sector, based on figures per source of renewable power found
in (Kečeka, Mikulic, & Lovrincevic, 2019), due to a lack of local evidence indicating greater GVA in the sector. In contrast, investment
in the telecom sector is projected to produce 2.2 times its value in GVA, based on the average GVA per investment witnessed in
Brazil between 2010-2017, documented by (IBGE, 2020b).

Introduction and purpose

Between 1990 and 2016, Brazil invested an annual average of just over 2% of its GDP in
infrastructure (CBIC, 2015) (Oliver Wyman, 2018), and therefore ranks significantly below other
BRIC countries in the quality of its infrastructure. Brazil’s infrastructure gap represents a vast
opportunity for new investment, in particular in sectors where financial returns come with
significant social and environmental co-benefits.
Produced for the Prosperity Fund’s Brazil Green Finance Programme, this report’s objective is to
present a detailed assessment of determinant factors driving investment in each of the
infrastructure sectors where ‘sustainable’ projects can be undertaken; discuss key uncertainties
and potential benefits; review factors holding back investments; and provide insights into
solutions to enable increased investment. In doing so, this report intends to present sectors in a
comparable way serving as a first step for the Brazilian government, investors and other
stakeholders to better understand the opportunities, risks and high-level benefits of sustainable
infrastructure in Brazil. This report is therefore intended to serve as a backdrop for all of the
Green Finance Programme’s activities, in that it determines the scale and break-down of the
opportunity sought to be unlocked by the programme; where Brazil currently stands with
regards to investment levels and barriers; puts sectors and barriers into perspective; and as such
helps the programme to focus on what matters the most.
This report does so by gathering evidence from a wide range of public and private sources and
specialist interviewees to feed into a quantitative model that forecasts capital expenditure in
key sustainable infrastructure sectors in Brazil between 2020 and 2040. The result is a projected
BRL 3.5 trillion (~GBP 530 billion) in investment needed across all sectors in its baseline scenario
(see Figure 1 below). An alternative sensitivity analysis scenario is constructed by conservatively
adjusting key variables based on whether the baseline scenario is perceived to be either overly
optimistic (e.g. due to assumptions utilized in underlying governmental plans considering pre-
recession GDP projections) or overly pessimistic (e.g. due to assumptions not considering recent
policy developments) based on our research and specialist interviewees. The result is an
alternative investment projection of BRL 3.6 trillion (~GBP 544 billion) between 2020 and 2040.
Sustainable infrastructure projects are those that are planned, designed, constructed, operated,
2018). For the sake of this report all investment within the following sectors are considered as
sustainable infrastructure: low carbon energy (including power generation, transmission,
distribution, and biofuel refineries); efficient public lighting; sanitation; solid waste
management; telecommunications; clean urban transport; ports; waterways; and railways. This
is based on the premise that they can lead to positive environmental, economic and social
impacts, contributing to Brazil’s NDC goals9 and sustainable development goals10 in the form of
greenhouse gas mitigation, gross value add (GVA), job generation and gender equality, among
other indicators. Given the hypothetical nature of project pipeline discussed herein, this report
is unable to assess the actual impact of specific projects or their lifecycle sustainability.
9 All such sectors have a role to play in the achievement of Brazil’s NDC:
https://www4.unfccc.int/sites/ndcstaging/PublishedDocuments/Brazil%20First/BRAZIL%20iNDC%20english%20FINAL.pdf
10 All such sectors have a role to play in the achievement of Brazil’s SDG goals: http://www.odmbrasil.gov.br/o-brasil-e-os-odm

Figure 1. Brazil’s sustainable infrastructure investment history and baseline projection

250
Railways
200
BRL 3.5 trillion
Ports and waterways
between 2020-2040
BRL billion
Telecommunications
150
Clean Urban transport
100 Solid Waste

Sanitation
50 Efficient public lighting
Low carbon energy
-
2010 2015 2020 2025 2030 2035 2040
Notes: Gaps in investment history and trends per sector were filled in by Carbon Trust estimates as detailed in
subsequent sections. Sources: Adapted from: Low carbon energy: (ANEEL, 2020), (EPE, 2019a), (MME, 2019), (IBP,
2019); Efficient public lighting: (Radar PPP, 2019), (ANEEL, 2018), (PROCEL, 2018); Sanitation: (SNIS, 2018), (MDR,
2019a); Solid Waste: (MDR, 2020b), (MDR, 2019a); Clean Urban transport: (Folha de São Paulo, 2019a), (Mobilize,
2020); (DENATRAN, 2020), (CNT, 2020a), (FIESP, 2019), (ITDP, 2018), (Secom/BA, 2013), (SIMOB/ANTP, 2020);
Telecommunications: (ANATEL, 2018, 2020), (ABVCAP, 2019), (IBGE, 2020a); Ports: (CNT, 2020a), (PNLP, 2020);
Railways: (ANTT, 2015), (ANTT, 2020).
Low carbon energy and telecommunications represent 54% (27% each) of Brazil’s sustainable
infrastructure investment opportunity between 2020-2040. Key factors underlying these
sectors’ figures respectively are: (i) fast deployment projections for wind and solar PV; and (ii)
optical fiber telecom service reach expansion, moving from 19% of Brazilian households in 2019
to 95% in 2040. The next most significant sectors are sanitation and clean urban transport
representing 14% and 13% of the investment opportunity in the period respectively, due to the
inherently capital-intensive nature of building and operating in both sectors. Key assumptions
and uncertainties within each sector are described in subsequent sections.
The following sections of this report provide an overview of the purpose and additionalities of
sustainable infrastructure. An assessment of general factors holding back investment in Brazilian
infrastructure follows alongside suggestions for potential solutions and comments on the
progress in addressing such barriers to date. Figure 1 is then dissected into eight sub-sections –
one for each sector – in which definition boundaries are set; historic and projected investment
baselines are presented along with projected impact in GVA and jobs while transparently
accounting for uncertainties and modelling challenges; specific barriers and solutions to unlock
investments are discussed; baseline figures are adjusted up or down in sector-specific sensitivity
analysis; and projections are compared against alternative sources from literature.
Disclaimer: This report does not consider the impacts of COVID-19 on the economy. Our
research on similar circumstances (i.e. the global economic downturn in 2008 and Brazilian
recession between 2015-2018) does not identify a clear pattern of influence upon infrastructure
investments. For instance, in Brazil, sanitation investments grew 40% between 2008 and 2009
while railway investment fell by 44% in the same period. A reduction in investment is
nonetheless observed in Figure 1 in 2020, primarily due to the lack of envisaged renewable
energy auctions this year.

Why focus investment on sustainable infrastructure?

There is a growing consensus among G20 countries on the importance of infrastructure, the
permanent assets that a society needs for the orderly operation of its economy, as a driver of
growth, jobs and competitiveness (EBRD, 2020) thereby contributing to poverty alleviation.
Infrastructure enables trade, powers businesses, connects workers to their jobs, creates
opportunities for struggling communities and protects the nation from an increasingly
unpredictable natural environment. However, despite this evidence and the strong consensus
regarding infrastructure investment, statistics demonstrate that the G20 economies have
reduced their investments in infrastructure since the global financial crisis in 2008 (EBRD, 2020).
The investment gap applies to all types of infrastructure, but there is increasing focus globally of
the benefits in investing in sustainable infrastructure, in order to ensure that countries continue
to develop and thrive in a way that is aligned to the UN global commitments of the 2015 Paris
Agreement and the approved UN Sustainable Development Goals. As set out in the introduction,
this report takes a broad approach to sustainable infrastructure, considering all investment into
the sectors herein included as potentially sustainable. That is, this report acknowledges
sustainable infrastructure projects are those that are planned, designed, constructed, operated,
2018), but is unable to assess the extent to which future investment in such sectors will
effectively do so. Carbon intensive infrastructure sectors, such as coal, oil, gas, airports, roads,
and fossil-fuelled transport are therefore not included in this report.
There are clear benefits to focusing investment on sustainable infrastructure. Investments in

sustainable infrastructure are a "win-win" for economies: they help increase productive capacity
and lift economic growth rates, while strengthening a country's resilience to withstand and even
combat future climate risks (World Bank, 2019). Importantly, if infrastructure built today is not
aligned to global sustainable development commitments, e.g. because it is carbon intensive or
excludes or negatively impacts different social groups, then the investment is not sustainable
nor does it represent good societal value in the long term, as it is increasingly likely that it will
need to be replaced again in the not-so-distant future. For example, Brazil has pledged an
economy-wide target of limiting greenhouse gas emissions to a level that is 43% below 2005
levels by 2030. Any infrastructure which is set to significantly increase Brazil’s emissions will
undermine this pledge and will need to be replaced at some point or require more effort and
investment in other areas.
Impact on the economy

The value of public investments in sustainable infrastructure is often underappreciated given its
quantitative and qualitative contribution to enhancing health benefits, quality of life, delivering
public savings, employment, value add and a safer environment is widespread. As this
contribution is intertwined with other impacts it is therefore hard to estimate.
OECD and IMF analyses have shown that for every dollar of investment in infrastructure, such
as motorways, bridges, power plants and grids, communication systems, ports, airports,
housing, water, sewers and social infrastructure, there is an average 1.6x multiplier in the form

of a boost to short-term employment combined with a longer term productivity gain to the
economy. The value of resilient infrastructure investment has not been quantified at a sector
level in this report. However, Lifelines, a report by the World Bank and the Global Facility for
Disaster Reduction and Recovery, finds that the net benefit of building more resilient
infrastructure in low- and middle-income countries would be USD 4.2 trillion with USD 4 in
benefit for each USD 1 invested (World Bank, 2019). This is due to the cost of not investing in
sustainable infrastructure. In Brazil, it has been estimated that inefficiencies due to inadequate
infrastructure subtract 10−15 percent from the country’s GDP (IMF, 2015). In São Paulo, Brazil,
for example, daily traffic jams reaching more than 350 km are estimated to cost USD 120 billion
each year in lost work hours, increased fuel consumption, and traffic accidents, which is nearly
8% of urban GDP (Gouldson, Sudmant, Khreis, & Papargyropoulou, 2019). Therefore, designing
future infrastructure to be climate resilient is both necessary and cost effective in the long term.
Impact on Women and Socially Disadvantaged Groups

Sustainable infrastructure that is inclusive is essential for achieving a wide range of social and
economic development outcomes that contribute to the Sustainable Development Goals. More
opportunities in sustainable infrastructure can also contribute to increase women participation
in STEM areas (Science, Technology, Engineering and Math), contributing to gender equity and
addressing women needs in infrastructure development.
Women and socially disadvantaged groups are disproportionately affected by a lack of water or
electricity, by poor local roads and inadequate transport – all of which increase their time spent
on domestic tasks. Evidence suggests that improving their access to quality infrastructure is
essential to expanding their access to economic opportunities as well as reducing the time
devoted to unpaid work (OECD, 2018).
Moreover, women have historically been left out of jobs in traditional infrastructure fields. By
ensuring that women have access to job opportunities in sustainable infrastructure projects, this
can spur inclusive economic growth and poverty reduction and generate social benefits
including improving gender equality.
Methodology used to calculate benefits in this report

This report considers sustainable infrastructure’s benefits to Brazil’s economy in terms of impact
on GVA and job creation. The increase of jobs expected from investment in different sub sectors
is derived using multipliers found in “A Jobs Centric Approach to Infrastructure Investments”
(BCG, 2017); unless otherwise specified. GVA figures are estimated using sector-specific sources
or bottom-up calculations, as indicated in sections’ footnotes. It is therefore important to note
that this analysis is intended to show the high-level opportunity in different sectors and is not a
precise representation of the number of jobs or GVA expected per sector.
Factors holding back investments in Brazilian infrastructure

Brazil’s sustainable infrastructure gap exists due to a number of factors, which can be described
as:
• Factors that render Brazil generally unattractive to investors

• Limitations of foreign investors and of local financial institutions

• Sector-specific barriers
Given the overarching relevance of the first two subsets, this section focuses on them before
sector-specific barriers are examined in subsequent sections. Tables 3 and 4 below respectively
list the factors that render Brazil unattractive to investors and the limitations of foreign investors
when it comes to seizing opportunities to invest in Brazil. Both tables also suggest interventions
to address these barriers and report on progress to date. All barriers listed below limit to some
degree investment in all sectors listed in subsequent sections.
Table 3. Factors rendering Brazil unattractive to investors when assessed against other countries,
proposed interventions, and progress to date
Barrier Description Proposed Interventions Progress to Date*
Brazil’s BB- risk rating, is • Structure financial instruments Limited:
non-investment grade that involve multilateral Credit agencies report
and represents the ceiling development banks (MDB) structural weaknesses and debt
rating of infrastructure providing collateral or as as reasons to keep Brazil at BB-.
investments. shareholders to enhance project
rating.
Currency risk & liquidity • Safeguarding foreign currency Moderate:
risk of Brazil’s currency investors from some degree of • Currency hedging has been
relative to EUR, USD, or exchange rate risk, e.g. first loss applied to recent PPI
GBP affects foreign loan catalytic capital or guarantees. concessions, significantly
takers’ capacity to pay reducing risk for foreign
back (Debt Service investors.
Coverage Ratio).
Complexity and lack of • Decrease hurdles to companies Limited:
stability of regulatory wishing to enter the market, e.g.: • Signs of instability remain a
environment. tax reform, environmental permits concern of potential
Regularly changing and employment policies. investors.
political priorities, and • Demonstration of policy stability
changes to tax regimes for consecutive years as a means to
translate into long lead- create credibility and raise investor
times required for major confidence.
infrastructure projects • Share best practices on effective
regulatory frameworks and
promote opportunities for
exchanges on the topic.
Limited sources of capital • Adjusting local content rules (focus Moderate:
with adequate conditions on where they can bring most • BNDES started to reduce local
for foreign investors benefits or phase-in progressively content rules in late 2018,
• Local capital market per sector) splitting risks with from 60% to 30%. New
(interest rates ~7- foreign investors, correctly pricing government demonstrates
10%/yr for risks. willingness to review further
infrastructure projects) and to hedge a share of
foreign investors’ currency
• BNDES (interest rates
risk (see above).
<10%/yr, limited to 70-
90% of project value
and linked to local
content rules)

• Foreign capital (low

interest, but
susceptible to FX risk)
Ongoing environmental • Support Brazilian Federal Ministries None identified:
degradation represents a and state governments to re- • Environmental agencies
red flag for investors consider environmental policies across the country witnessed
abiding by ESG standards and enforcement, e.g. weighing the budget cuts and leadership
(particularly in the benefits of enhanced changes that are openly in
Amazon region) and environmental protection versus favour of reducing
creates uncertainty about potential investments. environmental controls. As a
the conditions for result, there has been a surge
investing in or providing
of divestment threats11.
financial services to Brazil.
Lack of long-term • Support Brazilian Federal Ministries Limited:
planning/prioritisation. and state governments to institute • Prioritisation frameworks are
Government investments prioritisation frameworks based on non-existent or inconsistent
and concession plans global best practice, e.g. UK’s between ministries and
follow short-medium term Technology and Innovation Needs across states/municipalities.
plans and lack long-term Assessments to justify investments
prioritization to justify in technologies based on realistic
budget allocations. evidence of how much each
Power generation and infrastructure option can reap in
transmission sectors are benefits.
exceptions to this barrier.
Delays and uncertainty in • Support Brazilian Ministries to Limited:
obtaining environmental consider the case to increase • Current government
and/or operating permits investments in capacity building demonstrates willingness to
represent a high risk for across environmental bodies, streamline environmental
potential investors. learning from global best practice permits, although this creates
This has been primarily on how to balance adequate a risk of increasing
caused by limited environmental protection with environmental and social
financial, technical and strong industrial development. externalities.
human resources of • Support increased collaboration
Brazil’s environmental and between environmental bodies
regulatory agencies; lack and sector representatives, aiming
of autonomy of such to provide some degree of
agencies; and high certainty around licensing
vacancies in senior posts deadlines and therefore improve
across these. the conditions for investors.
Governance issues, • Support federal government to Limited:
corruption, political institute anti-corruption12 and • The Anti-corruption Law
influence, and lack of transparency13 frameworks and 12,846 of 2013 provides for
transparency in consider governance models that the administrative and civil
infrastructure render infra concessions profitable liability of legal entities
concessions. for the private sector and achieve involved in acts against the
11 e.g. (i) https://www.reuters.com/article/us-brazil-environment-divestment-exclusi/exclusive-european-investors-threaten-

brazil-divestment-over-deforestation-
idUSKBN23Q1MU#:~:text=BRASILIA%20(Reuters)%20%2D%20Seven%20major,destruction%20of%20the%20Amazon%20rainforest
. (ii) https://www.ft.com/content/ad1d7176-ce6c-4a9b-9bbc-cbdb6691084f
12
e.g. OECD public integrity guidelines: https://www.oecd.org/corruption-integrity/Explore/Topics/public-integrity.html
13 e.g. OECD transparency guidelines: https://www.oecd.org/investment/investment-policy/18546790.pdf

value for tax-payers’ money, e.g. national or foreign public

PPP models. administration.
Skill gaps. • Support government and Limited:
Rapid technological and implementation agencies to • Whilst governmental
regulatory evolution poses develop capacity building upskilling programmes have
a challenge to source programmes that address skill gaps certainly had some impact
adequate labour, which in priority sectors. they are clearly not at the
adds costs and time to scale/quality required.
investment decisions.
Limited access to capital for • Strengthen institutional Moderate:
‘sustainable’ projects on environment for GF market in • Investors are able to price
competitive terms. Brazil. basic risk mitigation benefits
Risk mitigation benefits are (e.g. avoiding fossil price
• Support financial institutions to
not yet fully priced into volatility), but full benefits are
better assess portfolio risks.
investments discouraging not appreciated.
development of a
sustainable project pipeline.
Limited portfolio of • Roll-out ESG framework across FIs Moderate:
bankable projects with to develop portfolio that renders • International and local
credible socio- transactions more cost effective (FEBRABAN’s) guidance for
environmental standards. and dissipates risk across multiple green standards + ESGs are
Particularly relevant for projects. consolidating but have not
green bonds, where large- yet produced a concrete flow
scale pipelines are • Assure green credentials of
Brazilian projects via credible of sustainable projects.
needed, the lack of a
project pipeline is pointed independent institutions that can • Decree 10,387/2020 includes
as a main concern for attest and demonstrate the impact clean urban transport,
investors. of each investment. sanitation, solar PV, wind and
• Consider public seed funding for waste-to-energy as priorities
sustainable project development. for infrastructure investment
(Presidência da Repúlica,
2020).
Limited capacity to attend • Build capacity across government Limited: Interviews with the
to investors’ ESG levels to systematically assess MDR, MinEco, Raízen and IPGC
requirements across essential ESG metrics and better (which structured >10 municipal
federal and municipal address investors’ demands. PPPs across multiple sectors)
governments, where there indicate socio-environmental
is limited understanding of aspects of Brazil’s infrastructure
infrastructure projects’ pipeline are seldom assessed
socio-environmental beyond the minimum required
impacts. by legislation. Whilst the federal
This is partially linked to government is developing
limited ESG demands from means to better address ESG
investors, in particular requirements and mitigate
from smaller companies reputational risks, municipalities
with local investor pools.
lag behind.
Source: Carbon Trust research and interviewee insights. *Note: Progress to date with regard to addressing each barrier
is classified qualitatively between: None identified when no signs of progress are identified at any level; Limited when
early stage policies/initiatives are identified, or when or when these are unlikely to fully address the barrier; and
Moderate when concrete steps are being taken to address the barrier.
Addressing such factors would significantly impact the investment attractiveness of Brazil,
increasing the projection depicted in Figure 1. However, given the overarching nature of these

factors and their interdependencies, most are beyond the Prosperity Fund’s Green Finance
Programme capacity to influence14. The impact of resolving such barriers is therefore not
modelled or discussed individually but subsequent sections show how projected investments
per sector could be seen with greater optimism if overarching and sector-specific barriers were
to be resolved or minimized.
Table 4. Limitations of foreign investors and local financial institutions, proposed interventions and
progress to date
Limitations of foreign investors
Investors have small or no • Continuing to support Brazil’s accession Limited: Brazil is
mandates for non-OECD process into the OECD to overcome non- taking steps to join
markets, which limits their OECD mandate constraints, and so that the OECD, but
flexibility to invest in Brazil. Brazilian opportunities can be considered progress is unclear at
Nonetheless, these remain by the larger investment teams that review this stage.
undersubscribed, meaning OECD opportunities.
that there is room for them
to increase their exposure to
emerging markets.
Foreign investment teams • Reducing the cost of risk assessment for Limited: Non-OECD
responsible for non-OECD investors by improving the accessibility and mandates are
opportunities are relatively ease of assessment of infra projects and unlikely to change.
small and time-constrained, standardising the presentation of
so focus their resources and opportunities. e.g. IFC established a fund
time on regions with a that pays for trusted technical experts to
better risk rating. perform ESG or DD assessments for infra
projects in Colombia and share outputs
with potential investors on the condition
they reimburse the fund should they invest
in the project.
Foreign investors without • Supporting co-investment partnerships Unknown: More
previous exposure to Brazil between foreign investors that are new to research on co-
lack local knowledge and Brazil and Brazil-experienced investors investment
find it hard to accurately from e.g. Spain, the USA or Canada. partnerships is
appraise risk. needed.
• Develop and showcase case studies of
profitable infrastructure investments by UK
companies in Brazil.
Small teams have limited • Several solutions proposed above will Limited: Unlikely to
Portuguese language indirectly support the addressing of this chance within UK &
capabilities (compared to barrier. EU investors whilst
e.g. Spanish) which makes Brazil is not
Brazilian opportunities less sufficiently
accessible attractive.
Limitations of local financial institutions**

Local Development FIs do • Provide tailored solutions to ease local FI’s Limited: There are
not prioritize sustainable socio-environmental impact assessments of ongoing discussions
infrastructure, mostly due projects and meet internationally within forums such
14
Notable exceptions of barriers within the Prosperity Fund’s influence capacity are: Limited portfolio of bankable projects with
credible socio-environmental standards; and Limited capacity to attend to investors’ ESG requirements.

to complexity of obtaining recognized standards – thereby increasing as the Financial

‘green’ standards, lack of the attractiveness of sustainable Innovations Lab;
capacity to undergo impact infrastructure investment opportunities. FEBABAN and ABDE
assessments, and competing about how best to
priorities. address existing
limitations of local
Few local FIs have the • Provide a technical assistance facility to FIs, but no sign of
capabilities, size, exchange- ease local FI’s access to foreign capital. systematic efforts to
rate-risk hedging capacity curb limitations.
to raise capital in foreign
markets toward sustainable
infrastructure.
Source: Adapted from (CLT, 2019); (GIZ, 2020) and interviews. Notes: *Progress to date with regard to addressing each
barrier is classified qualitatively between: None identified when no signs of progress are identified at any level; Limited
when early stage policies/initiatives are identified, or when or when these are unlikely to fully address the barrier; and
Moderate when concrete steps are being taken to address the barrier. **Compiles perceptions gathered in interview
with ABDE and from (GIZ, 2020).
Addressing this set of factors would enhance the capacity of foreign investors and local FIs to
seize opportunities for sustainable infrastructure in Brazil. Nonetheless, the impact of
addressing these factors is not modelled or discussed individually, but again factored into the
sensitivity analysis of subsequent sections.
Low carbon energy infrastructure

Definitions and overview
Within the energy sector, the following sub-sectors are considered as low-carbon infrastructure:
centralized renewable power generation15; decentralized solar PV generation; transmission and
distribution assets; and biofuels (namely ethanol, biodiesel production sites)16.
On average BRL 6.6 billion were invested each year in Brazil’s low carbon energy infrastructure
between 2010-2020 – a CAGR of 10%. In the baseline scenario, this is expected to ramp up to an
average 14%/year between 2020-2040 – based on the assumptions described below. As such,
low carbon energy is responsible for the greatest share (27% – BRL 968 billion) of sustainable
infrastructure investment perspectives shown in Figure 1, potentially creating over 1.2 million17
jobs and a GVA of BRL 490 billion18 over the period.
The sector’s investment pattern is uneven across years, due to renewable power generation
investments having been assigned to the years in which auctions were made, rather than
reflecting precise investment schedules per project - since these are generally unavailable. Sub-
sectors are also unevenly contributing to low carbon energy infrastructure projections, with 52%
15 Large and small hydropower plants, wind, solar, biomass and biogas.
16 Bioenergy production sites are typically classified as industrial sites rather than as energy infrastructure. Nonetheless, given their
close relationship with the low-carbon energy infrastructure investment described in this section, these have been deliberately
included under low carbon energy infrastructure. Bioenergy investment related to agriculture and logistics are deliberately not
included in this section, as these would fall under the agricultural and transport sectors, hence not infrastructure.
17 In Brazil, there were 1,125,300 jobs in renewable energy in 2019 (IRENA, 2019) - 21,605 jobs per billion litres of biofuel produced
and 2,038 jobs per GW of renewable installed capacity. Assuming the proportion of jobs remain the same, the incremental biofuel
production and renewable generation capacity between 2020-2040 would lead to 931,184 additional biofuel jobs and 281,271
additional renewable power generation jobs.
18 Assumes the following GVA multipliers per technology: Wind (34%); Solar (64%); biomass (60%); biogas (67%); small hydro (65%);
large hydro (50%) – according to (Keček, Mikulić, & Lovrinčević, 2019). Transmission and distribution; biofuels; and decentralized PV
are all assumed to produce 50% of their equivalent investment in GVA.

linked to centralized power generation; 11% to decentralized PV; 31% to transmission and
distribution; and 7% to the bioenergy sub-sector.
Figure 2. Low carbon energy infrastructure investment history and baseline projection per subsector
100 projection Distribution
80
BRL 968 billion Transmission
between 2020-2040
BRL billion
60 Biofuels
40
Decentralized PV
20
Centralized power
- generation
2010 2015 2020 2025 2030 2035 2040
BRL billion Total Per year
2010-2019 144 14
2020-2029 337 34
2030-2040 630 57
Notes: Sectoral disaggregation, specificities and an alternative scenario are discussed below. Sources: (ANEEL, 2020)
(ANP, 2020) (Biodiesel BR, 2014) (Biomassa e Energia, 2016) (EPE, 2019b) (EPE, 2018a) (EPE, 2019a) (IBP, 2019) (MME,
2019).
Modelling method and results

The energy subsectors’ recent investment history and future projections were constructed as
follows:
Investments made in power generation infrastructure within the regulated market between
2010-2019 are sourced from Brazil’s Power Sector Regulatory Agency’s (ANEEL) power auction
records19 and 2010-2019 power generation installed capacity data is sourced from Brazil’s
Energy Research Office’s (EPE) Energy Balance20. Together these allow us to derive the past
decade’s investments per GW per source. Looking forward, centralized power generation,
decentralized PV, transmission and distribution investments between 2019-2029 were directly
sourced from EPE’s Ten-Year Energy Expansion Plans between 2015 and 2019, projecting power
generation capacity and investments up to 2025 and 2029 respectively.
Investments made in biofuel production sites between 2010-2018 are estimated by multiplying
the number of new plants recorded in each year by the average cost of a site, which is in turn
estimated by dividing the 2018-2030 investment needs (EPE, 2018a and IBP, 2019) equally by
the number of new plants projected to be built in that period.
To project investment needs between 2020-2040, the same rationale was used for all sub-
sectors: (i) between 2020-2029, power-sector investments and capacity expansion are projected
using a mix of EPE’s ten year energy plan and insights from Brazil’s Solar PV Energy Association,
while biofuel investment projections are sourced directly from IBP; (ii) between 2030-2040,
specific CAGRs were assumed to project the evolution of: generation capacities for each
renewable source (GW), biofuel production sites (number of sites), extension of transmission
19https://app.powerbi.com/view?r=eyJrIjoiYmMzN2Y0NGMtYjEyNy00OTNlLWI1YzctZjI0ZTUwMDg5ODE3IiwidCI6IjQwZDZmOWI4LWVjYTctNDZhMi05
MmQ0LWVhNGU5YzAxNzBlMSIsImMiOjR9
20 http://www.epe.gov.br/pt/publicacoes-dados-abertos/publicacoes/balanco-energetico-nacional-2019

lines (km), and transformation capacity of distribution substations (MVA); all of which are
multiplied by respective costs and adjusted by a yearly inflation rate to produce yearly
investment figures per sub-sector. Specific assumptions per sub-sector are described in Table 5
below.
Table 5. Low carbon energy infrastructure sector base case assumptions
Parameters Assumptions
Centralized power generation
2020-2025 Investments – ANEEL auctions (BRL billion) 53
2020-2029 Investments – PDE 2029 (BRL billion) 384
2030-2040 Investments – Estimates on Investments per kW (BRL) Hydro: R$ 5,275/kW
Small hydro: R$ 5,000/kW
Wind R$ 5,000/kW21
Solar PV22: R$ 3,230/kW
Biomass: R$ 3,760/kW
Biogas: R$ 3,760/kW
All adjusted by inflation yearly
2020-2029 Additional generation capacity – PDE & ABSOLAR 45.6 GW
forecasts (renewables)
2030-2040 Additional generation capacity – Generation capacity Large-scale hydro 0.22%
growth rate Small hydro 3.16%,
Wind 5%
Solar 5%
Biomass 1.35%
Biogas 3.0%
Decentralized PV
2020-2029 Investments – PDE 2029 (BRL billion) 43.4
2030-2040 Investments – Estimates on Investments per kW (BRL) R$ 4,000/kW23
adjusted by inflation yearly
2020-2029 Additional generation capacity – PDE forecasts 8.7 GW
2030-2040 Additional generation capacity – Generation capacity 5%
growth rate
Transmission and distribution
2030-2040 Investments – Estimates on Investments per km or per Transmission: R$
MVA (BRL) 928,000/km
Distribution: R$
12,000/MVA
2020-2040 Transmission and distribution growth Transmission 4.3%
Distribution 4.8%
Biofuels
2017-2030 Investments in biodiesel and ethanol plants (BRL billion) 38.5
IBP & EPE estimates
21 (EPE, 2018b) does not project wind power costs into the future but shows a downward trend from between 2007-2018 which we
assume to lead to an average of BRL 5,000/kW in 2030 - adjusted by inflation from then on.
22 (EPE, 2018b) projects solar PV systems are projected to cost USD 800/kW between 2030-40. A 3.8 USD-BRL exchange rate is
assumed in EPE’s report and herein to obtain BRL 3,230/kW.

23 (EPE, 2019a) projects BRL 43 billion to be invested in 8.65 GW decentralized PV capacity between 2019-2029, i.e. BRL 4,990/kW.
(EPE, 2018b) is cautious in projecting a cost reduction for decentralized PV systems, due to the high costs of batteries. As such, this
report assumes an average of BRL 4,000/kW for decentralized PV in 2030-2040.

Average investments per

production unit forecasted by
IBP & EPE between 2017-2030
allocated to number of plants
needed in the period and
2017-2030 Ethanol production (consistent with Renovabio’s target) 29.4 billion litres (2017)
50 billion litres (2030)
(CAGR 4.2%)
2030-2040 Ethanol production (beyond Renovabio’s target) 50 billion litres (2030)
61.5 billion litres (2040)
(CAGR 2.1%)
2017-2030 Biodiesel production (consistent with Renovabio’s target) 4.3 billion litres (2017)
(CAGR 8.9%)
2030-2040 Biodiesel production (beyond with Renovabio’s target) 13 billion litres (2030)
(CAGR 4.5%)
Adjustments made to centralized PV and wind power
Following advice provided by ABSOLAR and discussions with other energy sector interviewees (see
Annex 1), an adjustment in EPE’s projected proportion of solar vs. wind installed capacity by 2029 was
made to factor in recent signs of solar PV’s relative competitiveness – not accounted for in EPE’s 10-
year energy plan.
In essence, EPE’s wind (24.5GW) + solar PV (7.4GW) projected capacity increments between 2019-2029
are assumed to be maintained, but the wind/PV ratio is adjusted to allocate 70% of the wind + PV
output to PV and 30% to wind power. To do so, wind and PV capacity increments in the period are
multiplied by respective capacity factors (wind 42%24; PV 26.8%25) to obtain a total GWh output. This
total is then assigned the 70/30 ratio between PV and wind and converted back into GW. Installed
capacity figures are then multiplied by the CAPEX costs assumed per GW, as detailed above.
Adapted from: (ANEEL, 2020) (EPE, 2019a) (MME, 2019) (IBP, 2019).
As a result of the above assumptions, centralized solar power is responsible for the greatest
share of the power sector’s renewable installed capacity growth between 2020-2040 (69 GW
out of the 140 GW total increment), as illustrated by Figure 3. Wind power is expected to witness
a 29 GW increment over the same period – as illustrated in Figure 3.
Figure 3. Low carbon power generation infrastructure installed capacity history and baseline projection
EPE's 2019-29 energy plan Linear annual growth
& ABSOLAR projections following historic CAGR
300
Decentralized PV
250
Biogas
200
GW
Biomass
150 Solar PV
100 Wind
50 Small hydro
Large hydro
0
2010 2015 2020 2025 2030 2035 2040
Sources: (ANEEL, 2020) (EPE, 2019a) (MME, 2019) (IBP, 2019).
24
https://www.canalenergia.com.br/noticias/53096013/energia-eolica-atinge-15-gw-em-capacidade-instalada-no-brasil
25 http://www.ons.org.br/AcervoDigitalDocumentosEPublicacoes/Boletim%20Mensal%20de%20Gera%C3%A7%C3%A3o%20Solar%202018-05.pdf

In terms of investment in the power generation sector, Figure 4 dissects the ‘centralized power
generation’ area shown in Figure 2, to show how centralized PV leads over the period, attracting
BRL 193 billion in investments, followed by wind power (BRL 180 billion), and decentralized solar
PV (BRL 104 billion). Between 2019-2025 wind power investments oscillate in accordance to
what is already contracted for each year – as reported in ANEEL, 2020. Beyond the contracted
horizon and EPE’s 2029 energy plan, wind power is projected to progressively lose space for
solar PV. Investments in large hydropower plants virtually stagnate during the whole period.
Biogas, agricultural waste, forestry waste and urban solid-waste-fuelled plants generating
electricity and/or heat are merged within the biomass category of EPE’s projections depicted in
Figure 3 and Figure 4 and modestly contribute to the investment opportunity. For reference,
4 GW of generation capacity are projected to come from urban solid waste by 203026 (EPE,
2014). This was 2.3% of the country’s projected capacity in that year.
Figure 4. Low carbon power generation investment history and baseline projection
EPE's 2019-29 energy plan Linear annual growth projection
60 & ABSOLAR projections following historic CAGR
Decentralized PV
ANEEL auction data
Biogas
BRL 599 billion
BRL billion
40
Biomass
between 2020-2040
Solar PV
20 Wind
Small hydro
Large hydro
0
2010 2015 2020 2025 2030 2035 2040
2010-2019 57 5.7
2020-2029 204 20
2030-2040 395 36
Notes: Investments between 2010-2029 are assumed to happen in the year of energy auction deals, rather than
following actual project implementation calendars. Sources: (ANEEL, 2020) (EPE, 2019a) (MME, 2019) (IBP, 2019).
Within the biofuel subsector, historic investment in production sites for ethanol and biodiesel
are marked by an upsurge between 2000-2010, powered by the rise in flex-fuel vehicle
manufacturing in Brazil, competitive prices against fossil fuels and mandatory mixes of ethanol
and biodiesel to gasoline and diesel respectively. Although mandatory mixes have since
increased with regulatory reviews, the demand for biofuels decreased between 2010-2019 due
to relatively low costs of fossil alternatives holding back the ‘non-regulated’ demand. This
brought down investment in production sites (in particular for ethanol). The result, depicted in
Figure 5, was a complete lack of investment in new infrastructure in 2011-2014, 2017 and 2018,
when several production sites were closed down.
Looking forward, to meet the National Biofuel Plan’s (RenovaBio) ambitious targets27 and EPE’s
mid-growth biofuel output scenario28, between 2018 and 2030 it is estimated that
BRL 38.5 billion will be required to retrofit existing ethanol and biodiesel plants and build new
26 3.2 GW from un-recyclable waste incineration plants and 0.9 GW from anaerobic bio-digestion plants (EPE, 2014).
27 To increase ethanol production from ~30 billion litters/year in 2018 to ~50 billion litres/year in 2030; and to increase biodiesel
production from ~4 billion litres/year in 2018 to 13 billion litres/year by 2030 (MME, 2019).
28 EPE projects ethanol production to rise from ~29.4 billion litters/year in 2018 to ~49.4 billion litres/year in 2030 (EPE, 2018a)

units, and another BRL 17 billion for biofuel pipeline infrastructure (IBP, 2019). Assuming 2031-
2040 will see 50% less annual output growth than what is projected by EPE (2018) and IBP (2019)
between 2018-2030, and adjusting the investments by annual inflation, another BRL 41 billion
will need to be invested between 2031-2040. Figure 5 shows the relationship between past and
projected investments and operational plants required to meet output targets.
Figure 5. Biofuel production sites and investment history and baseline projection
BRL 66 billlion
between 2020-2040
Notes: The number of ethanol and biodiesel plants and annual outputs for both biofuels between 2010-2018 are
gathered from multiple sources listed below, with the exception of the number of biodiesel production sites between
2014-2016 which were estimated to linearly connect 2013-2017 figures. Annual outputs between 2018-2030 are
estimated assuming a linear progression toward the achievement of Renovabio's target outputs in 2030 (see
footnote). The proportion of ethanol plants to output in 2019 is maintained throughout 2020-2030 to estimate the
number of ethanol plants needed to achieve Renovabio's target output in 2030; the same method is applied to
estimate the number of biodiesel plants required to meet Renovabio’s targets. Between 2031-2040, the CAGRs
required to meet Renovabio’s targets onto 2030 for ethanol (4.2%) and biodiesel (8.9%) are assumed to be slashed by
half, thereby reducing the growth rate in the number of plants proportionately, assuming ratio between plants/output
remains constant. Finally, to calculate investment history and trends, the 2018-2030 investment needs estimated by
(EPE, 2018a) and (IBP, 2019) are allocated equally per plant in that period, and the cost per plant is then assumed to
apply for the actual number of operational plants registered in (ANP, 2020) between 2010-2020 and for the number
of plants needed to meet outputs between 2031-2040. Source: Adapted from: (ANP, 2020), (Biodiesel BR, 2014),
(Biomassa e Energia, 2016) (EPE, 2018a); (Exame, 2014), (Távora, 2012).

Barriers limiting investments and potential solutions

Table 6. Energy infrastructure barriers, proposed interventions and progress to date
Limited local supply chains for • Support industrial policies to Limited:
key technologies translate into focus on supply chain gaps that • Brazil’s industrial policies
higher CAPEX costs, difficulty to can produce most primary and local content rules have
meet local content rules and benefits, based on comparative not resolved major supply
tighter margins for potential modelling between chain gaps.
investors. The few technology technologies, costs and • Innovation support is of
providers pull CAPEX prices up, associated benefits. Provide relatively small scale,
squeezing potential investors’ bespoke support to such gaps, dispersed among key
margins as these consider e.g. tax exemption for key technologies, disjointed
bidding into competitive manufacturers, innovation between states, and lack
auctions. competitions for storage continuity.
solutions, subsidized pilot
projects, or generation of
demand for key components.
• Enhance cooperation among
players developing the supply
chain, e.g. PROCEL, labs, and
R&D initiatives.
Power utilities are not • Support MME/ANEEL to design Limited:
incentivized to invest in system incentives for financial • ANEEL’s annual tariff
improvements, given efficiency and innovation, e.g. readjustment procedures
concession contracts do not based on the delivery of have recently changed from
reward financial efficiency or public benefits. an assessment based on a
investments in system hypothetical basis, to an
efficiency. On the contrary, assessment on the basis of
utilities that minimize costs to each utilities’ expenditures
deliver services have their kWh to deliver its services.
sales cost reduced by ANEEL’s Although this reduces the
annual tariff readjustment downward adjustment of
procedures. tariffs for utilities with
greatest cost efficiency, the
market still perceives a
disincentive to invest.
Distance to large consuming • Support long term planning of Moderate:
centers and limited capillarity transmission network and • São Paulo developed
of transmission development of local base a long-term energy security
network poses a distribution load capacity for contingency agenda based on gas and
challenge to centralized PV and becoming less susceptible to biomass installed capacity
wind plants in transmission bottlenecks. within the state to
north/northeastern hotspots. avoid exposure to
transmission failures.
Tributary burden (particularly • Updating ICMS convention Limited:
ICMS) on key components of 101/1997 to include key • ICMS convention 101/1997
solar PV systems and inputs to components and lower exempted part of PV
manufacturers (such as tributes. components from ICMS tax,
modules, inverters, support
• Support states to assess the but most key elements are
structures, cables and not included.
benefits of adhering to ICMS
connectors) increase PV
convention 114/2017 and
production and market costs.
extent the exemptions beyond

public buildings. • ICMS convention 114/2017

defines key exemptions for
public buildings only but
allows states to adhere
voluntarily. To date, only
SP, BA and PA adhered. ES
and GO seem to be on the
verge of ratifying the
exemptions.
Lack of short and long-term • Support MME to assess the Moderate:
governmental targets for benefits of contracting • A-4 and A-6 solar PV
renewable generation. renewables, such as GVA, job auctions have gone some
generation, reducing power way into demonstrating the
losses, and as a post-Covid 19 national demand for PV,
stimulus package and on that avoiding competition with
basis develop realistic other sources.
medium/long-term national
targets. • Decree 10,387/2020
includes clean urban
• Keep up a rhythm of PV A-4 transport, sanitation, solar
and A-6 auctions. PV, wind and waste-to-
• Unlock the participation of PV energy projects with
in the free market. environmental and social
benefits as priority for
infrastructure investment
(Presidência da Repúlica,
2020).
Second generation biofuels • Support MME/ANP to re- Limited:
incur substantial upfront consider fossil-fuel industry • Innovation programmes in
capital costs and entail subsidies and deploy the three Brazil, such as FINEP
significant risks rendering pillars of innovation policy: funding, State FAPs, FNDCT
investment decisions inherently (i) Technology-push - where and the R&D investment
difficult. support programmes reduce levy mandated upon energy
the cost of R&D to drive new companies have not
Biofuels lack competitiveness ideas and reduce technology systematically provided the
against fossil alternatives costs, taking early stage three pillars of support,
beyond mandated biofuel technologies through the limiting innovation
blends, especially given existing valley of death that exists outcomes.
subsidies to the fossil industry. between early development
and demonstration.
(ii) Market-pull - where the
policy helps create or
increase market demand for
the technology.
(iii) Enabling support - where
the policy addresses the
barriers existent in the
institutional environment.
*Note: Progress to date with regard to addressing each barrier is classified qualitatively between: None identified
when no signs of progress are identified at any level; Limited when early stage policies/initiatives are identified, or
when or when these are unlikely to fully address the barrier; and Moderate when concrete steps are being taken to
address the barrier.

Sensitivity analysis
In light of the barriers discussed above and of recent challenges faced by the Brazilian economy,
it is sensible to critically reassess the baseline figures presented above. Baseline assumptions
and modelling outputs were discussed in expert interviews and compared with alternative
installed capacity and investment projections where these were available in literature,
producing an alternative (and more conservative) view of this sector’s perspectives, as described
below.
Within the power generation sub-sector, capacity projections are inherently uncertain, as noted
by EPE interviewees. This is because they depend on (i) future demand for power (linked to
macro-economic uncertainties) and (ii) how future demand is attended to among renewable;
non-renewable; intermittent and non-intermittent power sources. In fact, baseline capacity
projections for 2040 (43 GW of wind, 67 GW of solar PV, and 95 GW of gas) seem optimistic
when compared to the International Energy Agency’s projections of 48 GW of wind, 22 GW solar
PV, and 29 GW of gas for that same year (IEA, 2017); or Centro Clima’s projections of 28 GW of
wind, 16 GW solar PV, and 14 GW of gas (Centro Clima, 2015). Therefore, for the purpose of this
report, the baseline’s installed capacity growth rates were cut in half so that total investments
projected between 2020-2040 represent 0.4% of Brazil’s projected GDP and as such are
compatible with the historical energy investments per GDP ratio in Brazil. Decentralized PV,
transmission and distribution baseline projections were deemed realistic and left untouched.
For the biofuels sub-sector, the sensitivity analysis assumes Renovabio targets are reached in
2040 rather than 2030, and as such assumes EPE’s and IBP's projected investments of BRL 38.5
billion happen between 2017-2040, rather than 2017-2030 as shown in the baseline.
Table 7. Low carbon energy assumptions in sensitivity analysis
Centralized power generation
2020-2025 Investments – Aneel auctions (BRL billion) 53
2030-2040 Investments – Estimates on Investments per kW (BRL) Hydro: R$ 5,275/kW
Small hydro: R$ 5,000/kW
Wind R$ 5,000/kW29
Solar PV30: R$ 3,230/kW
Biomass: R$ 3,760/kW
Biogas: R$ 3,760/kW
All adjusted by inflation yearly
2020-2029 Additional generation capacity – PDE forecasts 41 GW
(renewables)
2030-2040 Additional generation capacity – Generation capacity Large-scale hydro 0.11%
growth rate Small hydro 1.58%,
Wind 2.5%
Solar 2.5%
Biomass 0.68%
Biogas 1.5%
Decentralized PV
2020-2029 Investments – PDE 2029 (BRL billion) 28.1
29 (EPE, 2018b) does not project wind power costs into the future but shows a downward trend from between 2007-2018 which we
assume to lead to an average of BRL 5,000/kW in 2030 - adjusted by inflation from then on.
30
(EPE, 2018b) projects solar PV systems are projected to cost USD 800/kW between 2030-40. A 3.8 USD-BRL exchange rate is
assumed in EPE’s report and herein to obtain BRL 3,230/kW.

2030-2040 Investments – Estimates on Investments per kW (BRL) R$4,000/kW

Adjusted by inflation yearly
2020-2029 Additional generation capacity – PDE forecasts 8.7 GW
2030-2040 Additional generation capacity – Generation capacity 5%
growth rate
Transmission and distribution
2030-2040 Investments – Estimates on Investments per km or per Transmission: R$ 9,280/km
MVA Distribution: R$ 12,0004/MVA
2020-2040 Transmission and distribution growth Transmission 4.3%
Distribution 4.8%
Biofuels
IBP & EPE investment estimates
allocated to number of plants
needed in the period adjusted by
inflation yearly, assuming target
is reached in 2040
2017-2030 Ethanol production (delays Renovabio’s target) 29.4 billion litres (2017)
(CAGR 2.6%)
2030-2040 Ethanol production (delays Renovabio’s target) 41 billion litres (2030)
(CAGR 2%)
2017-2030 Biodiesel production (delays Renovabio’s target) 4.3 billion litres (2017)
(CAGR 6.4%)
2030-2040 Biodiesel production (delays Renovabio’s target) 9.6 billion litres (2030)
(CAGR 3.1%)
Adapted from: (ANEEL, 2020) (EPE, 2019a) (MME, 2019) (IBP, 2019). Note: Red font indicates changes to baseline.
The result is depicted in Figure 6 and adds to BRL 897 billion in investment between 2020-2040,
which could create over 800,00031 additional jobs and a GVA of BRL 453 billion32 over the period.
31 In Brazil, there were 1,125,300 jobs in renewable energy in 2019 (IRENA, 2019) - 21,605 jobs per billion litres of biofuel produced
and 2,038 jobs per GW of renewable installed capacity. Assuming the proportion of jobs remain the same, the incremental biofuel
production and renewable generation capacity between 2020-2040 in the sensitivity scenario would lead to 529,327 additional
biofuel jobs and 264,965 additional renewable power generation jobs.
32 Assumes the following GVA multipliers per technology: Wind (34%); Solar (64%); biomass (60%); biogas (67%); small hydro (65%);
large hydro (50%) – according to (Kečeka, Mikulic, & Lovrincevic, 2019). Transmission and distribution; biofuels; and decentralized
PV are all assumed to produce 50% of their equivalent investment in GVA.

Figure 6. Low carbon energy infrastructure investment history and sensitivity analysis projection
projection
80
Distribution
BRL 897 billion Transmission
BRL billion
60 Biofuels
between 2020-2040 Decentralized PV
40 Biogas
Biomass
Solar PV
20
Wind
Small hydro
0 Large hydro
2010 2015 2020 2025 2030 2035 2040
2010-2019 144 14
2020-2029 321 32
2030-2040 577 52
Sources: Adapted from: (ANEEL, 2020) (EPE, 2019a) (MME, 2019) (IBP, 2019).
Efficient Public Lighting

Definitions and Overview
With 86% of the Brazilian population living in cities, public lighting represented 3.3% of Brazil’s
power consumption in 2018 (EPE, 2019c) and the second largest cost for municipalities. With a
set of mature, proven technologies, such as LED lighting and sensors, efficient public lighting is
a low-hanging fruit in terms of sustainable infrastructure and can deliver multiple benefits to
public budgets through increased income, decreased expenses, as well as enhancing public
safety33. All CAPEX in public area lighting, street cameras, signalling, radar and traffic monitoring
are considered in this section and represent 0.2% of the investment opportunity shown in Figure
1.

Investment in efficient public lighting in the past decade originated from three key sources: PPP
between private players and municipalities from 2014 onwards; PROCEL Reluz; and power
sector utilities’ mandated investments under ANEEL’s energy efficiency levy34. Brazil’s first public
lighting PPP was contracted in 2014, and another 21 of such contracts were settled until 2019
adding to BRL 4.3 billion in estimated CAPEX (Radar PPP, 2019). PROCEL Reluz, made its first
grant tender for LED lighting projects in 2017, providing BRL 17.5 million and a second in 2018
providing BRL 30 million (PROCEL, 2018). Utilities allocated BRL 8 million to public lighting
retrofits between 2010-2017 under ANEEL’s energy efficiency levy (ANEEL, 2018) - there is no
further account of utility investment in the sector since.
Due to the de-centralized nature of this sector, there is no national plan for public lighting
retrofits. Looking ahead, the baseline scenario therefore assumes investment within the 22
contracted PPPs happen between 2015-2038, i.e. equally split across the 20-year lifetime of each
33 Well-lit streets improve visibility and discourage crime and violence, thereby creating a safer environment, particularly to women
and vulnerable groups. This could potentially lead to improved productivity that comes with additional working hours (PPIAF, 2014).
34
ANEEL’s Energy Efficiency levy mandates power sector utilities to spend 0.5% of their net annual revenues in energy saving
projects. Utilities may choose to deploy resources into efficiency public lighting projects.

contract. The remaining BRL 4.6 billion public lighting investment opportunity mapped in
(ABDIB, 2019) is assumed to be fully contracted via further PPPs progressively between 2020-
2040 with investment occurring between 2020-2060. PROCEL Reluz is assumed to keep
providing periodic grants for efficient public lighting, with its budget rising by 1%/year as
observed in recent years. Utilities investing under ANEEL’s energy efficiency levy are assumed
to contribute modestly, with a stable BRL 1 million/year, in line with the past decade’s trend.
Table 8. Base case assumptions for efficient public lighting sector
Contracted PPPs
Estimated CAPEX (BRL) 3.4 billion
Start date Starts according to each project’s
contracted year (2014-2018)
Duration of investment per PPP Equally split throughout each project’s
20-year contract period
To be contracted PPPs
Start date Equally split between 2020-2040
Duration of investment per PPP Equally split throughout each project’s
20-year contract period
PROCEL RELUZ
2020 budget allocation to efficient public lighting (BRL) 15 million
2020-2040 budget allocation growth 1%/year
Power utilities under ANEEL energy efficiency levy
2020-2040 budget allocation growth rate 0%/year
The result is an accumulated investment projection of BRL 6.7 billion between 2020-2040 in the
baseline scenario, which would enable the retrofit of over 12 million lighting spots, creating over
15,000 temporary jobs35 and saving BRL 1.7 billion in public expenses36.
Figure 7. Efficient Public Lighting investment history and baseline projection
projection
400
300
BRL million
200
BRL 6.7 billion
100
between 2020-2040
0
2022
2040
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
Utilities under ANEEL's EE levy RELUZ PPPs contracted PPPs to be contracted
BRL million Total Per year

2010-2019 571 57.1
2020-2029 2913 291.3
2030-2040 3748 340.7
Source: Adapted from (ABDIB, 2019), (Radar PPP, 2019), (ANEEL, 2018).
35
Assumes of BRL 517 per lighting spot (ABDIB, 2019) and 1,182 temporary jobs for BRL 1 million lighting spots (IEA, 2020).
36 Assumes BRL 250,000 in savings per BRL 1 million invested (The Climate Group, 2014).


Barriers limiting investment in public lighting retrofits overlap with those holding back low
carbon energy, including limited local supply chains for key technologies and power utilities who
are not incentivized to invest in system improvements, given concession contracts do not reward
financial efficiency or investment in system efficiency. Other sector-specific barriers are listed
below.
Table 9. Efficient public lighting barriers, proposed interventions and progress to date.
Municipalities are • Provide hands-on Moderate:
technically and technical assistance and • ANEEL’s resolution 414/2010 passed the
financially build municipalities’ responsibility of public lighting
constrained to invest capacity to design infrastructure from utilities to
in efficient public appropriate PPPs to municipalities. Since then dozens of
lighting and to catalyse private municipalities filed legal injunctions to keep
design, tender and investment. these under utilities’ responsibility, alleging
operate PPP lack of financial and administrative capacity
contracts. to deal with such assets.
In tandem, 14 municipalities (medium and
large ones) signed public lighting PPP
contracts between 2015 and 2018 (Radar
PPP, 2019).
• The federal PPI programme and FEP-CAIXA
programme includes support for
municipalities to structure PPPs, but both
have limited budget, having supported <10
municipalities to date.
Utilities are not • Revision of power Limited:
incentivised to utilities’ price control • Price control policies are under discussion
invest in public policies to compensate in ANEEL but are not featured in congress
lighting as it does not utilities for delivering bills.
translate into greater public benefits rather
remuneration. than solely kWh.
Based on an increasingly positive outlook for PPPs to materialize following the example of
currently contracted projects, the sensitivity analysis assumes the country’s remaining potential
for efficient public lighting (BRL 5.5 billion) is contracted in new PPPs between 2020-2030 (rather
than 2020-2040). All other parameters remain the same.
Table 10. Efficient public lighting sensitivity analysis assumptions
Contracted PPPs
Start date Starts according to each project’s
contracted year (2014-2018)

Duration of investment per PPP Equally split throughout the 20-year

contract period
To be contracted PPPs
Start date Equally split between 2020-2030
Duration of investment per PPP Equally split throughout the 20-year
contract period
PROCEL RELUZ
2020-2040 budget allocation growth 1%/year
Power utilities under ANEEL energy efficiency levy
2020-2040 budget allocation growth rate 0%/year
Note: Red font indicates changes to baseline.
In this scenario, the accumulated investment projection rises to BRL 7.9 billion between 2020-
2040, retrofitting over 15 million lighting spots, which could create over 18,000 temporary jobs37
and save BRL 1.9 billion in public expenses38.
Figure 8. Efficient Public Lighting investment history and sensitivity analysis projection
projection
500
400
BRL 7.9 billion
BRL million
300
between 2020-2040
200
100
0
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
Utilities under ANEEL's EE levy RELUZ PPPs contracted PPPs to be contracted
BRL million Total Per year
2010-2020 574 57.4
2020-2030 3484 348.4
2030-2040 4420 401.8
Source: Adapted from (ABDIB, 2019), (Radar PPP, 2019), (ANEEL, 2018).
Sanitation
This section includes all CAPEX related to the services and infrastructure required to provide
drinking water; waste-water collection, treatment and disposal; and rainwater drainage to
urban and rural consumers. Altogether, this sector accounts for 14% of the investment
opportunity between 2020-2040 depicted in Figure 1.
Sanitation infrastructure is inherently capital-intensive to build and operate. Moreover,

investment in the sector is likely to be pushed up by the fact that four million people still lack
access to safe water and 24 million people lack access to improved sanitation (Water.org, 2019).
37
Assumes of BRL 517 per lighting spot (ABDIB, 2019) and 1,182 temporary jobs for BRL 1 million lighting spots (IEA, 2020).
38 Assumes BRL 250,000 in savings per BRL 1 million invested (The Climate Group, 2014).

Between 2005 and 2016 Brazil invested BRL 12.8 billion per year in sanitation, on average, rising
from BRL 2.6 billion in 2009 to BRL 9.9 billion in 2016 (MDR, 2020a). Sanitation services’ reach
has not grown at the same pace however, with centralized drinking water distribution reaching
81% of the population in 2009 and rising to 84% in 2018 (SNIS, 2018). Waste-water collection
services reached 64% of the population in 2009 rising to 66% in 2018 (SNIS, 2018). However,
drainage indicators showed that 41% of urban areas had flooded in 2008 decreasing to 18% of
urban areas in 2016 (MDR, 2019b).

The Ministry of Regional Development (MDR) provides historic sanitation investment figures
from 2010 to 2016, and Brazil’s National Sanitation Data System (SNIS) provides historic
sanitation investment figures from 2017 to 2018 segregated between those made by service
providers, states and municipalities.
Between 2019-2033, Brazil’s National Sanitation Plan (PLANSAB) projects the need for BRL 357
billion in investments to expand drinking water provision to 99% of the population and waste-
water services to 93% of the population, and projects to diminish the percentage of
municipalities with urban flooding in the last 5 years to 11% 39 (MDR, 2019a).
To achieve PLANSAB’s targets, it is assumed that water services reach an additional 1.1% of the
population each year, sanitation services reach an additional 2.3% per year, and drainage (% of
municipalities with urban flooding) decreases 2.7% every year from 2020 to 2033. Beyond 2033,
the water, sanitation and drainage are maintained at a stable level. To project investments the
average ‘investment per additional % of population reach’ witnessed between 2014-2019 is
multiplied by each additional percentage of the population reached between 2034 and 2040
adjusted by the inflation rate.
Table 11. Sanitation sector base case assumptions
Total investments between 2018-2033 (BRL billion) 363
Achievement of sanitation services – PLANSAB’s targets 2033
Water service level increase per year between 2020 and 2033 1.1%
Waste-water service level increase per year between 2020 and 2033 2.3%
Drainage (% of municipalities with urban flooding) decrease per year -2.7%
between 2020 and 2033
Inflation rate 3%
As a result of the above assumptions, the baseline scenario projects investment of

BRL 507 billion in sanitation infrastructure and services over the next 20 years, an average of
BRL 24.2 billion/year. Investment is projected to decrease once sanitation services reach
PLANSAB’s targets in 2033, given further expanding reach becomes increasingly challenging and
costly. This level of investment could create 142,000 jobs between 2020 and 2040 and a GVA of
BRL 569 billion over the period. Furthermore, sanitation expansion comes hand-in-hand with
improvement in health conditions and therefore a reduction in public health expenses. For
reference, approximately 40,000 cases of hospital internment were linked to lack of sanitation
in the first three months of 2020, adding to BRL 16 million in costs to public healthcare (ABES,
39
Interviewees unanimously indicate that a 100% reach of waste-water services is virtually impossible to occur in isolated areas in
the foreseeable future.

2020). Assuming the proportion is maintained, that would translate into BRL 1.3 billion in costs
over 20 years which could be avoided.
Figure 9. Sanitation service reach, investment history and baseline projection
2015 2025 2035
% households
Sewage 56.5% 78.5% 92.8 %
Water 83.5% 90.2% 99.0%
Drainage 17.7% 13.8% 11.0%
30 projection
BRL billion
20 PLANSAB's targets
achieved
10 BRL 507 billion

between 2020-2040
0
2010 2015 2020 2025 2030 2035 2040

2010-2020 163.1 16.3
2020-2030 218.3 21.8
2030-2040 289.1 26.3
Source: (SNIS, 2018), (MDR, 2019a), and Carbon Trust estimates
For the sake of comparison, the Global Infrastructure Hub (GIH) estimates investment of
USD 176 billion in sanitation infrastructure in Brazil between 2020 and 2040, if Brazil is to match
its best performing peers (Global Infrastructure Hub, 2015), equivalent to BRL 596 billion using
an exchange rate of BRL 3.39/USD40. In contrast, ABVCAP estimates BRL 924 billion need to be
invested in the water and sanitation sector between 2012-2038 to place Brazil within the World
Economic Forum’s top 20 ranking in the Global Competitive Index by 2038 (ABVCAP, 2019).

Holding back potential investment in this sector are barriers that are primarily linked to
regulatory inefficiencies. Skill gaps in federal government and municipalities are also a major
obstacle in the way of a more dynamic and attractive sanitation sector. Limited progress to
address such barriers has been seen to date, although a series of attempts to review the
sanitation regulation in the form of bills and decrees in the Brazilian Congress and Senate serve
as evidence that the topic ranks relatively high on the national political agenda.
Table 12. Sanitation barriers, proposed interventions and progress to date.
Barrier Proposed Interventions Progress to Date*
Description
Existing • Support municipalities to Moderate:
concession institute performance- • Law 4,162/2019 was approved in the Senate on
contracts have based compensation in the 24th June 2020, and reviews Brazil’s
limited capacity concession contracts and sanitation legislation to include: mandatory re-
to induce tendering of expired contracts to facilitate the
40 Average BRL/USD when GIH published its report

innovation, PPPs. formation of novel PPPs; essential contractual

reduce water- clauses between municipalities and private
losses or deliver concessions including minimum performance
better and service expansion targets; and passes the
performance and responsibility of reference norms in ANA,
service rather than on municipalities. The
expansion. responsibility over sanitation contracts and
concessions remains with municipalities or
municipality consortiums.
• Whilst performance-based compensation
already occurs in few private concession
contracts, it is not the norm in public-owned
sanitation systems. PL 4,162/2019 is expected
to partially address this barrier to the extent
that it institutes performance metrics
systematically in public systems.
• Lei do Bem tax subsidies are meant to
incentivise private companies to invest in R&D.
Whilst it could be used to foster innovation by
sanitation concessionaries, there is no evidence
of this occurring.
• The Programme for Hydrographic Basins
Cleaning (PRODES) allows concessionaires to
receive monetary performance-based
incentives, on top of regular tariffs when
operating sewage treatment facilities aimed at
reducing watershed pollution. However,
PRODES does not finance civil works or
equipment investments (ANA, 2020), limiting
concessionary’s interest in it.
• As part of the PPI Programme, Law
13,529/2017 enacted the FEP-Caixa, a support
fund backed by the Federal Government and
managed by Caixa Econômica Federal to
support municipality consortiums design and
implement sanitation, waste management,
public lighting, concessions and PPPs, including
contract enhancement. FEP-Caixa benefits from
cooperation agreements with the Inter-
American Development Bank; International
Finance Corporation; and French Development
Agency.
• Eligible municipality consortiums must include
between 2-20 municipalities and serve at least
300,000 inhabitants. Interested municipalities
apply for the support, and selected ones
receive the support. However, the fund’s
current scale (BRL 180 million in two separate
calls for projects) limits its capacity to support
many municipalities/consortiums, until it
receives further backing.

• Water losses have been decreasing and

reached 38.1% in 2016. However, there are 8
states where losses are >50%. (Trata Brasil,
2018).
Regional • Support state Limited:

regulatory and environmental agencies • Environmental agencies across the country
environmental to build regional agencies’ have witnessed budget cuts in 2020.
agencies lack capacity to speed up • PL 3,729/2004 is an attempt to simplify the
capacity and environmental licensing environmental licensing process in Brazil.
resources to for SMEs (e.g. through
supervise simplified online • Law 4,162/2019 approved in the Senate on the
compliance with procedures) and to 24th June 2020 seeks to establish ANA as
environmental inspect bigger companies responsible for editing reference standards for
legislation and using systematic tools to sanitation regulation and foresees the creation
penalize when monitor KPIs, along with of a dedicated fund to finance specialized
required. third-party inspection technical services.
options to free up
resources in public
institutions and broaden
the inspection reach.
Municipalities • Support the National Moderate:
lack technical Secretariat of Sanitation • Initiatives such as: FEP-Caixa, ProteGEEr, and
and human to build specific capacity ProEESA2 foresee some level of capacity
resources to within municipalities building to municipalities. However, until the
produce under the Interáguas end of 2016 only 30% of municipalities declare
sanitation plans, plan. to have a Municipal Sanitation Plan (CNI, 2018).
tenders and
• PL 4,162/2019 seeks to establish ANA as
ToRs.
responsible for editing reference standards for
sanitation regulation.
Cross-subsidies in • Considering ANA is Limited:
tariff may cause responsible for editing • PL 4,162/2019 seeks to establish ANA as
significant reference standards for responsible for editing reference standards for
distortions, and sanitation regulation (PL sanitation regulation.
its indiscriminate 4.162/2019), standards
use has the may be edited to
potential risk of modernize the subsidies
benefiting a that focus on low-income
certain portion of users and localities and/or
the population to enable high cost
that does not sanitation investments
require subsidies. that have positive
externalities.
Lack of projects • Support FGTS Board to Limited:
presented for streamline project • In February 2020, the Congress approved a R$
financing through selection and qualification 4 billion fund from FGTS for sanitation
Federal Funds, process. (ABRAINC, 2020). However, it is not clear to
among which the what extent these funds will unlock sanitation
• Increase the predictability
Severance investments since field experts report a lack of
of Public tenders to allow
Indemnity Fund project applications for funding.
companies to present
(FGTS) to support
reliable projects and grant • Decree 10,387/2020 includes clean urban
the “Sanitation
continuous access to transport, sanitation, solar PV, wind and

for All Federal funds. waste-to-energy projects with environmental

Programme” and social benefits as priority for infrastructure
investment (Presidência da Repúlica, 2020).
The sensitivity analysis assumes PLANSAB targets will be reached in 2030 rather than 2033 on
the basis of: (i) a clear perspective for improved legislation to attract new investments and
incentivize greater performance (PL 4,162/2019), (ii) ongoing efforts to deliver new concessions
(for example within the FEP Caixa mechanism where 24 sanitation, waste and public lighting
projects are being supported toward public-private partnership models), and (iii) the recent
boost in the capital markets for investment in sanitation (in 2019 the number of debentures in
sanitation increased 70% when compared to the 2011-2018 period (Gov.BR, 2020). In this
scenario, water services reach an additional 1.3% of the population each year, sanitation
services reach an additional 3% per year, and drainage (% of municipalities with urban flooding)
decreases by 3.3% every year from 2020 to 2030. Beyond 2030, the ratios remain stable, as
summarized in Table 13.
Table 13. Sanitation sector sensitivity analysis assumptions
Total investments between 2018-2033 (BRL billion) 420
Achievement of sanitation services – PLANSAB’s targets 2030
Water service level increase per year between 2020 and 2030 1.3%
Waste-water service level increase per year between 2020 and 2030 3.0%
Drainage (% of municipalities with flooding/year between 2020 and 2033 -3.3%
Inflation rate 3%
Provided these premises materialize, the sector’s investment perspectives rise to BRL 595 billion
over the next 20 years, 17% greater than the baseline, and well aligned with the GIH’s estimate
of USD 176 billion invested in the period (Global Infrastructure Hub, 2015) – BRL 596 billion using
an exchange rate of BRL 3.39/USD 41. This level of investments could create 167,000 jobs42 and
a total GVA increase of BRL 660 billion43.

42
Assumes 280 jobs per BRL billion invested, as suggested by (BCG, 2017).
43 Assumes a 1.11 GVA multiplier for every BRL invested in sanitation infrastructure, as suggested by (Trata Brasil, 2017).

Figure 10. Sanitation service reach, investment history and sensitivity analysis projection
2015 2025 2035
% households
Sewage 56.5% 70.8% 93.5 %
Water 83.5% 87.1% 99.0%
Drainage 17.7% 13.1% 11.0%

projection
40
30
BRL billion
PLANSAB's targets
20 achieved
10 BRL 595 billion

between 2020-2040
0
2010 2015 2020 2025 2030 2035 2040

2010-2020 163.1 16.3
2020-2030 260.4 26.0
2030-2040 334.4 30.4
Source: (SNIS, 2018), and Carbon Trust estimates
Solid waste
This section considers all CAPEX related to solid waste destination and treatment, including
sorting and the actual construction of recycling units, controlled or sanitary landfills, and
composting sites. This sector accounts for 2% of Brazil’s sustainable infrastructure investment
opportunity depicted in Figure 1.

Investments in solid waste destination and treatment units remained below BRL 0.5 billion
between 2011-2018. Similar to the sanitation sector, the pace of investment growth was not
followed by the service reach, with 72% of the population benefitting from solid waste collection
services in 2009 and 76% in 2018 – as shown in Figure 11. The reduction in service reach
witnessed since 2011 is due to a relative increase in the population in non-served areas.
Figure 11. Solid waste collection service level: % of population reached
82% 83%
81% 80% 81% 80%
75% 76% 76%
72%
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Source: (SNIS, 2018)

Looking forward, PLANSAB estimates the need for BRL 28.7 billion between 2019-2033 to ensure
an environmentally adequate destination for all collected solid waste (MDR, 2019a) – rising from
BRL 1.3 billion in 2019 to BRL 3 billion in 2033 – CAGR of 6%. Key factors underlying PLANSAB’s
investment projections are: (i) total waste generated – growing in tandem to IBGE’s
demographic projection; (ii) solid waste collection service reach, estimated to reach 100% of
urban households and 70% of rural households by 203344; and (iii) the phase out of waste
dumpsites by 2033 – as foreseen by the national solid waste policy. Beyond 2033, this CAGR is
reduced to 5% in the baseline scenario assuming there are still limited incentives for advanced
technologies, such as recycling, and hence a slower phase-out of dumpsites.
Table 14. Base case assumptions for the solid waste sector
PLANSAB’s investments target (BRL 28.7 billion) achieved in 2033
CAGR of solid waste destination and treatment 2019-2033 6%
Inflation rate 3%
For the sake of GVA calculations, the phase out of waste dumpsites is assumed to occur as
illustrated in Figure 12.
Figure 12. Solid waste collection and destination projected in the baseline scenario
100
million tonnes of solid waste
Composting
80
60 Recycling
40
Sanitary Landfill
20
0 Dumpsite
2020 2025 2030 2035 2040
As a result, BRL 53 billion are projected to be invested in the solid waste sector in the baseline
scenario over the next 20 years, as shown in Figure 13. This level of investment could create
over 15,000 jobs45 in the solid waste sector between 2020 and 2040 and a total GVA of BRL 41
billion46.
44 Interviewees unanimously indicate that a 100% reach is virtually impossible in remote regions of Brazil in the foreseeable future.
45
46 Assumes the following GVA per tonne of waste: Dumpsites (BRL 0); sanitary landfill (BRL 15); recycling (BRL 90); composting (BRL 50).

Figure 13. Solid waste destination and treatment investment history and baseline projection
6
PLANSAB evaluation report PLANSAB 2019 Reduced CAGR

BRL billion
2 BRL 53 billion
between 2020-2040
0
2010
2013
2011
2012
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2010-2019 3.3 0.33
2020-2029 16 1.6
2030-2040 37 3.3
Source: (MDR, 2019a); (MDR, 2020b) and Carbon Trust estimates.

Table 15. Solid waste sector barriers, proposed interventions and progress to date.
Barrier Proposed Interventions Progress to Date*
Description
Distance from • Support municipalities Limited:
landfill, lack of to develop waste
• Only 55% of Municipalities in Brazil developed a
incentives for management plans
Municipal Solid Waste Management plan (PIGRS)
adequate waste that comply with the
by the end of 2018 (CNM, 2019).
sorting and PNRS and incentivise
destination sorting, e.g. via • MMA launched the Zero Landfill Programme48
following the Building Tax Breaks to (Programa Lixão Zero) in 2019 with the aim of
waste disposal residential and office providing Municipalities with diagnostic as well as
hierarchy47, buildings adequately action and monitoring plans in order to comply
reduces business sorting waste. with the PNRS’ target to achieve Zero Waste-to-
opportunities. Landfill, by 2021. The Federal Government initially
• Increase awareness
allocated BRL 64 million in 2020 to support 57
raising activities in
small Municipalities, across 10 States, in
Municipalities
developing their PIGRS (MMA, 2020).
adopting the Green
Building Tax. • Interministerial Ordinance 274/2019 authorizes
the use of Waste-to-Energy (WtE) technology as a
• Extend the use of the
proper mean to dispose municipal wastes.
Green Certificates
However, investors are unlikely to come whilst
mechanism, currently
there are no adequate incentives for sorting and
used in São Paulo and
destination, as a WtE plant requires a regular
Mato Grosso do Sul
quantity and quality (calorific value) of solid waste.
state to incentivise
Reverse Logistics.
• Support the formation
of intermunicipal
consortium solutions
47 The waste hierarchy provides a framework for waste management options that minimise costs, social and environmental impacts.
Preventing, or reducing waste generation are preferred, followed by reuse and recycling technologies that can extract value from
waste. Non-reusable and non-recyclable wastes are suitable for energy recovery technologies at the next level down. Non-
recoverable and inert materials are finally suitable for disposal in sanitary landfills or incineration. For reference, see European
Commission’s Directive 2008/98.
48 https://sogi8.sogi.com.br/Arquivo/Modulo113.MRID109/Registro1346846/Programa.pdf

where possible, joining • Constitutional Amendment PEC 13/2019 seeks to

municipalities’ solid introduce a Green Building Tax (IPTU Verde) at
waste investment national level and is under discussion in the
opportunities and Senate, although it does not include in its original
balance sheets. text waste sorting as a sustainable practice (Jus
• Liaise with financial Brasil, 2019). To date, 65 Municipalities across the
institutions to country adopted municipal-level Building Tax
innovate in credit Breaks (IPTU verde) (CBN, 2019), although even
solutions for solid among these municipalities awareness seems to be
waste management. low.
• São Paulo’s Environmental Agency (CETESB)
approved a State regulation (DD 76/2018) in which
companies’ Environmental Licenses are only
approved upon presentation of the company’s
Waste Management Plan in which Logistic Reverse
must be included, depending on their field of
activity.
Small • Support MMA and Moderate:
municipalities State Governments to
• As part of the PPI Programme, Law 13,529/2017
(90% of those in create federal
enacted the FEP-Caixa, a support fund backed by
the country): guidelines to support
the Federal Government and managed by Caixa
the design and
• Lack capacity to Econômica Federal to support municipality
development of small
design solid consortiums design and implement sanitation,
municipalities’ PIGRS
waste waste management, public lighting, concessions
and increase the
management and PPPs, including contract enhancement. FEP-
requirements of
plans; Caixa benefits from cooperation agreements with
performance-based
• Are unable to the Inter-American Development Bank;
concession contracts,
attract investors International Finance Corporation; and French
rather than fixed price
due to limited Development Agency.
solutions, mostly used
size of • Eligible municipality consortiums must include
to date.
opportunities; between 2-20 municipalities and serve at least
• Are unable to • Introduce adequate
300,000 inhabitants. Interested municipalities
access federal incentives that
apply and compete to receive the support.
funding solid promote the creation
However, the fund’s current scale (BRL 180 million
waste of waste management
in two separate calls for projects) limits its capacity
infrastructure intermunicipal
to support many municipalities/ consortiums.
investments as consortium through
they do not federal dedicated • In 2017, 730 Municipalities declared to be part of
meet eligibility funds or subsidized an intermunicipal consortium providing at least
criteria such as credit lines. one service related to Municipal Solid Waste
Management, as permitted by Law 11,107/201549
co-funding • Support States’
capacity and (SINIR, 2020).
governments to
have high provide the needed However, few large Municipalities in Brazil
default rates. capacity to draw adopted a performance-based concession
consortium. contracts, based on the collection efficiency, rather
than on a fixed price contract.
• At the end of 2019, the Ministry of Justice and
Public security launched a BRL 30 million fund
(Diffuse Rights Defense Fund) to support the
development of small Municipalities’ PIGRS (MJSP,
2019).
49 http://www.planalto.gov.br/ccivil_03/_Ato2004-2006/2005/Lei/L11107.htm

• BNDES Climate Fund provides subsidized credit

lines to Municipalities for dedicated waste
management projects, although the extent to
which small Municipalities with high default rates
can accede is unknown.
Difficulties to • Support federal and Moderate:
perform municipal • Law nº 12,305/2010 institutes the National Solid
reverse logistics governments to Waste Policy (PNRS) and determines
due to limited consider incentives to manufacturers, importers, distributors and traders
consumer and enhance waste are responsible for the reverse logistics process of
corporate sorting, such as: specific product categories including: Pesticides,
awareness, lack corporates being batteries, tires, lubricating oils, fluorescent lamps,
of sorting mandated to subsidize and medicines. Nonetheless The heterogeneity of
capacity, road waste sorting and these products increases the system’s complexity
conditions, and recycling cooperatives; and players are still seldom held accountable for
prohibitive costs. increasing consumer not attending to PNRS’ requirement.
awareness of benefits;
and performance- Industrialized states, e.g. São Paulo, Rio de Janeiro,
based incentives for Amazonas, Minas Gerais and Rio Grande do Sul,
sorting. introduced local legislation to closely monitor
reverse logistic indexes for such products.
• Increase public
authorities’ inspection • The “Isonomy Decree” 9,177/2017 extends the
capacity for reverse reverse logistic obligation to all accountable
logistic regulation. institutions mentioned in the PNRS, in addition to
Sectorial Agreement signatories (BNDES, 2019).
Lack of direct • Support municipalities Limited:
taxation for to calculate adequate • The mandatory provision of PNRS that obliges
waste solid waste tariffs and municipalities to close landfills by 2014 has been
management charge that as a tariff, postponed to 2021. To date, 42% of municipalities
activities forces giving it visibility, even still rely on illegal and/or environmentally
municipalities to if bound to other inadequate landfills for waste disposal.
operate such taxes, such as water
sector in deficit. collection. PNRS allows municipalities to introduce a waste
tariff correlated to the waste management
activities. However, mayors across the country
have been reluctant to add such a tariff, charging a
waste fee within the Building Tax (IPTU) instead.
• Paraná State’s water, wastewater and urban
cleaning concessionaire (SANEPAR) bound
together water and waste tariffs in order to
decrease invoice and collection costs. However,
there is an open debate about whether this is
constitutional or not (Jus Brasil, 2010).
Considering the recent Federal Government’s emphasis on solid waste projects in the PPI and
announcements made by the Minister of Environment50, the sensitivity analysis assumes the
50 https://exame.com/brasil/intencao-e-encerrar-lixoes-diz-salles-sobre-novo-programa-de-reciclagem/

investment projection laid out in the PLANSAB is materialized 3 years earlier – in 2030. It also
assumes the maintenance of PLANSAB’S projected CAGR for 2019-2033 onto 2040.
Table 16. Solid waste sector sensitivity analysis assumptions
PLANSAB’s investments target (BRL 28.7 billion) achieved in 2030
Inflation rate 3%
For the sake of GVA calculations, the phase out of waste dumpsites is assumed to occur as
illustrated in Figure 14.
Figure 14. Solid waste collection and destination in the sensitivity analysis scenario
100
Million tonnes of solid waste
Composting
80
60 Recycling
40
Sanitary Landfill
20
- Dumpsite
2020 2025 2030 2035 2040
In this scenario, BRL 80.5 billion would need to be invested over the next 20 years, potentially
creating over 23,000 jobs51 and a GVA of BRL 45 billion52 over the period.
Figure 15. Solid waste destination and treatment infrastructure investment history and sensitivity
analysis projection
8
PLANSAB evaluation report PLANSAB 2019 Maintains 2019-33 CAGR
6
BRL billion
4 BRL 81 billion
between 2020-2040
2
0
2014
2032
2010
2011
2012
2013
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2033
2034
2035
2036
2037
2038
2039
2040

2010-2019 3.3 0.33
2020-2029 23 2.3
2030-2040 57 5.1
Source: (MDR, 2019a), (MDR, 2020b) and Carbon Trust estimates.
51
52 Assumes the following GVA per tonne of waste: Dumpsites (BRL 0); sanitary landfill (BRL 15); recycling (BRL 90); composting (BRL 50).

Clean urban transport

This section considers investments in cycling lanes, electric and hydrogen bus fleets, and all
forms of subway and urban train infrastructure as clean urban transport. Pedestrian
infrastructure is not featured in this section as it is not a federal government responsibility in
Brazil. Infrastructure for individual motorized transport and diesel-fueled buses are not deemed
to be sustainable and also not included. Altogether, this sector accounts for 14% of Brazil’s
sustainable infrastructure investment opportunity depicted in Figure 1.

Over the last ten years, it is estimated that BRL 124 billion was spent on clean urban transport
infrastructure in Brazil. Historical data for urban transport is sparse, so different sources were
used to calculate past investment.
Given the lack of data on investment and the extension of cycling lanes between 2010-2020,
fragments of information published in newspapers between 2014, 2017 and 2018 were pieced
together (G1, 2018), (Mobilize, 2020) to estimate investments in the past decade. By 2014, there
were 1,414 km of cycling lanes in Brazil, increasing to 3,291 km in 2018. During this period it is
estimated that BRL 519 million were invested in such lanes, or BRL 170 million per year,
assuming recent average construction costs from the city of São Paulo (Folha de São Paulo,
2019a). A linear progression was assumed to stretch this curve back to 2010 and onto 2020.
To estimate investments in electric and hydrogen bus fleets (low carbon buses) between 2010-
2020, the number of electric and hydrogen buses circulating in Brazil53 (adding to 39) was
multiplied by the average cost per vehicle in recent purchases – BRL 1.4 million per bus (Diario
do Transporte, 2018) – and allocated to each year according to each city’s purchases. No such
investments were made prior to 2015, and BRL 50.4 million spent between 2015-2019.
For subway, trams and urban trains, the Brazilian Public Transport Association’s Urban Mobility
Information System (SIMOB/ANTP) indicates the extension of such systems added to 1,028 km
in 2014, increasing to 1,170 km in 2019. Assuming a linear growth pattern, an extension of 950
km is assumed for 2010. Assuming average construction cost of BRL 516 million per km based
on recent average costs for metro lines in São Paulo, Rio and Salvador54, it is estimated that
BRL 123 billion was invested in these modalities between 2010-2019.
Looking ahead, the projection of investment needs between 2020-2040 also require a number
of assumptions for each transport modality, given the lack of a unified government plan or
private-sector announcements.
For cycling infrastructure, the baseline projection assumes an average 13%/year growth,
deemed as realistic by interviewees, although less than the 2010-2020 CAGR (24%/year) which
was boosted by the Olympics and World-Cup events. The baseline growth assumes the Bicicleta
Brasil Programme will effectively manage to drive cycling lane investments in small
53São Paulo 3 hydrogen buses (FINEP, 2017) and 15 electric buses (Auto Indústria, 2019); Campinas 13 electric buses (Prefeitura de
Campinas, 2019); Bauru 2 electric buses (Prefeitura de Bauru, 2018); Volta Redonda 3 electric buses (Diário do Transporte, 2019);
Brasilia 2 electric buses (CNT, 2019); Salvador 1 electric bus (Correio 24h, 2019).
54 ViaQuatro (FIESP, 2019); Metrô Rio (ITDP, 2018); and Metrô Salvador (Secom/BA, 2013)

municipalities (where bus and train modalities are often uneconomic) and maintain a steady
pace of investments within large municipalities. As such cycling lanes are projected to increase
from 3,291km in 2018 to 48,423 km in 2040. The average cost of cycling lanes is assumed to be
BRL 325,000 per km throughout the period, based on (Folha de São Paulo, 2019a).
The baseline projection for electric and hydrogen buses assumes these will make up 5% of the
urban bus fleet55 by 2040 – as deemed realistic by interviewees – and assumes a continuation
of the average growth over the total bus fleet witnessed over the past three years (2%/year)
during the next 20 years. Meeting the 5% fleet target for low-carbon busses will require 13% of
the annual bus purchases to be either electric or hydrogen, adding to a total of 9,228 such buses
by 2040. The average cost per vehicle is assumed to remain stable at BRL 1.4 million throughout
the period, based on locally built models (Diario do Transporte, 2018).
Given the lack of public or private investment plans, subway, tram and urban train infrastructure
is projected to increase by 2.6%/year between 2020-2040, based on the CAGR witnessed
between 2014 and 2019. As such, 811 km are expected to be built in the period, reaching 2,011
km in 2040. Average construction costs are assumed to remain at BRL 516 million per km
including stations and new vehicles.
Table 17. Base case assumptions for clean urban transport sector
Cycling
Bikeway cost (BRL billion/KM) 0.0003
Bikeway extension growth rate 13%
Electric or hydrogen bus
Vehicle unit cost (BRL billion) 0.001
Bus fleet growth rate 2%
Bus fleet to electric conversion rate 13%
Subway and urban train
Subway and urban train system cost (BRL billion/KM) 0.516
Subway and urban train extension growth rate 2.6%
Inflation rate 3%
As a result of the above assumptions, the baseline scenario estimates BRL 475 billion is required
in the clean urban transport sector over the next 20 years, as illustrated in Figure 16. Subway
and urban train network expansions are responsible for 94% of these investments, requiring BRL
446.7 billion over the next couple decades to continue to grow at 2.6%/year on average. Cycling
infrastructure is projected to require BRL 15 billion, while low carbon buses are projected to
require BRL 13.8 billion. This level of investment could create 83,000 jobs56 between 2020 and
2040 and a total GVA of BRL 599 billion, assuming different multipliers for cycling vs. other clean
transport57.
55 Urban bus fleet in 2014:107,000 vehicles; 2017: 108,791 vehicles (DENATRAN, 2020)
56 Assumes 180 jobs per BRL billion invested, as suggested by (BCG, 2017).
57 Subway and clean bus transit investments are multiplied by 1.3; based on (APTA, 2019). Cycling investments are not considered
to produce GVA, noting this deliberately ignores the multiple benefits of public health savings from a physically fitter population and
improved air quality, as well as benefits from reduced congestion.

Figure 16. Clean urban transport investment history and baseline projection
projection
40
30
BRL billion
20
10
BRL 475 billion
between 2020-2040
0
2010 2015 2020 2025 2030 2035 2040
Subway and urban train Low carbon bus Cycling
2010-2020 124.2 12.4
2020-2030 191.3 19.1
2030-2040 284.2 25.8
Sources: Cycling: (Folha de São Paulo, 2019a) (Mobilize, 2020); Low carbon buses: (CNT, 2020a); (DENATRAN, 2020)
(Diario do Transporte, 2018); Subway and urban trains: (FIESP, 2019) (ITDP, 2018) (Secom/BA, 2013) (SIMOB/ANTP,
2020) and Carbon Trust estimates for all sectors beyond 2020.

Table 18. Clean urban transport barriers, proposed interventions and progress to date.
Municipalities lack • Support Regional Limited:
technical Development Ministry • Law 12.587/2012 establishes the guidelines
and human (Secretariat of mobility of the National Urban Mobility Plan, but
and urban regional there is no form of enforcement for
resources to development) to build municipalities to design and implement
produce urban specific capacity their respective plans.
mobility plans, and within municipalities.
• The deadline for submitting such plans was
PPPs which are
postponed in 2019 with different
mandatory to timeframes according to the size of
receive federal municipalities, but municipalities are
funding (since April obliged to meet the deadline otherwise
2019) they will be impeded from accessing
federal resources for urban mobility. Cities
Difficulty in • Support government with >250k inhabitants must submit until
readjusting and levels to produce 2022; whilst cities with >20k<250k
comprehensive inhabitants must submit until 2023.
integrating fares of
intermodal fare • There are 3 sources of funding available for
intermodal strategies. municipalities to invest in clean urban
transport (subway,
• Orient municipalities in transport (all backed by FGTS):
bus and train), as the elaboration of o The Programme for Rail Urban Transport
they are regulated concession contracts with Fleet Renewal (Retrem) was launched by
by different levels private companies MDR in June 2019, offering low interest
of government (operation busses, credit options for public or private
agencies (federal, subway and trams) E.g. players to renew urban rail fleets, with a
avoid earnings based on total budget of BRL 1 billion (MDR,
state and
the number of passengers 2019b).
municipality). and prefer alternatives
such as quality of o Avançar Cidades was launched by MDR in

transport. 2017, with an initial budget of BRL 3.7

billion from FGTS – Pró Transporte
programme in order to finance urban
collective transport and non-motorized
vehicles infrastructure (Secretária do
Governo, 2017).
o Programa Refrota, launched in 2017 by
MDR as part of the Pró-Transporte
Programme, offers up to BRL 3 billion of
credit lines to Municipalities to replace
up to 10% of urban buses with new
“green” vehicles. Even though it is not
specifically mentioned, the programme
includes non-conventional hybrid or
electric buses (Eletrabus, 2017).
• Law project 4881/2012 seeks to institute a
national metropolitan transport authority
as well as a new fund for municipalities to
access. Critics claim the authority and the
fund would have limited benefits to small
municipalities, hence the project is yet to
be approved in congress.
Small municipalities • Joining small Limited:
(90% of those in the municipalities together in • The FEP funding council in MDR is debating
country) are largely consortiums to increase the possibility of allowing municipality
unable to access their purchase power, consortiums to gather and propose joint
federal funding for reduce service provision PPPs.
urban mobility as costs, and allow these to • In contrast, the merging of secretariats of
they do not meet access federal funding. Urban Mobility and Regional and Urban
eligibility criteria
Development, has led to less attention to
such as co-funding
urban passenger transport in MDR.
capacity.
• Law 13,724/2018 instituted the Programa
Law 13529/2017 Bicicleta Brasil but it has not yet been
determines that regulated by a decree, meaning no funding
municipalities can is yet available. The criteria for municipality
only open a PPP eligibility to access funding are yet being
tenders above BRL defined.
10 million, ruling out • Decree 10,387/2020 includes clean urban
small municipalities transport, sanitation, solar PV, wind and
(90% of them) waste-to-energy projects with
environmental and social benefits as
priority for infrastructure investment
(Presidência da Repúlica, 2020).
Based on interviews with subject matter experts, the sensitivity analysis scenario assumes
barriers laid out above can be largely resolved in this decade, primarily in terms of enabling

smaller municipalities to access funds and attract investment in consortia with support of the
government-led PPI. Projections for subways and urban trains are left untouched in this
scenario, whilst the projected growth rate for cycling lanes is increased to 15%, and the
conversion rate of bus fleet to low carbon buses is increased to 20% respectively between 2020
and 2040 – reasonable ranges according to interviewees.
Table 19. Clean urban transport sensitivity analysis assumptions
Cycling
Bikeway cost (BRL billion/KM) 0.0003
Bikeway extension growth rate 15%
Electric bus
Electric bus cost (BRL billion) 0.001
Bus fleet growth rate 2%
Bus fleet to electric conversion rate 20%
Subway and urban train
Subway and urban train system cost (BRL billion/KM) 0.516
Subway and urban train extension growth rate 2.6%
Inflation rate 3%
Based on these assumptions, there would be an investment opportunity of BRL 490 billion within
the clean urban transport infrastructure sector between 2020-2040, which could lead to 88,000
jobs58 and a total GVA of BRL 607 billion in the period, assuming different multipliers for cycling
vs. other clean transport59.
Figure 17. Clean urban transport investment history and sensitivity analysis projection
projection
40
30
BRL billion
20
10
BRL 490 billion
between 2020-2040
0
2010 2015 2020 2025 2030 2035 2040
Subway and urban train Low carbon bus Cycling
2010-2020 124.2 12.4
2020-2030 195.1 19.5
2030-2040 294.9 26.8
Sources: Cycling: (Folha de São Paulo, 2019a) (Mobilize, 2020); Low carbon bus: (DENATRAN, 2020) (CNT, 2020a);
Subway and urban trains: (FIESP, 2019) (ITDP, 2018) (Secom/BA, 2013) (SIMOB/ANTP, 2020). (Global Infrastructure
Hub, 2018); and Carbon Trust estimates.
58Assumes 180 jobs per BRL billion invested, as suggested by (BCG, 2017).
59 Subway and clean bus transit investments are multiplied by 1.3; based on (APTA, 2019). Cycling investments are not considered
to produce GVA, noting this ignores the multiple benefits of public health savings from a physically fitter population and improved
air quality, as well as benefits from reduced congestion.

Telecommunications
According to Brazil’s National Telecommunications Agency (ANATEL) the main
telecommunications services in Brazil are wired or wireless phone services, internet and
television. This report also considers the installation and maintenance of all pieces of equipment
required for any of the three purposes as telecom infrastructure. This sector accounts for the
largest share (27%) of Brazil’s sustainable infrastructure investment opportunity depicted in
Figure 1.
In 2018 ANATEL published its Structural Plan for Networks Telecommunications (PERT)60 to
support its overall strategic plan on infrastructure needs for 2015-2024 (PET)61. Considering the
rapid expansion of internet-based services for the transmission of voice, data and video, PERT
assesses broadband infrastructure needs in each region and highlights that virtually all future
investment to provide phone, internet and television services will be made via optical fiber
technologies. Taking this into account, this report estimates infrastructure investment needs in
the broadband network using the fiber-to-the-home (FTTH) penetration rate62 multiplied by the
cost per connection as a proxy for investment in all technologies. In 2015, the FTTH penetration
showed only 2% of the Brazilian households had optical fiber connections, rising rapidly to 19%
by 2019.

Over the last ten years, BRL 281 billion was spent on telecommunication infrastructure in Brazil
according to the Brazilian Private Equity and Venture Capital Association (ABVCAP)’s
‘Infrastructure Investment in Brazil’ report, and the Teleco market intelligence portal63. Year-on-
year figures have kept relatively stable over the past decade, moving from BRL 31.4 billion spent
in 2013 to BRL 28 billion in 2017 (ABVCAP, 2019). Approximately 90% of such investment is
concentrated among five corporations,64 although interviewees point to the increasing
importance of small and medium-size companies focused on optical fiber broadband network
expansion in small municipalities. Considering this, the investment projection described below
can be divided into the CAPEX of the five largest companies and the CAPEX of the small (but
growing) companies focused on optical fiber technologies.
To project 2020-2040 investment, four key assumptions were made: (i) FTTH penetration rate
reaches 95% in 2040, maintaining the fast pace witnessed over the past few years until 2035
(4.5% growth per year on average) and then slowing down due to the limitations of reaching
remote areas65 from to 2% in 2036 to 0.5% in 2040 following the population growth trend
projected by Brazilian Institute of Geography and Statistics (IBGE); (ii) when FTTH penetration
rate reaches 90% there is no further expansion expected, and as such the five corporations’
CAPEX decreases to cover the depreciation of their assets. Depreciation expenses were based
60 (ANATEL, 2019)
61 ANATEL’s first 10-year strategic plan (PET) published in 2015 covers the period between 2015 and 2024 and discusses the
expansion of access and use of such services (ANATEL, 2015), although it does not mention investment needs.
62 The FTTH penetration rate is obtained by dividing the number of FTTH subscribers by the total number of subscribers to all
connection technologies – both datasets available in ANATEL.

63 https://www.teleco.com.br
64
Algar, Claro, Oi, Tim, and Vivo.
65 Interviewees unanimously indicate that a 100% reach is virtually impossible.

on historical data of the percentage of depreciation by total assets of the five companies; (iii)
the percentage depreciation by total assets remains equal to that of 2019 and the total assets
of the five companies increase by the inflation rate; and (iv) the cost of each FTTH was assumed
to remain stable at the 2015-2019 average, adjusted by the inflation rate and assumed to apply
to each new fiber optic connection.
Table 20. Base case assumptions for telecom sector
Capex growth rate of the five Brazilian listed companies 2020-2035 3% (inflation rate)
Capex growth rate of the five Brazilian listed companies 2036-2040 7% (depreciation per total
assets)
Achievement of optical fiber service to 95% of households 2040
Penetration rate growth 2020-2035 4.5%
Penetration rate growth 2036-2040 Curve from 2% to 0.5%
Population yearly growth rate 6% between 2020 and 2030
3% between 2030 and 2040
Inflation rate 3%
As such, BRL 939 billion is expected to be invested in telecom infrastructure in Brazil over the
next 20 years, or BRL 44.7 billion per year on average. This projected investment could create
469,000 jobs66 and a GVA of BRL 2.2 trillion67 over the period.
The investment projection is somewhat similar to the GIH’s – which estimates USD 284 billion
(~BRL 961 billion68) in telecom infrastructure in Brazil between 2016 and 2040 (Global
Infrastructure Hub, 2015).
Figure 18. Telecom infrastructure investment history and baseline projection
60
projection
50
BRLL billion
40
30
20
BRL 939 billion
between 2020-2040
10
0
2010 2015 2020 2025 2030 2035 2040

2010-2020 280.7 28.1
2020-2030 420.7 42.1
2030-2040 518.1 47.1
Sources: Adapted from (ANATEL, 2018, 2020), (ABVCAP, 2019), (IBGE, 2020a), and Carbon Trust estimates.
66 Assumes 500 jobs per BRL billion invested, as suggested by (BCG, 2017).
67 Telecom sector GVAs between 2010-2017 were obtained in (IBGE, 2020b). These were divided by investments documented in
these years and averaged to obtain a 2.347 multiplier.
68 Considering 3.39 average BRL/USD exchange rate when GIH published its report


Table 21. Telecom barriers, proposed interventions and progress to date.
Tax burden limits the ability • Support policy makers to Limited:
of operators to invest (e.g. assess benefits of changing • Special Taxation Regime of the
mandatory contributions to to authorization model. National Broadband Program
FUST and FISTEL)
• Support co-investment (REPNBL) aims to stimulate
partnership between investments in the sector.
Brazilian and international Included in Law No. 12.715/
companies. • 2012 and regulated by Decree
No. 7.921/2013. However,
operators still require new
incentives.
Last mile costs for broadband • Support ANATEL and MCTIC Limited:
universalization holds back to assess and design • ANATEL published the Structural
investments in smarter grids, regulatory incentives. Plan for Networks
water monitoring, air quality Telecommunications (PERT) in
trackers, connected transport, 2018. In 2019, it amended the
etc. Fust law (9.998/2017) to make it
possible to apply the fund’s
resources in other services
besides fixed telephony
concessions.
Concession contracts signed • Support the updates in None identified
in the past two decades oblige current regulation to avoid
companies to invest in fixed similar lock-ins in the
phone lines and other future.
obsolete technologies that
generate no benefits to
society or investment returns
to companies. The inflexibility
of such contracts essentially
consumes resources that
would otherwise be invested
elsewhere.
Given that the major barrier for telecom infrastructure is the high tax burden, the sensitivity
analysis considered 10% tax exemption in 2020 onwards. As a result, the companies have more
than 10% of their revenues to invest in telecommunications infrastructure in the short term.
With that, 95% of the Brazilian households will have access to optical fiber service in 2035 and
the penetration rate growth will be higher.

Table 22. Telecom sensitivity analysis assumptions

Capex of the five Brazilian listed companies 2020-2035 growth rate 3% (inflation rate) + 10% of
revenues
Capex of the five Brazilian listed companies 2036-2040 growth rate 7% of the total assets
Achievement of optical fiber service to 95% of households 2035
Penetration rate growth 2020-2035 5%
Penetration rate growth 2036-2040 Curve from 4.2% to 0.1%
Population yearly growth rate 6% between 2020 and 2030
3% between 2030 and 2040
Inflation rate 3%
In this scenario, BRL 986 billion would be invested in telecommunications infrastructure, or

BRL 47 billion on average, potentially leading to 493,000 jobs69 and a GVA of BRL 2.3 trillion70
over the period.
Figure 19. Telecom infrastructure investment history and sensitivity analysis projection
60 projection
50
BRL billion
40
30
20
BRL 986 billion
between 2020-2040
10
0
2010 2015 2020 2025 2030 2035 2040

2010-2020 280.7 28.1
2020-2030 471.4 47.1
2030-2040 514.6 46.8
Sources: (ANATEL, 2018, 2020), (ABVCAP, 2019), (IBGE, 2020a), and Carbon Trust estimates.
Ports and waterways

The Brazilian Agency for Waterway Transportation (ANTAQ), divides the port system into state-
owned ports managed by private players under concessions, and corporate-owned private
terminals operating under government authorization. CAPEX investments in both categories are
considered as port infrastructure for the sake of this report, as well as investments in in-country
waterways, such as river-based ports, water-locks and dredging. Altogether, this sector accounts
for 11% of Brazil’s sustainable infrastructure investment opportunity depicted in Figure 1.
While ports are relatively mature sector in Brazil as key export infrastructure, less than one third
of Brazil’s 63,000 km of sailable rivers are utilized as waterways (CNT, 2019). Brazilian waterways
are concentrated in the deepest sections of large rivers, primarily in the Amazon, and Tocantins
69Assumes 500 jobs per BRL billion invested, as suggested by (BCG, 2017).
70
Telecom sector GVAs between 2010-2017 were obtained in (IBGE, 2020b). These were divided by investments documented in
these years and averaged to obtain a 2.347 multiplier.

basins, which together account for >99% of the country’s waterway-based transport despite
meagre investments in water locks, ports, signalling, channels or dredging – essential elements
to ensure efficient and safe waterways. Figure 20 compares basic port and waterway indicators
between Brazil, China and the USA.
Figure 20. Water infrastructure indexes
Notes: Connectivity index is set at 10 for the maximum value of country connectivity, which was represented by China
in 2006 (UNCTAD, 2019). Source: Adapted from (Oliver Wyman, 2018), (UNCTAD, 2019), (World Bank, 2020).

Investment in port infrastructure between 2010-2020 is estimated at BRL 126 billion on the basis
of cargo movement history, provided in the National Port Logistics Plan (PNLP); the number of
operational ports, provided by the National Transport Confederation’s Transport Yearbook
(CNT, 2020a); and average investment per ton of cargo. In-land waterway investment added to
BRL 3.3 billion over the last ten years (CNT, 2019).
Looking forward, PNLP’s projections for cargo movement in 2025, 2035, 2045 were used to
estimate the incremental port capacity required to handle additional cargo onto 2040 on the
basis of the utilization capacity of Brazilian ports, which stood at 70% in 2018 (PNLP, 2020) and
is assumed to increase by 1%/year, reaching 85% in 2040.
Inland waterway investments are not regularly assessed or projected in any governmental plan.
Nonetheless, Brazil’s Waterway Transport Agency (ANTAQ) Statistical Yearbook shows
transported volumes consistently grew from 22.9 million tons in 2010 to 40.2 million tons in
2019 (ANTAQ, 2020). Looking ahead, the Ministry of Infrastructure’s Strategic Waterway Plan
(PHE)71, dating back to 2013, projects in-land cargo movement onto 2031, allowing for an
extrapolation onto 2040 on the basis of the average CAGR witnessed until 2031. Investment
needs per ton of cargo movement are then estimated based on the recent average, adjusted by
the inflation rate.
Table 23. Base case assumptions for ports sector
Port
Cargo movement PNPL forecast 2018-2025 growth rate 3.3%
Infrastructure investment per port (BRL million) 82
Capacity utilization growth rate 1%
Waterway
71 (Ministério da Infraestrutura, 2013)

Waterway – Cargo movement CAGR 6.25%

Investment per cargo movement growth rate Inflation
Inflation rate 3%
The baseline therefore projects the need for BRL 389 billion to be invested in port and waterway
infrastructure in Brazil over the next 20 years, or BRL 18.6 billion/year on average, which could
create over 397,000 jobs72 and generate a GVA of BRL 210 billion73.
The projection is a similar order of magnitude as the BRL 339 billion projected by the Brazilian
Association of Private Equity and Venture Capital (ABVCAP, 2019). The Global Infrastructure
Hub, however, projects investments of USD 56 billion in ports (sea and in-land) between 2016
and 2040 (Global Infrastructure Hub, 2015); approximately BRL 190 billion using an exchange
rate of BRL 3.39/USD74.
Figure 21. Port and waterway infrastructure investment history and baseline projection
30
projection
BRL billion
20
10 BRL 389 billion

between 2020-2040
0
2010 2015 2020 2025 2030 2035 2040
Ports Waterways
2010-2020 129.6 13.0
2020-2030 170.4 17.0
2030-2040 219.1 19.9
Sources: (CNT, 2020a), (PNLP, 2020) and Carbon Trust estimates.

Table 24. Port infrastructure investment barriers, proposed interventions and progress to date.
Maritime access • Support ANTAQ to Limited:
retrofits (e.g. dredging) create incentives to • Since 2007 Brazil has a National Dredging
to enable larger vessels stimulate maritime Program (Ministério da Infraestrutura,
into ports are held back accesses improvements. 2015). However, few dredging activities
by contractual hurdles75. were undertaken so far.
As a result, access is
limited to smaller ships
increasing the
cost/tonne transported.
72 Assumes 1,029 jobs per BRL billion invested, as suggested by (BCG, 2017).
73 Port and waterway sector GVAs between 2010-2017 were obtained in (IBGE, 2020b). These were divided by investments
documented in these years and averaged to obtain a 0.54 multiplier.
75 Law n. 11.610/2007 establishes several mandatory requirements for the provision of dredging services, among which: the joint
contracting of maintenance services in deepening dredging works, the mandatory commissioners’ provision of guarantee, according
to Art. 56 of Law n. 8.666/93, the inclusion of up to three ports in the same contract, so called “dredging block”.

Management • Support ANTAQ to Moderate:

inefficiencies increase increase participation of • The “Ports Law” n. 12,815/13 opened the
costs related to customs private companies with port sector to private companies,
clearance and cargo higher efficiency establishing the possibility to tender both
release in most ports. standards in the sector. the administration and the operation of
public ports to private companies through
concession contracts.
• In 2019, the Rotterdam Port Admin.
entered a PPP to manage Pecém Port
installations and storage activities.
• Espirito Santo’s state intends to tender
Mucuripe Port installations presently
managed by CODESA, a public company
(Diario do Nordeste, 2019).
Non-prioritisation of in- • Support the government Moderate:
land waterways as an to assess multiple • the Department for Transport
alternative to land benefits of developing Infrastructure (DNIT) has been recently
transport, and waterways and design a established as a centralizing entity for
institutional deployment roadmap. waterway-related public policies.
decentralization
• Decrease ICMS taxation • Resolution n. 70/2019 (BR do Mar)
resulted in limited
on water transport fuel establishes fiscal incentives for local
investment to date
as a market pull vessel manufacturing, eases access to the
incentive for waterways. Merchant Navy Fund for docks and
chartered foreign vessels, and allows
players to equate long-haul
transportation with cabotage fuel prices
(PPI, 2019). The resolution is currently
pending Senate approval.
• An ongoing partnership between Ministry
of Infrastructure and the World Bank
includes the assessment of the potential
for PPPs to be established for
development of waterways in Tapajós
and Madeira rivers.
• The Ministry of Infrastructure is currently
developing its ‘Inland Waterway Incentive
Programme’ to identify physical,
operational and institutional
opportunities to unlock further
investment in the sector.
• The PROHIDROVIAS programme is being
launched by DNIT under the auspices of
the Ministry of infrastructure, to monitor
the hydrology, hydrography,
hydrodynamics and geomorphology of
inland waterways in the Tapajós,
Madeira, and Tocantins. This data will be
publicly disclosed to support the planning
of future investment.

The sensitivity analysis considered the total volume of cargo port movement projected by PNPL
for 2040 will be achieved only in 2050, ten years later, by assuming the growth rates are
decreased from 3.3% to 2.5% between 2018-2025 and from 1.2% to 0.9% between 2025-2040.
The capacity utilization was not changed, reaching 85% in 2040. The growth rate of waterway
cargo movement was increased to 9.65% to achieve the PHE projections, of 120 million tons in
2031.
Table 25. Ports sensitivity analysis assumptions
Port
Infrastructure investment per port (BRL million) 82
Capacity utilization growth rate 1%
Waterway
Waterway – Cargo movement CAGR to achieve PHE projections 9.65%
Investment per cargo movement growth rate Inflation
Inflation rate 3%
In this scenario BRL 379 billion would be invested in port infrastructure, or BRL 18 billion/year
on average, potentially creating 387,000 new jobs76 and GVA of BRL 204 billion77 over the period.
Figure 22 - Port and waterway infrastructure investment history and sensitivity analysis projection
30 projection
BRL billion
20
10
BRL 379 billion
between 2020-2040
0
2010 2015 2020 2025 2030 2035 2040
Ports Waterways
2010-2020 129.6 13.0
2020-2030 165.8 16.6
2030-2040 213.6 19.4
Sources: (CNT, 2020a), (PNLP, 2020), (PHE, 2013) and Carbon Trust estimates.
76Assumes 1,029 jobs per BRL billion invested, as suggested by (BCG, 2017).
77
Port and waterway sector GVAs between 2010-2017 were obtained in (IBGE, 2020b). These were divided by investments
documented in these years and averaged to obtain a 0.54 multiplier.

Railways
Given passenger railways are insignificant in Brazil and are not considered in the Federal
Government’s Logistics Investment Program (PIL) nor in the Investment Partnerships Program
(PPI), this section considers only rail freight transport and all related CAPEX as railway
infrastructure. Altogether, this sector accounts for 5% of Brazil’s sustainable infrastructure
investment opportunity depicted in Figure 1.
Historically under-utilized despite its cost-effectiveness and lower carbon nature, railways move
only 5.4% of Brazilian goods, compared to 75% delivered by trucks (Fundação Dom Cabral,
2017). Efforts to boost investment in this sector have had limited effect to date but are gaining
momentum. In 2012 the Federal Government launched the Logistics Investment Program (PIL)
to incentivize investment across all transport infrastructure, channeling a modest BRL 4.9 billion
toward railways. In 2015 a second stage of the PIL was announced, catalysing a further BRL 5.7
billion. In 2016 the government’s latest attempt to attract private capital into infrastructure –
the PPI – was launched listing 8 railways as a key priority, of which two (BRL 6 billion) have
already been auctioned. The remaining 6 stretches are expected to inject a further BRL 38 billion
in CAPEX and OPEX investments. The index below provides a sense of Brazil’s rail network in
comparison to China and the USA.
Figure 23. Railway infrastructure index (km network/1,000km2 area) 2014
Source: Adapted from (Oliver Wyman, 2018)

According to Brazil’s Land Transportation Agency (ANTT), BRL 49.4 billion was invested in the
country’s 15 existing railway concessions over the last ten years including locomotives, wagons,
rail infrastructure, telecommunications, signaling, capacity building, buildings, computerization
and environmental impact mitigation. As a result, Brazil’s railway network increased from 29,022
km in 2010 to 29,075 km in 2019 (ANTT , 2020b).
Looking ahead, investment in existing railway concessions is projected onto 2040 using the
existing concessions’ three-year investment plans to 2023, and extended from then on. The
projection assumes the average investment seen between 2015-2023 will be maintained and
adjusted by the inflation rate. As a result, BRL 138 billion are projected to be invested in existing
railway stretches between 2020-2040, primarily in the form of OPEX.
Investment in new railway concessions entail greater uncertainty due to the timing of auctions
and rate of spend over concession lifetimes. Between the PIL and PPI, BRL 80.3 billion are
projected to be invested over the 30 year lifetime of eight new railways contemplated (one of
which was auctioned in 2019), including a breakdown of the CAPEX per concession (ANTT, 2015)
(PPI, 2020). The key variables required to project investment among these concessions is
therefore when each is expected to be auctioned, and how their respective investment plans
will be distributed within their 30-year lifetime. The baseline scenario presented below assumes

the seven remaining concessions are auctioned between 2020 and 2027. For all eight new
concessions, 80% of investment is assumed to occur in the first five years, while the remaining
20% is assumed to be equally distributed over the remaining 25 years of each concession – based
on what is seen for in existing concessions.
Table 26. Base case assumptions for railway sector
New concession investments
(A) Ferrovia Norte-Sul (TO/GO/MG/SP) – Auctioned in 2019 (BRL billion) 2.7
(B) Tramo Norte do Ferroanel de São Paulo – Auctioned in 2019 (BRL billion) 3.3
(C) Ferrovia de Integração Centro-Oeste – Trecho I (MT-GO) (EF-354) (BRL billion) 2.7
(D) Ferrovia de Integração Oeste-Leste – FIOL I, II, III (BRL billion) 8.8
(E) Ferrogrão (MT/PA) (BRL billion) 8.4
(F) Ferrovia Norte-Sul (MA/PA) (BRL billion) 7.8
(G) Ferrovia Rio-Vitória (RJ/ES) (BRL billion) 7.8
(H) Ferrovia de Integração Centro-Oeste (Água Boa - Lucas rio verde) (BRL billion) 3,7
Timeline of each concession’s investment (years) 30
Year of auction for all new concessions
(A), (B) 2019
(C) 2021
(D), (E) 2022
(F), (G) 2024
(H) 2027
Existing concessions *
Inflation rate 3%
As a result, the baseline scenario projects BRL 181 billion to be invested in railway infrastructure
(existing and new) between 2020-2040, an average of BRL 8.6 billion/year. The curve is
characterized by the frontloaded investment among all new concessions, lasting onto 2027 and
then reducing to OPEX costs. This level of investment would take Brazil’s railway infrastructure
index to 4.4 km network/1,000km2 area, create 43,500 jobs78 in the period, and result in a GVA
of BRL 338 billion79.
For the sake of comparison, ABVCAP estimates BRL 990 billion would need to be invested in
Brazil’s railway sector between 2012-2038 to place the country within the World Economic
Forum’s top 20 ranking in the Global Competitive Index by 2038 (ABVCAP, 2019).
78
79 Assumes a 1.86 multiplier as suggested by (CNT, 2020b).

Figure 24. Railway infrastructure investment history and baseline projection

projection
15
BRL billion
10
5 BRL 181 billion

between 2020-2040
0
2010 2015 2020 2025 2030 2035 2040

2010-2019 50 5
2020-2029 95 9.5
2030-2040 86 7.8
Sources: (ANTT, 2015), (ANTT, 2020), (PPI, 2020) and Carbon Trust estimates.

Table 27. Railway barriers, proposed interventions and progress to date.
Investment • Support Brazil’s Land Moderate:
responsibility for Transports Agency • Law 13,448/2017, authorized rail network
shared stretches is (ANTT) to review railway sharing among different concessionaires
undefined by law. concession resolutions. although this seldom happens in practice
due to lack of clarity regarding investment
responsibilities and lack of information
regarding idle stretches (see barrier below).
• ANTT’s resolution 5,831/2018 regulates on
productivity and security targets established
by concessionaires, increasing service
reliability and railways’ efficiency (Diário
Oficial da União, 2018).
Asymmetry of • Tender railway Moderate:
information stretches’ idle capacity. • See Law 13,448/2017 above.
regarding actual
circulation capacity
of trains on idle
stretches, as there is
often no consensus
among operators.
Low demand • Decrease price cap, Moderate:
decreases incentives established by ANTT, to • New concessions to be tendered in 2020
to invest in some decrease service costs. (FIOL and Ferrogrão) are mainly addressed to
railway stretches. commodity transportation and set as a
• Increase railway
capacity to raise interest priority (CNT, 2020c). This shall increase
for commodity companies’ demand for railway
transportation through transportation due lower costs vis-à-vis road
railways. transportation.
*Note: Progress to date with regard to addressing each barrier is classified between: None identified when no signs
of progress are identified; Limited when early stage policies/initiatives are identified, or when or when these are
unlikely to fully address the barrier; and Moderate when concrete steps are being taken to address the barrier.

The sensitivity analysis assumes a less optimistic calendar for railway concession auctions, partly
due to barriers listed upfront and directly above, partly due to lack of progress to date regarding
the large FIOL concession (D below), which is the PPI’s next in line. In this scenario, PPI’s planned
concessions are concluded in 2029 as detailed below.
Table 28. Railways sensitivity analysis assumptions
New concession investments
(A) Ferrovia Norte-Sul (TO/GO/MG/SP) – Auctioned in 2019 (BRL billion) 2.7
(B) Tramo Norte do Ferroanel de São Paulo – Auctioned in 2019 (BRL billion) 3.3
(C) Ferrovia de Integração Centro-Oeste – Trecho I (MT-GO) (EF-354) (BRL billion) 2.7
(D) Ferrovia de Integração Oeste-Leste – FIOL I, II, III (BRL billion) 8.8
(E) Ferrogrão (MT/PA) (BRL billion) 8.4
(F) Ferrovia Norte-Sul (MA/PA) (BRL billion) 7.8
(G) Ferrovia Rio-Vitória (RJ/ES) (BRL billion) 7.8
(H) Ferrovia de Integração Centro-Oeste (Água Boa - Lucas rio verde) (BRL billion) 3,7
Timeline of each concession’s investment (years) 30
Year of auction for all new concessions
(A), (B) 2019
(C) 2021
(D) 2024
(E) 2022
(F), (G) 2026
(H) 2029
Existing concessions *
Inflation rate 3%
The result produces little change to the baseline figure, with a projected BRL 179 billion invested
between 2020-2040, potentially creating 43,000 new jobs80 and a GVA of BRL 335 billion81.
80
81 Assumes a 1.86 multiplier as suggested by (CNT, 2020b).

Figure 25. Railways infrastructure investment history and sensitivity analysis projection
projection
15
BRL billion
10
5 BRL 179 billion

between 2020-2040
0
2010 2015 2020 2025 2030 2035 2040

2010-2019 50 5
2020-2029 88 8.8
2030-2040 92 8.3
Source: (ANTT, 2015), (ANTT, 2020), interviewee insights and Carbon Trust estimates.

Annex 1. Interviewee List

The analysis presented in this report is underpinned by interviews with the following individuals:
Table 29. Summary of interviewees
Name Institution Position Sectors discussed
• Luiz Campos EY • Partner. Government and Sanitation, solid
• Lucio Teixeira infrastructure lead waste, ports,
• Otavio Bachir • Partner. Power sector and railways, low carbon
utilities lead energy and
• Partner, Transactions telecommunications
area, Technology Media,
Entertainment, Telecom
specialist.
• Jeferson Soares & EPE • Director’s Technical Low carbon energy
• Emilio Matsumara advisor and
• Technical advisor for the
CEO
• Eduardo Tude Teleco • Director Telecommunications
• Luma Cordeiro CNM • Technical Analyst of Urban mobility
Costa transit and urban mobility
• Rodrigo Sauaia ABSOLAR • CEO Solar PV
• Ricardo Baitelo • Technical and Regulatory
Specialist
• Two anonymous Ministry of • Concession structuring Sanitation, solid
representatives Economy support to municipalities waste and railways
and states.
• Environmental licensing
and de-appropriation
support to concessions
• Carla B. Carneiro Ministry of • Chief of International Sanitation and solid
• Eduardo P. Coelho Regional Advisory Team waste
• Leandro Cardoso Development • Technical Analyst of Intl.
• Luciana Capanema Advisory Team
• Denise Seabra • Director for National
• Cassio Bueno Sanitation Secretariat
• Dogival C. Junior • Project manager for
• Ernani de Miranda Project Finance Dept.
• General coordinator for
public sector projects
• Infrastructure analyst
• Technical advisor for
Project Finance Dept.
• Leonardo L. Santos IPGC • President Solar PV, public
lighting, sanitation
and solid waste
• Cristiane Viturino ABDE • Operational Manager Development FIs
• Fabricio S. de Melo Raízen • Environment and Ports
regulation manager

• George Yun Ministry of • Director of Navigation Inland waterways

• Dino Antunes Dias infrastructure and Waterways
Batista • Waterway coordinators at
• Bruna A. Santoyo National Secretariat of
• Rafael S. Ports and Water
Mendonça Transport
• Director of sub-
secretariat for
Sustainability
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Brazil - S Sustainable Infrastructure Market Assessment - Sept 2020

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Brazil Green Finance Programme

Simon Retallack, Director for Latin America, Carbon Trust

João Lampreia, Senior Manager for Brazil, Carbon Trust

Lindsey Hibberd, Manager, Carbon Trust

Raquel Costa, Independent Consultant

Luca Degrandis, Independent Consultant

Brazil Green Finance Programme – Brazil’s Sustainable Infrastructure Market Assessment | 2

Executive Summary .............................................................................................................4

Introduction and purpose .................................................................................................. 13

Why focus investment on sustainable infrastructure?......................................................... 15

Factors holding back investments in Brazilian infrastructure ............................................... 16

Low carbon energy infrastructure ...................................................................................... 21

Efficient Public Lighting ...................................................................................................... 31

Solid waste ........................................................................................................................ 40

Clean urban transport ........................................................................................................ 45

Ports and waterways ......................................................................................................... 54

Annex 1. Interviewee List ................................................................................................... 64

Brazil Green Finance Programme – Brazil’s Sustainable Infrastructure Market Assessment | 3

Brazil Green Finance Programme – Brazil’s Sustainable Infrastructure Market Assessment | 4

Low carbon energy infrastructure

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lack of incentives to invest in system improvements; limited capillarity (reach) of transmission

Efficient Public Lighting

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Clean urban transport

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Ports and waterways

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The country’s attractiveness to foreign investors is hindered by over-arching factors such as

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• Consider solid waste tariffs for end-users.

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Table 2. Summary of baseline vs. sensitivity analysis across sectors.

Sanitation 507 142 563 595 167 660

Total 3,520 2,389 4,445 3,616 2,019 4,621

KEY: Greater optimism Less optimism

Despite the recession witnessed in Brazil during 2015-2018, it is realistic to be conservatively

Brazil Green Finance Programme – Brazil’s Sustainable Infrastructure Market Assessment | 11

Infrastructure Investments” (BCG, 2017).

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Introduction and purpose

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Figure 1. Brazil’s sustainable infrastructure investment history and baseline projection

100 Solid Waste

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Why focus investment on sustainable infrastructure?

There are clear benefits to focusing investment on sustainable infrastructure. Investments in

Impact on the economy

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Impact on Women and Socially Disadvantaged Groups

Methodology used to calculate benefits in this report

Factors holding back investments in Brazilian infrastructure

• Factors that render Brazil generally unattractive to investors

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• Foreign capital (low

11 e.g. (i) https://www.reuters.com/article/us-brazil-environment-divestment-exclusi/exclusive-european-investors-threaten-

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value for tax-payers’ money, e.g. national or foreign public

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Limitations of local financial institutions**

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