Brazil creates program to decarbonize national fleet

The Brazilian government has issued a provisional measure to establish the National Green Mobility and Innovation Program (Mover). This initiative aims to reduce carbon emissions from the country's automotive fleet by offering tax incentives.

This program raises the sustainability standards for vehicles and encourages the development of new technologies in the fields of mobility and logistics.

Brazil's Vice President and Minister of Development, Industry, Trade, and Services, Geraldo Alckmin, has stated that Mover is expected to draw foreign investment into the country's energy and energy efficiency sectors, thanks to the tax benefits it offers.

Companies relocating their industrial plants to Brazil will receive a financial credit equivalent to the import tax imposed on the transfer of production cells and equipment. Additionally, they will be eligible for rebates on Corporate Income Tax and the Social Contribution on Net Profits (CSLL) for products and systems exported from the country.

The new program incorporates minimum recycling requirements in vehicle manufacturing and imposes lower taxes on companies with lower pollution levels. This is achieved through the implementation of the Green Tax on Industrialized Products (IPI).

The government will also offer tax incentives to encourage companies to invest in decarbonization and comply with the program's mandatory standards. These incentives will amount to BRL 3.5 billion in 2024, BRL 3.8 billion in 2025, BRL 3.9 billion in 2026, BRL 4 billion in 2027, and BRL 4.1 billion in 2028. These funds will need to be converted into financial credits.

In order to qualify, companies must allocate a minimum of 0.3 percent to 0.6 percent of their Gross Operating Revenue to these initiatives. For every real invested, they will receive between BRL 0.50 and BRL 3.20 in credits, which can be applied towards reducing any taxes administered by the Federal Revenue Service.

Innovations

Mover introduces several improvements over similar programs that have been phased out. One notable enhancement is the inclusion of "well-to-wheel" carbon emission measurements, which assess the entire energy source cycle, thereby increasing the mandatory sustainability standards for vehicles sold in the country.

According to the Ministry of Development, Industry, Trade, and Services, Brazil is a global leader in decarbonization efforts. “I'm going to stimulate a less polluting industry, with decarbonization, but analyzing it from the ground up, in other words, how I produce this fuel. So, in the case of ethanol, it involves considering sugarcane production all the way through to fuel usage,” Alckmin said. The same comprehensive approach applies to other propulsion sources, such as electric batteries, gasoline, and biofuel.

Mover has evolved beyond being solely focused on the automotive sector and has been redefined as a Low Carbon Sustainable Mobility and Logistics program. This broader scope, as highlighted by the ministry, enables the inclusion of all vehicle types capable of minimizing environmental impact.

The new program offers an additional advantage by reducing the Import Tax for manufacturers importing parts and components without domestic equivalents, provided they invest 2 percent of the total imported amount into research, innovation, and industrial modernization projects.

To support this initiative, the provisional measure of Mover establishes the National Industrial and Technological Development Fund. It is anticipated that investments in these programs will range between BRL 300 million and BRL 500 million annually.