The tax incentive for green innovation in companies is one of the Brazilian government’s greatest strategies to face the challenge of energy generation in the country.

Brazil experienced the worst drought in 100 years in 2021. Consequently, the lack of water in hydroelectric plants has plummeted to the lowest level on record. The environmental crisis created by climate change demands emergency solutions for the Brazilian energy matrix.

The path often pointed out to solve the issue is through micro and mini distributed generation of energy from renewable sources. It is a promising alternative, since Brazil has great potential for natural and inexhaustible resources such as sun, rain, tides, wind, and organic waste (biomass).

Government initiatives to address the energy crisis

Seeking to promote the use of the abundant renewable resources in the country, the Brazilian government created the ProGD (Program for the Development of Distributed Generation of Electric Energy). The Program includes special lines of financing and tax relief, with the objective of boosting investments in the development of renewable sources in the decentralized generation of electricity.

In addition, the government offers financing lines and tax incentives for companies and projects that promote environmental sustainability, with the aim of encouraging companies to invest in green practices to obtain global competitiveness and attract the interest of foreign investors. We list some of the main initiatives below:

• Green IPTU: percentage discount on IPTU offered by several Brazilian cities with the objective of promoting sustainable measures of environmental preservation in properties (residential and commercial). It is important to note that each municipality has autonomy in its own law, which creates and defines the conditions of the benefit.
• GECEX Resolution No. 257, of September 24, 2021: the forecast zeroes the Import Tax (IPI) rates levied on photovoltaic solar modules (the main component of the solar energy generation system).
• ICMS Agreement No. 16/2015: provides that the basis for calculating the ICMS tax on energy will be levied only on the consumption of energy supplied by the distributor, that is, the excess consumption that was not generated by own renewable sources.
• Exemption from PIS/PASEP and COFINS: following the same criteria above, these taxes will also be levied only on energy consumption provided by the distributor (which was not produced by the company) through the compensation system of resolution 482/2012.
• ICMS Agreement nº 101, of December 18, 1997: grants exemption from ICMS in operations with equipment and components for the use of solar and wind energy.
• PADIS (Support Program for the Technological Development of the Semiconductor Industry), according to Law No. 11,484/2017: includes a set of tax benefits for companies that invest annually in research and development (R&D) activities for the production of equipment and services related to generation of photovoltaic solar energy.
• Decree No. 10,387/20: regulates the issuance of green infrastructure debentures, the so-called “green bonds”. These are fixed-income securities intended for the implementation, expansion and refinancing of projects or assets that have a positive impact from the environmental point of view, or social bonds, which provide positive impacts to society.
• REIDI (Special Incentive Scheme for Infrastructure Development), pursuant to Law No. 11,488/2007: benefits from exemption from PIS and COFINS levied on goods and services of projects aimed at implementing infrastructure in the energy sector.

The green agenda as a win-win

It is evident that the government incentive to innovation promotes great advantages to the Brazilian energy system. Among the main benefits for the country are the diversification of the energy matrix, savings with reduced losses caused by long distances between generation and consumption, the postponement of investments in energy infrastructure works, in addition to the significant environmental impact on energy generation.

For companies, in turn, investing in renewable energies goes hand in hand with the sustainable development of their businesses. Responsible environmental positioning brings a series of benefits to the company. Energy autonomy, ESG practices, up to 95% reduction in energy costs and tax benefits are some examples of competitive advantages.

Want to know how these initiatives can benefit your business? Gescon has a team of experts ready to analyze your company’s potential, contributing to its sustainable growth.