The global climate urgency demands an unprecedented transformation of energy systems, and Brazil, despite its relatively clean matrix, is not exempt from the need for massive investments to accelerate decarbonization and meet its environmental targets. In May 2025, the debate over the cost of this transition gained sharper contours, with estimates pointing to the need to channel around 6% of the national Gross Domestic Product (GDP) annually to finance the change. The figure, although significant, reflects the magnitude of the challenge, raising crucial questions about funding sources, priority sectors, and the economic and social risks of not mobilizing the necessary resources in time.
Brazil starts from an advantageous position compared to many other large economies. Its power matrix already has a high share of renewable sources, surpassing 88% in 2024, driven primarily by hydroelectricity and the significant growth of wind and solar energy in recent years, as indicated by the National Energy Balance released by the Ministry of Mines and Energy (MME). Furthermore, the country has vast untapped potential in sources such as biomass, biogas/biomethane, and green hydrogen, and benefits from an average implementation cost for wind and solar significantly below the global average, according to analyses by the National Bank for Economic and Social Development (BNDES).
However, the energy transition goes far beyond electricity generation. It involves decarbonizing hard-to-abate sectors such as transportation (especially heavy freight), industry (processes requiring high temperatures), and agriculture. It requires substantial investments in transmission and distribution infrastructure to accommodate the intermittency of renewable sources, in energy storage, in energy efficiency across all sectors, and in the development of new sustainable technologies and fuels, such as green hydrogen and synthetic fuels.
It is in this context that the estimated investment needed on the order of 6% of GDP annually becomes relevant. The figure was highlighted by Enio Shinohara, CEO of BB Investimentos, during an industry event in May 2025, as reported by Canal Energia. Although not an official government number, it reflects the financial market’s perception of the scale of effort required and aligns with international studies on the costs of global decarbonization. The International Energy Agency (IEA), for example, estimates that global investments in clean energy need to more than triple by 2030 to put the world on track for carbon neutrality by 2050, according to its Net Zero roadmap.
Funding Sources: A Complex Mosaic
The big question that arises is: where will these resources come from? The answer lies in a complex combination of public and private, national and international sources.
The public sector plays a fundamental enabling role. BNDES, historically the main infrastructure financier in Brazil, positions itself as a central actor. The bank has directed significant resources toward renewable energy, becoming, according to its board, one of the largest funders of the sector in the world. Instruments such as the Fundo Clima, managed by BNDES, offer favorable conditions for climate mitigation and adaptation projects, including energy efficiency, solar, wind, biomass, and, more recently, biometanation and carbon capture projects, such as the funding approved for the first green CO2 plant in the country. Additionally, the bank works on structuring concessions and public-private partnerships (PPPs) in infrastructure, including transmission and sanitation projects, which are essential for the transition.
The federal government also seeks to drive the transition through industrial and development policies, such as the Nova Indústria Brasil program, which foresees BRL 300 billion in financing (via BNDES, Finep, and Embrapii) until 2026 for strategic sectors, including decarbonization and the bioeconomy. The recently launched Brazilian Energy Transition Atlas, in May 2025, aims to map state actions and identify synergies and opportunities.
However, public resources alone are insufficient. Attracting private capital is crucial. The Brazilian capital market has shown growing interest in sustainable investments, with the issuance of green bonds, sustainability-linked bonds (SLBs), and the creation of ESG-focused investment funds. The existence of ESG portfolios recommended by major financial institutions, such as BB Investimentos and XP Investimentos, reflects this trend. However, for the capital market to finance the transition at the necessary scale, challenges such as the standardization of green taxonomies, ensuring transparency, and mitigating long-term regulatory risks need to be overcome.
Foreign direct investment (FDI) and financing from multilateral development banks (such as the World Bank, IADB) and international development agencies are also important pieces. Brazil, with its renewable potential and biodiversity, is a natural destination for international capital focused on the climate agenda, but attracting these flows depends on a stable business environment, legal certainty, and clear, consistent public policies.
The regulated carbon market, still in the implementation phase in Brazil after intense debates, is another potential funding source. By pricing greenhouse gas (GHG) emissions, it can generate revenues for the government (through emission allowance auctions) and create economic incentives for companies to invest in clean technologies and emissions reduction projects. The success of this market will depend on its scope, the price set for carbon, and its integration with international markets.
Priority Sectors and Socioeconomic Challenges
Transition investments need to be strategically directed. The continuous expansion of wind and solar generation is fundamental, but it requires parallel investments in transmission lines to transport generated energy (often from remote locations) and in storage solutions (such as batteries or reversible hydroelectric plants) to deal with intermittency. Modernizing the power grid, incorporating digital technologies (smart grids), is also essential to manage a more complex and decentralized system.
Decarbonizing transportation will demand investments in electrification (light vehicles and, gradually, heavy vehicles), charging infrastructure, and the development and use of advanced biofuels and biomethane. Industry will need to invest in energy efficiency, process electrification, the use of green hydrogen, and carbon capture to reduce its environmental footprint.
However, this transformation is not free of socioeconomic challenges. The transition needs to be just and inclusive, as highlighted in the theme of the 25th National Electric Power Distribution Seminar (SENDI), which will take place in June 2025. This means ensuring that transition costs do not fall disproportionately on the most vulnerable populations. A recent study by Energy Action Partners (Energy Alliance) showed that the lowest socioeconomic groups in Brazil already spend a significant portion of their income (up to 18%) on electricity, highlighting the need for policies to prevent tariff increases for these consumers.
Workforce retraining is also a critical point. The transition will create new job opportunities in green sectors, but it may also displace workers from fossil fuel–based industries. Training programs and support policies for these workers are essential to mitigate negative social impacts.
Furthermore, the lack of adequate infrastructure and high initial costs remain significant barriers, especially for large-scale adoption of new technologies. Overcoming these bottlenecks requires long-term planning, coordination between public policies and private investment, and a stable regulatory environment that encourages innovation.
The Imperative of Strategic Investment
The estimate that Brazil needs to invest 6% of GDP annually in the energy transition underscores the magnitude of the task, but also the opportunity to build a more prosperous, resilient, and sustainable future. The country has important comparative advantages, such as an abundance of renewable resources and competitive generation costs, but mobilizing the necessary capital requires a coordinated and strategic effort.
Funding will come from a mosaic of sources—public, private, national, and international—and will depend on clear public policies, stable regulatory frameworks, and innovative financial instruments, including a functional carbon market and strengthened sustainable finance. Equally important to mobilizing resources is directing them efficiently, prioritizing investments in infrastructure, technological innovation, and the decarbonization of the most challenging sectors.
Above all, the energy transition must be just, ensuring that its benefits are widely shared and that its costs do not deepen existing inequalities. The May 2025 debate on transition costs serves as a call to action: Brazil has the potential, but now needs to secure the financial means and political will to turn that potential into reality, ensuring not only energy security but also a positive environmental and social legacy for future generations.
