Conselhão Urges Government to Veto Climate Fund Use in Oil Projects

Government advisors are pressuring the Planalto (presidential palace) for strict vetoes on carbon capture financing in oil projects, demanding a focus on hard-to-abate sectors.

Members of the Council for Economic and Social Sustainable Development, known as the Conselhão, have sent an open letter to top federal government officials questioning the current strategy for allocating resources from the Climate Fund. The group demands that the government veto the use of public funds for carbon capture and storage (CCUS) technologies when these are linked to enhanced oil recovery (EOR).

The measure challenges one of Petrobras‘s main decarbonization tactics. The state-owned company, which has achieved significant results in reinjecting carbon dioxide to boost the productivity of its fields, sees its strategy confronted by a high-level council. The council warns of the risk that public funding could subsidize the longevity of fossil fuel exploration under the guise of addressing climate change.

Restriction for Strategic Sectors

The document, addressed to President Lula and ministers such as Dario Durigan (Finance) and João Paulo Capobianco (Environment), as well as BNDES President Aloizio Mercadante, proposes a change of course. The council members advocate that financial support through the Climate Fund be limited solely to industries where emission reduction is complex, such as steelmaking and the cement sector.

“A climate instrument cannot fund what prolongs the very problem it claims to combat.”

The central concern of the Conselhão members is that the inclusion of CCUS in the 2026 investment plan was premature. According to the group, the lack of clear regulation by the National Agency of Petroleum (ANP) creates a vacuum of legal and environmental responsibility, which could result in long-term damages to the state if storage problems arise.

Efficiency Criteria and Resource Allocation

Beyond controversies surrounding oil, the group questions the lack of transparency in the allocation of the R$ 42.5 billion available in the fund. There are direct criticisms of recent investments directed towards corn ethanol plants, which, in the view of the council members, could exacerbate water stress in certain regions and divert capital from more effective alternatives.

The group calls for the implementation of cost-effectiveness criteria to evaluate each project, ensuring that funds are directed towards measures that truly accelerate the national energy transition. The goal is to prevent the Climate Fund from becoming merely a financier of industrial inertia, keeping the country tied to extractive models.

The pressure for changes in the guidelines is expected to intensify in the coming months, as BNDES and the Steering Committee assess how to reconcile economic development demands with the government’s climate goals, which remain at the center of the political debate for the next electoral cycle.