Regulations for the Special Tax Regime for Data Center Services (Redata) are moving forward, but internal government disagreements persist regarding the definition of low-emission energy.
The enactment of the law establishing the Special Tax Regime for Data Center Services (Redata) marks an important step for the industry. However, the controversy surrounding the energy sources that will power these complex data centers is far from settled, highlighting a split within the government over the definition of low-emission energy.
The lack of a clear consensus prevented natural gas from being definitively classified. This crucial definition was omitted from the regulatory decree, indicating that a specific interministerial ordinance will be required to flesh out the rules. While the market celebrates the law’s passage, there is apprehension regarding the absence of a unified policy for a sector that has been awaiting action for over a year.
Ministerial Disagreements over Natural Gas
The controversy centers on whether natural gas should be classified as a low-emission source. The Ministry of Mines and Energy (MME), aligned with an amendment introduced by the Senate, supports including natural gas, arguing that it fits the concept of low-emission energy and is an internationally recognized transition fuel.
Conversely, the Ministries of Finance and Development, Industry, Trade and Services (MDIC) are resisting the idea of allowing data centers that benefit from up to R$ 7.2 billion in tax incentives to utilize energy from fossil fuel sources.
Rafael Dubeux, a special advisor to the Minister of Finance, explained:
There is an ongoing debate within the government to reach a consensus on the scope of the term ‘low-carbon,’ and to refine the technical evidence we have to define exactly what that covers.
Possibilities and Industry Outlook
Internal discussions are considering various approaches: the total exclusion of natural gas, its full acceptance, or its use conditioned on compensation mechanisms, such as carbon credits, the use of biomethane, or carbon capture and storage (CCS) technologies. Another alternative is to allow gas usage only as a backup during power supply instabilities.
Industry associations argue that natural gas expands the options for ensuring the continuous and reliable supply that data centers require. Currently, even with contracts for renewable energy, many of these facilities use diesel generators for backup, which also raises questions about the overall sustainability of the projects.
For investors, the priority is the rapid completion of the regulation. This will allow companies to formally join the Redata program and begin their investments.
Natural Gas in Legislation and Sustainable Taxonomy
The Minister of Mines and Energy, Alexandre Silveira, reaffirmed the ministry’s stance in favor of natural gas:
For the law to ensure the attractiveness of large data processing centers, the MME advocates for the inclusion of diverse energy sources in the program’s regulation, including natural gas.
However, this view conflicts with Brazil’s sustainable taxonomy. Although the October 2025 decree establishes limits for the use of fossil fuels in sustainable projects, it provides for the eligibility of biogas/biomethane blends with natural gas—capped at 50% through 2029—and the use of natural gas with carbon capture through 2035, subject to specific emission limits.
Therefore, Redata regulations must navigate these complex sustainability definitions, balancing the need for reliable power for data centers with environmental goals and the ongoing debates within the government itself. The final decision on natural gas will have a direct impact on the attractiveness and sustainability of future data centers in Brazil.