The National Policy for Low-Carbon Hydrogen was adopted last December and set out details for the voluntary Brazilian Hydrogen Certification System (SBCH2) to certify the hydrogen’s greenhouse gas (GHG) emissions intensity, with plans for billions of dollars of incentives.

However, President Luiz Inácio Lula da Silva vetoed some of the incentives approved last month, claiming they would violate financial and budgetary legislation, despite “good intentions.”

Having undergone debate, the bill was approved in July with the defined limit of low-carbon uplifted from 4kg CO2/kg to 7kg CO2/kg, with a combined BRL 18.3bn ($3.19bn) of incentives over five years attached. The incentives include tax and duty suspensions for hydrogen producers looking to buy or import new machinery, equipment and more for hydrogen projects.

Read more: Brazil’s hydrogen subsidies get green light, emissions cap raised by 75%

An announcement by the Brazilian Government said there would still be BRL 18bn ($3.14bn) of incentives available for hydrogen producers over five years, despite the cut-backs.

The axed incentives would have been funded from national and international donations; loans from national and international financial institutions; and a percentage of surplus profits from official development financial agencies the previous year.

“When I see these people talking about green hydrogen, solar energy, wind energy, biomass, I wonder: what country in the world can compete with Brazil?” the President said during the signing of the law last Friday (August 2).

Despite the roll-back, the law is slated by the government to bring “legal certainty, predictability and attractiveness” to the $30bn of projects already announced in the country.

The approved text creates a “Brazilian standard” to certify low-carbon hydrogen, which will have a “competition authority” to set public policy guidelines.

Despite Brazil’s hydrogen export potential becoming increasingly more attractive, incentive beneficiaries would have to sell some of the hydrogen produced to meet domestic demand, with other investments made in research, development and innovation.

Alexandre Silveira, Brazilian Minister of Mines and Energy, said the President was creating a new industry for Brazil, and “lighting the flame” that would “revolutionise” the world’s energy mix.