Water Management Policy in Brazil

For the growing body of academic and policy research on the energy-water nexus, the case of Brazil is particularly important and interesting. Brazil has a large biofuel crop industry that makes use of extensive water resources. The country’s large oil industry uses and disposes of large quantities of water, and hydropower is the nation’s largest single source of electric power. Each of these elements of the energy system implicates different aspects of Brazil’s policy and regulatory systems for managing water resources.This essay, which reviews the experience managing the intersection of Brazil’s energy and water issues, makes five arguments. First, as a federal system one of the most important policy issues in Brazil is the allocation of authority between the federal government and the many varied state regulatory systems that affect water. There is huge variation in state-level regulation; the most sophisticated of these systems is that of Sao Paulo — the state where we focus in this case study. Second, in terms of sheer volume of water consumed, Brazil’s sugar crops have a huge impact on the country’s water-energy nexus. However, as a practical matter, most of the sugar crop is not much affected by water policy because it is rain fed — as in most countries, water uses that affect rainfall are not much regulated whereas irrigated water is under much stricter control. Third, much of Brazil’s river system crosses state boundaries, raising potential concerns about lack of policy coordination. A system of river basin committees is designed to ameliorate those concerns — however, for the most part, those committees have little practical impact on policy. Nationally, there is huge variation in the actual implementation of water laws; only three regions in the most economically developed areas of the country have implemented essentially all of the nation’s administrative framework for managing water.Fourth, we note that in theory different water-using sectors could allow for fungibility in water usage and pollution control costs across the sectors. In practice, however, a wide array of organizational and legal rigidities makes that impractical. The oil and gas sector, for example, is managed using policy and regulatory frameworks that are completely separate from other water using sectors. Fifth, and finally, we note that use of water flow for generating electricity is of paramount importance in Brazil due to the country’s dependence on hydroelectricity. For years it has been known that this use of water is under-priced and under-regulated — mainly because of the close relationship between the hydroelectric sector and its regulatory bodies. There have been very limited use of market forces to encourage more efficient water behavior. In addition to some limited efforts to use water pricing, there are also auspicious experiments under way to use ecosystem services to put a proper value on watersheds. Other ideas, including smarter pricing of water flow, have been around for years yet still have had limited practical impact due to an array of political barriers we describe.