Industrializing the Green Advantage

The transition to a low-carbon economy offers Brazil a rare opportunity–perhaps the first in decades–to expand its share of international trade in manufactured goods based on a competitive advantage that few countries can replicate: the ability to produce with lower carbon intensity.

However, this opportunity does not materialize automatically. There is a stumbling block–many stumbling blocks–in the middle of this path, in the middle of the transition to a low-emission economy. The way we move forward in these movements is crucial–we have moved beyond formulating goals, promises, and visions of the future. Still, we are not yet at the finish line, where new productive, technological, and institutional structures would already be consolidated. Brazil, like the rest of the world, finds itself in the middle of this transition.

It is in this intermediate stage–the mid-transition–that the dilemmas become more difficult. The choices cease to be abstract and begin to involve concrete investments, infrastructure, regulatory decisions, technology routes and financing, to name just a few. It is also at this moment that the greatest risks arise: institutional and technological bottlenecks, decisions that produce long-term dependencies, incomplete transitions, concentrated gains, environmental regressions, and new forms of productive subordination. These are decisive moments for the transition's success or failure.

But before we discuss the current situation, in the midst of this transition, let us understand where we are coming from.

The path to a low-emission economy is redefining the criteria for international competitiveness. Governments, investors, and buyers are beginning to consider not only price, quality, productivity, and security of supply, but also, gradually, the emissions associated with the production of the goods they consume. Still gradually and unevenly, carbon intensity is becoming integrated into economic decisions. This change could benefit Brazil and needs to be considered during the mid-transition.

Few countries combine, on the same scale, renewable energy, biomass, biodiversity, water, mineral resources, an agro-industrial base, scientific capacity, an established industrial base, and a sophisticated financial system (public and private capital). This combination gives the country a significant structural advantage. However, structural advantage is not the same as development strategy. Low fossil carbon intensity does not replace productivity, infrastructure, innovation, regulatory security, competitive financing, or technological capacity. It adds a new dimension to international economic competition–but it translates into development only when articulated through a deliberate policy of productive transformation.

Over the past few decades, the reorganization of the world economy, the rise of Asia as a manufacturing platform, and the logic of specialization that spread from the 1990s onwards have reduced Brazil's relative share in the international trade of manufactured goods. At the same time, the country has consolidated itself as one of the world's largest exporters of food, minerals, oil, and other raw materials.

On the other hand, the country preserves industrial sectors capable of competing in global markets for highly complex products. The aeronautical industry is the most obvious example, but not the only one. There are significant competencies in machinery and equipment, paper and pulp, chemical products, electrical equipment, processed foods, and other niches, where Brazilian companies combine scale, technology, productivity, and international integration.

These experiences demonstrate that Brazil is capable of competing in sophisticated markets. The challenge is to ensure that these experiences cease to be exceptions and become part of a broader development strategy. How can we transform natural and energy advantages into lasting industrial, technological, and institutional capabilities?

This question is especially important because the ongoing transitions are interdependent. The energy transition cannot be separated from the productive transition. The ecological transition cannot be treated as an agenda isolated from innovation. The social transition cannot be reduced to subsequent compensations for affected groups. Energy, nature, technology, industry, labor, and territory form a single system of choices.

That is why we say the transition is not merely an energy transition. It is an economic transition, changing not only how we do things, but also why, at what cost, and in whose service.

Therefore, the Brazilian debate should not be limited to identifying which sectors are most impacted by decarbonization. The question is how to organize a transition that increases economic complexity, reduces emissions, protects natural assets, expands technological capabilities, generates skilled jobs, and avoids new strategic dependencies.

This is where the main institutional bottlenecks appear. Brazil has an abundance of scattered diagnoses, sectoral plans, and instruments, but still faces difficulties in coordinating industrial, climate, energy, technological, commercial, and environmental policies. The transition requires coordination between ministries, regulatory agencies, public banks, states, municipalities, universities, companies, international organizations, and civil society. Without this coordination, the country risks producing fragmented policies: incentives without clear goals, regulation without predictability, infrastructure without territorial planning, innovation without productive scale, and climate commitments without an industrial base.

Governance during the transition needs to address selective choices, and this is the first bottleneck. Here, we have choices that imply renunciations. It is either this or that, like the poem by Cecília Meireles. Public resources and incentives must be results-oriented. It is not enough to support any activity presented as sustainable. Projects must be evaluated based on their ability to combine international competitiveness, productive transformation, technological learning, skilled jobs, consistent emission reductions, environmental integrity, and contribution to the country's resilience. This will mean renouncing other paths.

The second bottleneck is technological. Many of the solutions currently considered international benchmarks were conceived based on the economic, energy, and natural conditions of developed countries, especially European ones. Naturally, these economies prioritize technologies consistent with their infrastructure, resource availability, and industrial interests. The problem begins when these choices are transformed into a universal standard. We always say that when it comes to the energy transition, the maxim "one size fits all" does not apply.

Advocating for technological neutrality does not mean a lack of strategy. It means evaluating different paths using rigorous, comparable, and transparent criteria: life-cycle analysis, traceability, land use, biodiversity protection, social conditions, and effective emissions reduction. Electrification, renewable hydrogen, biofuels, biomass, biomethane, nature-based solutions, and other technologies can play different roles in different sectors. What should determine their acceptance is the result.

Technology neutrality among commercially available pathways should not be confused with neutrality toward building domestic technological capabilities. If Brazil wishes to develop solutions adapted to its characteristics, it needs to expand its domestic capacity for research, development, absorption, adaptation, and technological diffusion. It is not enough to import technologies designed for other economic geographies. It is necessary to create conditions for Brazilian companies, universities, and research centers to develop their own competencies.

This point is crucial in attracting international investment. Establishing production capacity in Brazil can generate output, exports, and skilled jobs, but it does not automatically imply the internalization of the most knowledge-intensive activities. Research and development (R&D) centers, process development, bench research, equipment design, intellectual property, and strategic functions may remain concentrated at parent companies' headquarters and within their innovation systems in their countries of origin.

Therefore, the discussion about investments and industrial partnerships needs to include conditions for expanding linkages with national suppliers, strengthening the domestic knowledge base, and creating pathways for technological learning. Technology transfer should not only mean bringing a technology developed abroad to be operated in Brazil. It should mean creating conditions for Brazilian companies, universities, and research centers to absorb knowledge, develop their own competencies, and advance technologically, building on the country's existing capabilities.

The transition also involves trade-offs. Again, we need to talk about renunciations and what we can no longer do to move from one moment to another, from one reality to another. Some are environmental: the expansion of low-emission supply chains can put pressure on land, water, biodiversity, and local communities if robust environmental integrity criteria are not in place to guide it. Others are economic: the pursuit of greater added value can increase short-term costs, require complex infrastructure, and demand public-private coordination. There are also social trade-offs: technological and productive changes can create skilled jobs, but also displace workers, alter regional economies, and deepen inequalities if they are not accompanied by vocational training, social protection, and territorial planning.

Recognizing trade-offs is not an argument against the transition. It is a condition for its success. Real transitions involve distributive conflicts, choices under uncertainty, and competing priorities. The risk lies in treating decarbonization as a purely technical process, when it is also economic, political, social, and institutional.

Another key risk is lock-in: becoming trapped in the future by the decisions we make now, mid-transition. Decisions made in the middle of the transition can lock-in the country in long-term trajectories misaligned with the future we are discussing here. Infrastructure, energy sources, industrial routes, regulatory standards, supply contracts, and technological choices shape future opportunities. If poorly designed, they can consolidate dependencies, constrain innovation, reproduce primary specializations, or create assets incompatible with market developments and more ambitious climate goals.

From the outset, we can clearly state that Brazil must now avoid two types of lock-in: the first is fossil or carbon-intensive lock-in, associated with the promotion of new productive structures that will lose competitiveness in a world that increasingly prices emissions; the second is peripheral green lock-in: an international insertion in which the country supplies clean energy, minerals, biomass, or low-emission inputs, but remains distant from the stages of higher added value, knowledge, technology, and market power.

This second risk is more subtle. A transition can be environmentally better than the previous model and yet still be economically regressive or incomplete. The country can reduce relative emissions, attract investment, and expand exports without altering its position in global value chains. It can become a supplier of green inputs to other countries' industrialization. It can export natural advantages without building its own productive and technological capabilities.

Avoiding this outcome requires an industrial strategy compatible with the contemporary economy. This strategy fits neither the old logic of complete vertical integration nor the resignation to a supposed vocation for exporting raw materials.

There is a third way: to use the climate transition and the reorganization of international production chains to build a more sophisticated industrial integration– negotiated on a case-by-case, partner-by-partner, and chain-by–chain basis. To use the mid-transition period to set the ship sailing in this direction is fundamental. Now is the time to adjust this course on our navigation chart.

Contemporary industry is organized through international production networks. Each country seeks to preserve jobs, technological capabilities, economic security, and strategic segments. Therefore, there is no single answer as to which product Brazil should sell or which stage of each supply chain it should occupy.

The country should seek to maximize the economic value of aggregation, while continuously narrowing the gap between what it exports today and the most advanced stage of industrial transformation it can competitively achieve. In some supply chains, this will mean exporting the final product. In others, it may mean moving towards an intermediate product with higher added value and lower carbon intensity. In still others, it may involve co-manufacturing, joint investments, technology transfer, industrial complementarity, or negotiated division of production stages.

This approach does not replace or weaken Brazilian sectors that already produce goods and finished products. On the contrary: these segments should be strengthened, expand markets, and continuously incorporate technology and value. The strategy is primarily aimed at supply chains where Brazil still exports raw or minimally processed products, as well as at a new supply chain where the prevailing trend would be toward a more upstream position. In these cases, the objective should be to achieve the highest degree of industrial transformation in the country that is economically viable, environmentally sound, and accepted by (or negotiated with) the international market.

The starting point is the existing production agenda. The destination is not fixed. It must advance whenever new technological, commercial, and geopolitical conditions allow. Arguing that Brazil can occupy intermediate stages of a supply chain in certain negotiations does not mean advocating permanent specialization in inputs. It means recognizing that industrial development is a process of progressively building competencies, markets, and productive capacity. Flexibility lies in the commercial strategy. Industrial ambition remains.

This third path also requires a change in how Brazil relates to other countries. It is not just about exporting more, but about building international industrial partnerships. Some partners will be willing to import Brazilian industrial goods and finished products. Others, due to economic and labor pressures, will want to keep part of the transformation within their territories. In these cases, Brazil could supply strategic components or more sophisticated intermediate products, preserving room to advance to new stages over time.

Success will depend on the ability to understand what each market demands at any given time, what each partner intends to preserve, and where there is room to expand the industrial transformation underway in Brazil. This requires economic diplomacy, commercial intelligence, technological negotiation, and coordination between the public and private sectors.

Looking to the past is also very important in the mid-transition. It is about the investments our ancestors, grandparents, and parents made to enable Brazil to have one of the cleanest electricity grids in the world today, as well as fuel options such as ethanol. The transition must also more ambitiously incorporate Brazil's economic geography. The availability of renewable energy, biomass, agricultural and forestry residues, biodiversity, mineral resources, and the agro-industrial base opens up possibilities that are not yet fully incorporated into the national debate on decarbonization. In particular, there is little understanding of the potential of biomolecules as industrial inputs. Biomass is usually treated primarily as an energy source or as an extension of agricultural activity. However, molecules of biological origin can form the basis of a new generation of chemical, energy, and material chains. Urban, agricultural, and forestry waste, ethanol, vegetable oils, lignin, biogas, and other biological materials can be converted into sustainable fuels, bio-based chemicals, fertilizers, polymers, advanced materials, and other high-value-added products.

The economic potential of biomolecules is fully realized as a platform for productive transformation only when linked to the capabilities of the processing industry and the innovation system. It is through productive and technological capabilities that natural advantages are transformed into competitive advantages. Without industry, knowledge, and scale, biomass remains a resource. With strategy, it can become a technological platform.

The same reasoning applies to critical minerals, renewable hydrogen, sustainable fuels, low-emission steel, green fertilizers, storage solutions, power grids, industrial equipment, and digital technologies applied to energy efficiency and traceability. Then again: can we start from what favors us? What capabilities does the country seek to develop by leveraging the assets it already has?

This distinction is essential to avoid incomplete transitions. An incomplete transition occurs when a country advances in some dimensions but remains vulnerable in others. It may reduce emissions without increasing economic complexity. It may attract investment without developing technology. It may expand renewables without planning grids, storage, and licensing. It may preserve natural assets in some territories while putting pressure on others. It may generate growth without distributing opportunities. It may export more without increasing strategic autonomy.

There is also a risk of regressive transitions. These occur when climate policies, even if well-intentioned, reinforce inequalities, shift activities to less regulated regions, concentrate gains in the hands of a few actors, or impose disproportionate costs on vulnerable workers, consumers, and territories. A socially fragile transition tends to lose political legitimacy. Moreover, a transition without legitimacy is unlikely to be sustainable.

Therefore, the Brazilian transition must be guided by four principles.

The first is environmental integrity. The low-emission economy needs to deliver real emission reductions, biodiversity protection, traceability, responsible land use, and respect for social safeguards. It is not enough to change the energy source if the new chain produces significant environmental or social damage.

The second is productive sophistication. The green advantage should be leveraged to increase value added, productivity, innovation, and economic complexity. Exporting less carbon is important. Exporting more knowledge, technology, and industrial capacity is crucial.

The third is strategic selectivity. Brazil does not need to internalize everything, nor should it try to replicate industrialization models from other eras. Nevertheless, it needs to deliberately choose which capabilities to build, which dependencies to reduce, and which segments to compete for. Selectivity should combine economic, technological, climatic, and social criteria.

The fourth element is institutional coordination. The transition requires consistent public policies, regulatory predictability, financing, infrastructure, professional training, science, technology, economic diplomacy, and evaluation mechanisms. Without governance, the opportunity is lost.

The domestic market, while fundamental, will hardly sustain a new cycle of industrialization on its own, however green it may be. If Brazil intends to increase its economic complexity, expand productivity, develop technology, and generate skilled jobs, it will need to compete in international markets for low-emission goods, materials, inputs, and solutions.

This will require industrial policy, infrastructure, financing, innovation, vocational training, regulatory predictability, and economic diplomacy. It will also require results-oriented public policies. Public resources and incentives should prioritize sectors and projects that simultaneously achieve international competitiveness, productive transformation, technological learning, skilled jobs, and a consistent reduction in emissions.

In the world of global value chains, where the industrialization model is no longer that of the 1970s and geopolitics has changed, the strategy should not be to maximize national content indiscriminately. It should be to use the investment opportunities created by the transition to deliberately strengthen the points in the productive structure and the innovation system that can expand technological autonomy and future competitive capacity.

This is different from shutting down the economy. And it is also different from simply attracting capital because we have clean energy, minerals, or biomass. The issue is not choosing between autarky and passivity. The issue is building the capacity for negotiation, learning, and progressive advancement.

The climate transition is redefining the criteria for international competitiveness. Brazil must use this change to continuously expand its economic complexity and its capacity to generate value. Its integration into global supply chains must be dynamic, negotiated, and analyzed on a case-by-case basis, guided by the maximum economically viable value aggregation.

This opportunity will not remain open indefinitely. Other countries are already implementing industrial policies, attracting investments, protecting markets, and competing for the most promising segments of the low-carbon economy. The Brazilian window exists, but it may close if the country does not transform its natural advantage into an industrial strategy.

Brazil does not need to choose between producing everything domestically and remaining a supplier of primary products. Nor does it need to replicate models built for other realities. It can build another path: use its green advantages to negotiate a progressively more sophisticated industrial integration, strengthening what it already produces competitively and adding value to what it still exports in raw or minimally processed form.

Industrializing the green advantage means transforming resources, clean energy, and low carbon intensity into technological capacity, skilled jobs, income, and economic influence. It means recognizing that the green advantage is a starting point, not a sufficient development strategy.

In the midst of the transition, every step taken matters even more than it did at the beginning of the process. One step will not change the course a year from now, for the next climate diplomacy negotiation. A step now will be defining for decades to come. To avoid an incomplete or regressive transition, Brazil needs to combine climate ambition with productive ambition, environmental integrity with industrial sophistication, and international openness with deliberate capacity building.

We do not need to internalize everything from the supply chains that leverage our advantages in raw materials and clean energy. However, we do need to deliberately choose which competencies to build and which strategic dependencies to reduce.

Translated from Portuguese by Victoria Corrêa do Lago with the support of digital machine translation tools: Google Translate (initial draft), Grammarly (grammatical and syntactic revision), and ChatGPT (selective phrasing refinements). Reviewed by the authors.

Submitted: August 17, 2026

Accepted for publication: August 25, 2026

Copyright © 2026 CEBRI-Journal. This is an Open Access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original article is properly cited.