Company and sector profile Petrobras, Brazil’s largest corporate and semi-state-owned oil and gas company, dominates national production and refining. As one of the country’s top GHG emitters, its exposure to emerging carbon-pricing policies has implications far beyond its corporate strategy. Petrobras’s position is representative of Brazil’s industrial landscape: oil and gas are a key element of the country’s exports, revenues and energy mix.46 How Petrobras navigates carbon pricing and BCAs offers lessons for Brazil’s broader economy and other industries. Business exposure and response Petrobras’s exposure will intensify domestically and internationally. The forthcoming Sistema Brasileiro de Comércio de Emissões (SBCE) will cap emissions from large emitters, including Petrobras’s refineries and power plants, creating compliance costs. Internationally, emerging BCA schemes – notably the EU CBAM – signal a new wave of trade-related climate measures. While crude oil and fuels are currently not included in CBAM, they fall under the EU ETS2,47 which will apply to fuels of all origins. CBAM could potentially cover refinery-specific emissions, aligning imported refined products with EU carbon pricing. For Petrobras, this creates short-term indirect risks. Even without immediate coverage, BCAs reshape global demand patterns, tighten investor expectations and increase scrutiny of emissions intensity. Over time, the risks are likely to become direct, with potential carbon costs attached to exports. Petrobras faces structural challenges in aligning with carbon pricing and BCAs. Regulatory uncertainty over the SBCE’s final rules complicates planning. Internationally, the absence of harmonized frameworks creates risks of double compliance if Brazilian carbon pricing is not recognized. High decarbonization costs and limited demand for “low-carbon crude” further reduce incentives to accelerate transformation. Finally, investors increasingly demand robust climate strategies, and weak alignment could elevate Petrobras’s capital costs or limit access to environmental, social and governance (ESG) financing. To prepare, Petrobras has taken notable steps. It has implemented an internal carbon price to guide investment decisions and created a $1.3 billion decarbonization fund (2025–2029) to finance emissions reductions. The company is a leader in offshore carbon capture and storage (CCS), aiming to inject 40 million tonnes of CO2 by 2025. It has also begun diversifying into biofuels and renewables and recently invested in carbon credits to complement operational reductions. These actions position Petrobras as a transitional actor among producers in the Global South. CASE STUDY 3 Brazil – Petrobras Strategic responses Petrobras is addressing BCAs and carbon pricing through: –Internal carbon pricing: Applying shadow prices to guide investment decisions. –Decarbonization fund: Financing reductions via a $1.3 billion fund (2025–2029). –CCS: Scaling offshore CCS with a 40 million tCO2 target by 2025. –Renewables and biofuels: Investing in cleaner energy alternatives and carbon credit. –MRV systems: Strengthening MRV for compliance and transparency. These measures help manage risks and position Petrobras for future carbon pricing. Key takeaways and potential actions The Petrobras case underscores progress and gaps in Brazil’s oil and gas sector. To remain competitive in a context of BCAs, Petrobras and its peers could: –Strengthen MRV systems to meet BCA reporting requirements at facility and export levels. –Integrate internal carbon pricing aligned with international benchmarks into project evaluations. –Invest in refinery retrofits and logistics upgrades to reduce life-cycle emissions. Climate and Competitiveness: Border Carbon Adjustments in Action 15

Climate and Competitiveness Border Carbon Adjustments in Action 2025