Brazil's congress passed legislation on Thursday loosening environmental licensing, a potential blow to President Luiz Inacio Lula da Silva as he seeks to burnish his country's green credentials before hosting the United Nations global climate summit, COP30, this year.

The bill passed with broad support in congress where a powerful agri-business caucus holds huge influence, over criticism from environmentalists, members of Lula's cabinet, and European Union lawmakers who wrote to Brazil's lower house speaker last month asking him not to put the bill to a vote.

The vote in the lower house tallied 267 votes for and 116 against the bill.

Brazilian business leaders have criticized environmental permitting as a barrier to development. While many environmentalists agree that the process needed to be reformed, they argue that the approach taken by congress is likely to cause far more harm than good.

"Brazil will completely misalign itself with the best international standards," said Natalie Unterstell, head of the Talanoa Institute, an environmental think-tank.

The bill loosens several permitting requirements. For example, it allows projects considered to have a small- or mid-sized impact, such as dams and basic sanitation infrastructure, to be built without environmental permits.

Environment Minister Marina Silva has said the bill is a major setback that "dismantles" licensing in Brazil, although some members of Lula's cabinet had earlier expressed support for the bill.

Canada's Liberal government has introduced similar legislation, Bill C-5, that allows cabinet to quickly grant federal approvals for big projects deemed to be in the national interest such as mines, ports and pipelines by sidestepping existing laws. Prime Minister Mark Carney called a summit this week with First Nations leaders, who have expressed concerns the bill.

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Pressure to drill

The Brazilian bill was passed as the country's environmental agency Ibama faces intense pressure to issue a licence for state-run oil firm Petrobras to drill for oil off the coast of the Amazonian state of Amapa, a region with a fragile ecosystem that is also seen as Brazil's most promising oil frontier.

The project, which Petrobras considers its best shot to replenish reserves, has been waiting for a permit for over a decade.

The wait drew ire from senate head Davi Alcolumbre, who hails from Amapa and has been pushing for the development of the oil industry in the region, one of the poorest in Brazil.

Alcolumbre put the bill to a vote over protests from government officials and added what some environmentalists consider its most radical amendment, giving the federal government power to fast-track projects it considers strategic.

Lula can still veto parts or the whole bill, sending it back to congress, which could strike vetoes down. Its legality could also be questioned at the Supreme Court, which has intervened on other contentious environmental bills put forward by congress.