Between normative intent and substantive inclusion

state capacity and regulatory sandbox in the Brazilian electricity sector

Abstract

This work examines how differentiated activation of state capacities can promote formal inclusion, understood as the expansion of access in infrastructural and administrative terms without ensuring effective or adequate use, and constrain substantive inclusion, defined as effective, adequate, and socially recognized access capable of generating benefits across the distributive, procedural, and recognition dimensions of energy justice. Grounded in the state capacity literature and institutional design studies, it analyzes the implementation of Brazil’s Program Luz para Todos in the Xingu Indigenous Territory, in the Amazon. The work adopts a qualitative single-case design, based on systematic document analysis, institutional reconstruction, and examination of field-based evaluation reports produced by Indigenous communities and civil society organizations. Findings show that the program’s institutional arrangement prioritized infrastructural and administrative capacities, while political-relational, analytical, and dynamic capacities were only partially mobilized, with the program promoting formal inclusion through infrastructure expansion and administrative access to the service, but facing limitations in achieving substantive inclusion due to technological mismatches, absence of prior consultation, constraints on productive energy use, and weaknesses in billing design and communication, which ultimately compromised the effectiveness of social, economic, and territorial benefits.. This asymmetric activation generated formal inclusion through infrastructure expansion, but limited substantive inclusion in distributive, procedural, and recognition dimensions of energy justice. Drawing on these results, the work discusses the proposed institutionalization of a regulatory sandbox in the electricity sector as an adaptive governance instrument capable of integrating territorial participation, structured regulatory learning, evidence-based reforms, and distributive safeguards, highlighting that its implementation can be initiated in the present but requires continuous monitoring over time to systematically assess the formal and substantive implications arising from the experimentation. The work contributes to debates on state capacity and energy governance by demonstrating that institutional configuration rather than normative intent alone explains the gap between formal coverage expansion and substantive inclusion.