National Biofuels Policy
In December, 2017, a new National Biofuels Policy (RenovaBio) was signed into law (Federal Law Nº 13.576).
The Policy aims to reduce greenhouse gas emissions, improve the life cycle energy efficiency of biofuels, and promote the national biofuel industry.
It calls for the establishment of national carbon intensity targets, to be allocated among fuel distributors in proportion to their market share. Non-compliance can result in penalties between R$ 100 000 and R$ 50 000 000. The law further creates the framework for establishing decarbonisation credits (Crédito de Descarbonização - CBIO) for tracking and compliance with carbon emissions targets, as well as certificates reflecting the energy efficiency and carbon intensity of biofuels.
In practice, RenovaBio is designed to introduce market mechanisms to recognize the capacity of each biofuel to reduce emissions individually per production unit. Basically, there are two main instruments:
1) Establishment of national fuel matrix emission reduction targets, set for a period of 10 years. The goals are important to bring predictability, in terms of volumetric fuel needs (fossil and renewable) in this time horizon, and thus allow private agents to make their planning and investment analysis in a less uncertain environment. National targets are to be broken down into individual annual mandatory targets for all fuel distributors, according to their participation in the fossil fuel market;
2) Certification of biofuels production by private inspector firms, giving different grades for each producing unit (higher will be the grade for the producer that produces the largest amount of net energy, with lower CO2e emissions, in the life cycle). The note will accurately reflect each producer agent's individual contribution to mitigating a specific amount of greenhouse gases relative to their fossil substitute (in terms of tons of CO2e). The certification process of biofuel production under RenovaBio will be under the responsibility of the ANP.
These two instruments are to be linked with the creation of the Biofuel Decarbonization Credit (CBIO), a financial asset, traded on the stock exchange, issued by the biofuel producer, from the commercialization of its production (after issuing the invoice). Fuel distributors shall meet the target by demonstrating the required amount of CBIOs on their property. Other agents (individuals and companies) may buy and sell CBIOs on the stock exchange, as a way to bring greater liquidity to this market.
Want to know more about this policy ? Learn more (Portoguese)