Brazil’s senate approves environmentally-friendly biofuels law

December 13, 2017

Latin News

On 12 December, Brazil’s senate has green-lighted a new law to boost consumption of biofuels such as ethanol and biodiesel.

Significance: The aim of the bill, called 'Renovabio', is to double the domestic production of ethanol by 2030 and incentivise the use of other forms of renewable energy. Investing in alternatives to fossil fuels could help Brazil cut its greenhouse gas emissions in line with the 2015 United Nations cimate accord (COP21). Having already been approved by the chamber of deputies, the bill now passes to President Michel Temer to be sanctioned.

The bill was drawn up by the energy and mines ministry last year and is designed to bring biofuels regulations up to date. It will increase production by ruling that all fuel distributors must incrementally increase the amount of biofuels they sell each year. Fuel distributors will also need to prove that they are able to meet national carbon emissions targets by obtaining certificates known as 'CBios'.

Besides benefitting the environment and public health by reducing pollution, investing in renewable energy makes business sense, argue the bill’s proponents. A representative from Brazil’s federation for sugar cane planters (Feplana), Andrade Lima, told trade website Notícias Agrícolas that this could bring over R$1.4trn (US$423.4bn) in investment.

The new bill is particularly good news for producers of sugar cane, which can be used to make ethanol. Brazil’s economic recession was devastating for many sugar cane producers so the opportunity to sell more ethanol could aid their economic recovery and also trigger a wave of mergers and acquisitions to consolidate a sector with high levels of debt.

However, some still harbour reservations about the bill. Temer’s financial team is concerned that the new regulations for fuel providers could drive up costs for both consumers and fuel producers and may also affect inflation. Others from the legal community are concerned that the regulations lack clarity, since some details about their implementation have not been yet been finalised.

Looking Ahead: Currently, Brazil is the world’s second largest producer of biofuels and generated around 27bn litres of ethanol and 4.2bn litres of biodiesel in 2017, according to senator Cidinho Santos from the environmental committee. It may become an even larger producer once the bill is sanctioned and comes into effect from 2020.

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Latin American Newsletters (LatinNews) was founded in London in 1967 to provide expert political, economic, and security analysis on Latin America and the Caribbean. For nearly 50 years, it has been acknowledged as the foremost authority on the region.

Tags: brazil, energy, fuel, investment, investor, latam, latin, oil, renewable energy
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