| SAO PAULO, April 25
SAO PAULO, April 25 The Brazilian government is
evaluating setting biofuel mandates to fuel distributors with
the aim of increasing consumption of renewable fuels and cutting
carbon emissions, the country’s biofuels director Miguel de
Oliveira said on Tuesday.
Ethanol and biodiesel mills would issue certificates of
emissions reductions (CERs) that would be transferred to fuel
distributors when they buy the biofuels. Each distributor would
be required to hold a certain number of CERs at the end of a
year, according to mandates that would be set by the government.
The system would also create a secondary market for the
CERs, possibly at local exchange B3, Oliveira said, since fuel
distributors that do not have enough certificates would have to
buy them the market to fulfill their mandates, similar to
requirements in carbon markets in Europe and California.
The proposal is the main component of a program called
RenovaBio that intends to revamp Brazil's biofuels sector, which
is competing with cheaper gasoline and diesel as international
oil prices remain near historical low levels.
Oliveira said the system would give a lifeline to sugar and
ethanol mills and biodiesel producers.
"If this sector remains in the situation it is in today,
companies are likely to close down, production of hydrous
ethanol could be sharply reduced,” he said during an
international sugar and ethanol seminar hosted by F.O. Licht in
Hydrous ethanol competes with gasoline as the choice of
flexible-fuel vehicle owners in Brazil, since the vehicles can
run on any combination of the two fuels.
Hydrous ethanol has lost market share over the last two
years in Brazil, and the trend is expected to continue since oil
giant Petrobras recently adopted a new pricing policy
that will closely follows international oil values.
As a consequence, mills are allocating much more cane to
sugar production, which currently offers better returns. Ethanol
production fell last season and is expected to decline again as
the new crop starts in Brazil.
The mandates system may require approval by both houses of
Congress before it can be adopted. Oliveira said the proposal
could be put to a vote this year. He expects it to be
implemented around 2019.
(Editing by Jeffrey Benkoe)