Brazil biodiesel rule change could create 1.5bn litre import opportunity

Quantum Commodity Intelligence – Brazil's fuel regulator has moved to open up its domestic biodiesel mandate to imports in a move that could allow billions of litres of foreign biodiesel to be blended for the first time.

The National Agency for Petroleum, Natural Gas and Biofuels (ANP) said Thursday its board had passed resolutions removing rules excluding imported biodiesel from being used to meet the blend target and allowing suppliers to use up to 20% of imports to meet their obligation.

Brazil's biodiesel mandate currently stands at 12%, creating demand for locally produced biodiesel that is on track to hit 7.4 billion litres this year, but the change would allow fuel suppliers to use up to 1.5 billion litres of imported product.

That would be equal to around half of the annual biodiesel demand in Europe's largest consumers France and Germany.

That blend target is scheduled to reach 15% by 2026, which alongside projected growth in overall diesel demand would likely bump up biodiesel use and the potential for imports even further.

Further developments will be eyed with keen interest by exporters in the US, Europe and China, as well as in countries currently largely excluded from selling to the US and Europe by trade defence measures, such as neighbouring Argentina and Indonesia.

Lobbying

The government's National Council for Energy Policy (CNPE) which initially granted ANP the power to make the changes to import rules in a 2020 resolution could still potentially reverse the latest move if it was now deemed against the national interest.

Local producers have argued against the latest change, which has been mooted previously by ANP several times, arguing that domestic biodiesel nameplate capacity estimated at around 15.2 billion litres is already heavily under-utilised.

"[The] import regulation, in addition to creating obstacles to the energy transition, can generate predatory competition on the part of international players, who are heavily subsidized in the field of exports and without commitment to the legal and social obligations followed by national plants," said producer group Ubrabio.

While Brazil's domestic biodiesel industry is still under capacity and the agricultural sector is a powerful lobby, politicians and regulators have also grappled with the need to keep a lid on fuel price inflation that could be worsened by greater biodiesel use.

That includes a move last month to open up the country's parallel program for cutting emissions in transport fuels, RenovaBio, to more producers including biodiesel ones, to help increase the supply of credits and lower costs for meeting GHG reduction targets.

Resolutions

ANP's latest resolution would make changes to its previous 777/2019 and 857/2021 resolutions, removing constraints that imported biodiesel could only be used for the buyer's own consumption or for experimental uses and on changing import rules.

Its ability to allow more than 20% imports in the commercialisation system set up between fuel distributors and biodiesel suppliers for supplying the blend mandate was capped though by the same CNPE resolution granting it the power to regulate the market.

The CNPE's resolution said a minimum 80% of biodiesel sold for use in the mandate had to have the country's Social Biofuel Seal, which proves producers aided local smallholder farmers in providing feedstocks.