The RenovaBio Program combines environmental preservation with economic development

Brazil Uncovered -

Brazil is a signatory to the Paris Agreement, a commitment signed in December 2015 by 195 countries with the aim of controlling the planet’s temperature. As the country is the 2nd largest producer and consumer of ethanol and biodiesel for motor vehicles in the world, the RenovaBio Program has been developed to encourage the use of biofuels to replace fossil fuels. This is one of the main initiatives to reduce the emission of greenhouse gases.

Biofuel already has a relevant market share. Ethanol corresponds to almost half of the supply of fuels for light vehicles, while biodiesel meets 8% of diesel demand. Brazil’s international commitment is to go further and expand the share of biofuels to 18% by 2030.

As a result of this policy, it is estimated that by 2030 ethanol and biodiesel production will increase from 30 to 50 billion liters and from 4 to 13 billion liters, respectively. The sector’s new productive capacity has the potential to generate 1.4 million jobs.

RenovaBio was originally created in December 2017 during the Michel Temer administration, vice-president who took over the presidency after ex-president Dilma Rousseff’s impeachment. However, it has come to fruition during president Bolsonaro’s government. A study by the Ministry of Economy in June 2019 showed the traditional subsidy policy largely employed by the Workers’ Party government were incapable of leveraging the country’s growth, as there is no positive relationship between tax waivers and GDP growth. RenovaBio is a good innovation, not guided by traditional policies such as the creation of a carbon tax or subsidies, a common practice of leftist governments, who like big state and use public policies to privilege their ideological partners and always end up in corruption. RenovaBio was conceived as a financial asset (Decarbonization Credit - CBIO) sold in the Stock Exchange and as a result the program is merit based and benefits companies that are more efficient in the production and commercialization of CBIOs.

RenovaBio was conceived after a wide discussion with the private sector aiming to improve on existing biofuel policies in the world, such as the Low Carbon Fuel Standard (LCFS - California USA), Renewable Fuel Standard (RFS - USA) and Renewable Energy Directive (RED - European Union). The program is consistent and brings visibility and legal certainty to the sector.

In essence, the program involves the issuance of CBIO by the biofuel producer, with mandatory targets for the acquisition of CBIO by the fossil fuel distributor. The annual target for commercialization of CBIO will gradually increase from 14.53 million in 2020 (first year of the Program) to 90.67 million in 2030. Each CBIO represents 1 ton of avoided CO2. These quantities have already been revised by the Bolsonaro government in September 2020 to take into account the negative impact of the Chinese virus pandemic in 2020, which has considerably reduced fuel demand in the country. The distributor that does not meet the established target may be fined approximately US$ 10 million dollars.

While important world leaders carry out unfounded attacks on Brazil on account of environmental issues, the Bolsonaro government continues to develop serious work that strengthens the country’s vocation to blend economic development with environment preservation.

Please leave a comment

Brazil Uncovered - Subscribe to our newsletter: Subscribe to our newsletter: