Brazil biofuels program delayed as government worries over impact

Source: By José Roberto Gomes, Marcelo Teixeira, Reuters • Posted: Wednesday, October 25, 2017

SAO PAULO, Oct 23 (Reuters) – A program to boost biofuels usage in Brazil that was on the verge of being launched three months ago has stalled on the president’s desk, an official said on Monday, as the government weighs its potential impact on the economy and industry.

The government-led program, called RenovaBio, would boost the market share of renewable fuels such as ethanol and biodiesel through mandates for fuel distributors that would force them to gradually increase the volume of biofuels they sell.

President Michel Temer’s office, answering a request for comment from Reuters about the status of the program, said it was still ‘under evaluation’ and there was no date set for a draft bill to be sent to Congress.

The evaluation of Temer’s team was that it was unlikely that the program would be approved by Congress this year, said a government source who was present at a meeting two weeks ago held between biofuel producers, the president, and other officials involved with the program.

During the meeting, the president said that there were still impact studies to be done, according to the source, who was not authorized to speak publicly about the issue and asked not to be named.

The Finance Ministry has been questioning a possible impact on inflation if fuel prices went up as a result of increased biofuels blending and distribution, said a source from the ethanol sector taking part in talks on the proposal, who asked not to be named considering the sensitivity of those talks.

“All impacts of a program such as RenovaBio should be evaluated technically, including potential impacts over fuel prices and inflation”, said the Ministry in an e-mailed statement.

The program would mandate increasing minimum volumes of biodiesel and ethanol for fuel distributors to sell, tracked by emissions reductions certificates that can be traded on a secondary market to meet quotas.

Biofuel producers see the program as a crucial lifeline in their struggle to compete with petroleum-based products.

It also has the support of environmental groups in Brazil, who say it is the only way to guarantee that an expected fuel shortfall in the country is met with higher ethanol and biodiesel production instead of imported gasoline and diesel.

But the fuel distribution industry and state-controlled oil company Petróleo Brasileiro SA (Petrobras) have criticized the plan.

Petrobras told Reuters by email last week that it was not against biofuels in general, but that the proposal “could be improved to help balance Brazil’s fuels market.” (Additional reporting by Lisandra Paraguassu and Silvio Cascione in Brasília; Editing by Brad Haynes and Rosalba O‘Brien)