CBios Will Be Environmental Assets; Regulation Will Be the Responsibility of CNPE

by Renata Bossle (novaCana.com) Rules for issuing and trading credits created by RenovaBio now depend on new resolution. -- In a meeting held yesterday (22), representatives of the Ministry of Mines and Energy (MME), the Ministry of Economy, the Central Bank (BC), the Ministry of Agriculture, Livestock and Supply (Mapa) and B3 established that the credits of decarbonization created by the RenovaBio program, the so-called CBios, will be marketed as environmental assets.

According to a report by Valor Econômico, this implies that credit negotiations must take place along the lines of securities. In addition, the report points out that CBios trading rules should provide for limitations on speculative activity, at least at the outset. As a result, traders must have a limit on purchases. In the medium term, however, the idea is to include other market tools.

According to a statement sent by the MME to the press, B3 representatives stated that other assets available in its operating system, which already has financial availability to meet RenovaBio's requirements, will be used as a model. “From now on, the Exchange expects to look for potential interlocutors, which include bookkeepers, banks and brokerage firms, to help build the registration and trading environment,” he adds.

At the meeting, it was also established that the Central Bank will not need to regulate the CBios.

Thus, the CNPE will have to approve a resolution before RenovaBio comes into force in 2020. The text should deal with the issuance, maturity, distribution, intermediation, custody and trading rules of CBios.

Paulo Costa, MME's biodiesel coordinator, explains that after the ANP analyzes the information provided by the producers, the amount of CBios related to the analyzed production is defined and what was “the commercial process that based this amount”.

With this information in hand, the bank or bookkeeper who has a contract with the producer will record the CBios generated in its internal system and then make them available in the organized market, ie, B3, in a producer account.

From now on, it will be up to the producer to set the offer price of his CBios so that any interested party - distributor, individual, investor - can buy. As the distributors will have a goal of CBios to be acquired annually, they will close deals with producers and accumulate credits, says Costa.

The manager also adds that, as CBios will be available in an open market, anyone could buy the securities, with the market going beyond distributors. Thus, he expects the bonds to be "fairly liquid." "This is what will help in pricing this new asset," he says, adding: "But this whole trading process still lacks regulation."

Decision encountered obstacles

The choice to classify CBios as environmental assets, taken just four months before the bond was originally scheduled to begin, came after a series of controversies. At first, CBios would be characterized as real estate, but a report coordinated by the Choices Institute, to which novaCana had access, concluded that this would not be possible.

The justification is that securities that receive the classification of real estate value generate a right of participation, partnership or remuneration, which would not be the case of CBios. In addition, the commercialization of CBios would be related to goals set by the government and not to the objective of financial income.

Thus, the proposal was for CBios to be financial assets and, in this case, regulation would become the responsibility of the Central Bank.