Advanced BioFuels USA

byPeter Millard and Tatiana Freitas (Bloomberg)  Some call the program ‘inefficient.’ Others say it’s downright flawed. Either way, the sharpest critics say RenovaBio is not living up to its promise. — … At best, the program known as RenovaBio that mandates fuel distributors purchase biofuel credits is “asymmetrical” and “inefficient,” with an expected shortage of credits driving prices to more than triple since the start of the year, said Joisa Dutra, a professor at the Fundacao Getulio Vargas business school who has studied the program. At worst, its sharpest critics say, the program overpromises on emissions impact, ignores international standards and risks shrinking the potential market for other carbon credits — ones they say could more directly help the country meet its climate goals. READ MORE

Prices triple in Brazil’s unilateral market for carbon credits (Trending News)

Brazil Southeastern ethanol, gasoline prices diverge on tax cuts (S&P Global)

Excerpt from Trending News: As it turns out, Brazilian flex-fuel cars that run on ethanol produce less carbon dioxide per mile than European electric vehicles. Brazil’s energy ministry said fuel distributors avoided emitting 24 million tons of greenhouse gases in 2021 thanks to the program. In short, leaning into biofuels such as sugarcane ethanol as a solution to climate change just makes sense given the country’s status as a global agricultural powerhouse, supporters of the program say.

The program is an example of how difficult it is to satisfy all parties when trying to meet climate pledges set out under the Paris Agreement. Cut off a goal that is too ambitious and the project may fail; Take too small a step forward and critics will cry greenwashing. And unlike other publicly traded commodities such as a barrel of oil or an ounce of gold, there is debate about how to measure one ton of carbon removed from the atmosphere in the first place. That means every attempt to measure it is under the microscope – and in an increasingly ESG-minded world, not all carbon-reduction plans will eventually be necessary.

The way this specific program is set up, biofuel producers and importers generate decarbonization credits, known as CBIOs, which represent one ton of carbon that would have been emitted in an equivalent amount of fossil fuels. In turn, fossil fuel distributors are required to purchase CBIO to meet their decarbonization goals. Credits commenced trading in 2020.

But the program runs into some problems – big or small, depending on who you ask. For one, it is one-sided: The government sets a target for the number of CBIOs that need to be procured, but there is no uniform quota for the number that need to be built. This is putting pressure on availability and skyrocketing prices – an additional cost for fuel distributors that inevitably trickles down to the consumer in the form of higher gasoline prices, though perhaps only a few centavos per litre. At current prices, fuel distributors would need to spend about 7.5 billion reais ($1.4 billion) on CBIO next year to meet the government’s target, which is six times more than last year.

Why are prices rising? For one, fuel distributors are required to purchase 45% more of these credits this year than in 2021, but biofuel production has actually been declining since 2019. Brazil’s main sugar industry association, UNICA, argues that ethanol producers are on track to supply enough. CBIO will fulfill the demand this year; Still, fuel distributors are nervous about the future. According to estimates from FG/A, a consulting firm based in the state of So Paulo, Brazil’s ethanol production must nearly double by 2026 to meet the CBIO’s goals, an unlikely scenario as there are no major ethanol expansions in the works.  READ MORE