Brazil is considered a country with natural characteristics favorable to agribusiness. With its 8.5 million square kilometers, it is the largest country in South America, the fifth largest in the world, and it has the potential to expand its agricultural capacity without the need to harm the environment. In addition, it has different types of climates, good soil conditions, water, relief, and sunlight, aspects that contribute to its position as the second largest producer of biofuels in the world.

According to data recently released by the National Agency of Petroleum, Natural Gas, and Biofuels (ANP), production by sugar and ethanol plants reached the unprecedented mark of 4.29 billion liters throughout 2017.

In this scenario and considering Brazil’s advances in relation to renewable energy sources initiatives, Law No. 13,576, which created the National Biofuels Policy (RenovaBio), was approved on December 27 of last year. Corresponding regulations were enacted by Federal Decree No. 9,308, published on March 16.
RenovaBio’s aim is to stimulate the production of biofuels, such as ethanol, biodiesel, biogas, biomethane, and bio-kerosene, through tax incentives and targets to reduce greenhouse gas emissions.

The energy sector believes that, with RenovaBio, Brazil will create favorable conditions for private investment, thereby favoring Brazil's energy efficiency and development potential. In addition, the policy encourages conservation of the environment, as it seeks to balance the pillars of sustainability by means of an adequate energy efficiency ratio and reduction of greenhouse gas emissions in the production, selling and distribution, and use of biofuels, including life cycle assessment mechanisms.

It is worth remembering that, on September 21, 2016, Brazil ratified the Paris Agreement, which was approved by the 195 members of the United Nations Framework Convention on Climate Change (UNFCCC), and committed itself to reducing emission levels by 37% for greenhouse gases (GHG) by 2025 and by 43% by 2030 (based on 2005 levels).

In this context, the implementation of RenovaBio will be guided by the decarbonization targets to be stipulated by the government and promised for the second half of 2018. The objective is to improve the carbon intensity of the Brazilian fuel framework over a minimum period of ten years. The annual mandatory goal will be broken down into individual goals for each current year. They will be applied to all fuel distributors in proportion to their participation in the sale and distribution of fossil fuels in the previous year.

These goals will dictate the pace of expansion of the biofuels market and how financial agents will respond to the stimulus to generate new domestic investments.
Law No. 13,576/2017 also provides fines of up to R$ 50 million for fuel distributors that do not comply with what was established. Verification of compliance with the individual targets will be done through the presentation of decarbonization credits (CBIOs) by the distributors.

CBIOs are generated based on the production of qualified renewable fuels: the lower the carbon emission in relation to large-scale renewable energy productivity, the more producers and distributors will be rewarded with these credits, which can be used as compensation for greenhouse gas emission surpluses in compliance with the mandatory targets. In this way, CBIOs serve as a stimulus to the production of biofuels, guiding a mechanism to improve the RenovaBio framework.

The law also created a certification for biofuels, which is a condition for the generation of a CBIO and will be granted to both producers and importers that meet the parameters related to the reduction of GHG emissions. These parameters take into account the biofuel’s entire life cycle and its differential in relation to fossil fuels.

The trend is that, throughout 2018, the metrics for the implementation of the policy as a whole will be regulated, thereby increasing the participation of the various sectors related to the generation and destruction of biofuels. It is hoped, therefore, that the strengthening of RenovaBio will help Brazil meet the targets set out in the Paris Agreement.