Brazil's biomethane sector is growing beyond its first consumer markets, leading to appearance of new strategies, such as the creation of tax incentives and biomethane hubs. Argus spoke to Leidiane Ferronato Mariani, founder of biogas think tank Amplum Biogas, about these new initiatives. Edited highlights follow.
Can tax benefits affect Brazil's biomethane supply, demand or price?
We are monitoring the implementation of tax benefits for the biomethane sector in several Brazilian states. Some states such as Parana, Sao Paulo, Bahia, Mato Grosso and Rio de Janeiro have directly reduced the VAT-like ICMS tax on biomethane sales.
Studies from Amplum Biogás, PSR and Instituto 17 for FIESP and partners showed that the reduction of the ICMS tax could considerably reduce the cost of biomethane, generating greater competitiveness compared to its substitutes. This could become a differentiator for potential producers to continue investing in new plants, increasing supply and demand for biomethane in Brazil.
Other states such as Goias, Parana, Santa Catarina and Rio Grande do Sul, have signed agreements that grant ICMS credits. The states of Goias and Rondonia also offer tax benefits for the purchase of machinery, equipment and materials related to biogas and biomethane.
Do you believe that the entry of natural gas producers into the biomethane market starting next year, through the purchase mandate, could change the profile of the biofuel end consumer?
Some of the motivations for purchasing biomethane include its competitiveness to the price of fossil fuel; voluntary demand for the environmental attribute; and, more recently, the demand to comply with the purchase obligation created by the Fuel of the Future law.
As the biomethane market is still developing, it is difficult to predict how the entry of new consumers, voluntary or mandated, may impact the price, especially when we consider that biomethane may have different markets when we dissociate its molecule from its environmental assets.
Is the use of biomethane in public transportation fleets a potential new market for the fuel?
I believe that this is a very interesting path to developing demand for biomethane in the short and medium term, especially in cities where there is already a natural gas distribution infrastructure.
Companies that supply gas-powered vehicles have been offering more advanced technologies suited to the demands of public transportation and heavy vehicles. With incentives from the government, as cities renew their fleet, gas-powered vehicles would gradually be integrated.
But it is essential that programs of this nature clearly define the standards to prove the actual use of biomethane, either physically or through the purchase of biomethane certificates.
Where do you see Brazil's first biomethane hub?
The definition of "biomethane hub" has a big impact on the answer. A biomethane hub could be implemented in a region that is organizing itself to expand the supply and demand of biomethane on a large scale and for several players.
It is important to have logistics options so that local consumption can take place and the molecule can be made available to other regions.
I imagine that the first biomethane hubs or centers would be in the state of Sao Paulo, with great potential for the cities of Ribeirao Preto, Piracicaba, Araraquara and the metropolitan region. The state of Parana has also been developing a biomethane hub in the Toledo region.
Rio de Janeiro's metropolitan region has the potential to become a hub if supply is further encouraged, as it already has considerable infrastructure for logistics and there is demand for gas in industry and transportation.
