Q&A: Brazil can supply RNG mandate, transport

Sao Paulo, 17 July (Argus) — Brazil's biomethane industry expects the upcoming mandate under the fuel of the future law and the expansion of renewable gas use in heavy-duty transport to develop alongside each other, supported by growing supply and the emergence of a biomethane certificate market. Argus spoke with Felipe Souza Marques, chief executive of Brazilian international center for renewable energies CiBiogas, about the interaction between the mandate and transport demand, the role of CGOB certificates, bottlenecks to market growth and the regions best positioned to lead biomethane adoption. Edited highlights follow:

Will the biomethane mandate and the heavy-duty transport market compete for the same volumes, or can they complement each other?

Regulation points to complementarity rather than direct competition for biomethane volumes. Over time, that complementarity is expected to strengthen as the certificate market matures. The expectation is that CGOBs will reduce pressure on physical biomethane demand, allowing the gas molecule to be sold more competitively when detached from its environmental attribute.

In the near term, localized supply tensions may emerge because production remains concentrated. Regions that combine significant biomethane production with strong industrial gas demand, such as Sao Paulo, are more likely to experience competition for supply until new projects come on line.

How does CIBiogas assess the long-term economic viability of replacing diesel with biomethane?

Biomethane's competitiveness extends beyond diesel price volatility. The CGOB creates a mechanism to monetize biomethane's environmental value. At the same time, compressed natural gas can serve as a transition fuel while the biomethane market scales up. Growing demand for lower-carbon logistics from export-oriented supply chains is also increasing the value of decarbonized freight contracts.

Dedicated-fleet projects are expected to become more common, following models such as BioRota, recently launched by Coopersucar. In these cases, producers can improve the competitiveness of their core products by reducing logistics emissions.

On supply, CIBiogas estimates Brazil's technical biomethane potential at 90bn m³/yr and its economic potential at 30bn m³/yr. Current consumption for grid injection and vehicle use totals roughly 90mn m³/yr, leaving substantial room for growth. Even if CNPE targets lift biomethane demand to 7bn m³/yr before 2035, CIBiogas argues there would still be sufficient economic potential to serve both compliance markets and heavy-duty transport. The main challenge is not resource availability but the pace of project development and infrastructure expansion.

What is necessary for biomethane in heavy-duty transport to scale in Brazil?

The main bottlenecks are limited infrastructure between production and gas distribution networks, the need for further maturation of the CGOB system, limited availability of competitively priced vehicle technology and maintenance services, and restricted access to financing for biogas and biomethane projects.

Each stakeholder has a role. The government should provide predictable regulation and annual target-setting while encouraging initiatives like Sao Paulo's green distribution tariff. Biomethane producers need to invest in upgrading capacity and distribution logistics backed by long-term contracts. Transport operators should focus on captive fleets and fixed routes, where economics are easier to demonstrate. Shippers can stimulate demand by incorporating decarbonized logistics requirements into procurement contracts. Truck manufacturers need to expand the availability of natural gas- and biomethane-powered vehicles as well as after-sales support networks.

Are there international models that could accelerate biomethane adoption in Brazil?

Yes. In Europe, Guarantees of Origin verify renewable gas attributes and support cross-border biomethane trade. In the US, Renewable Identification Numbers under the Renewable Fuel Standard and state-level programs such as California's LCFS generate tradeable credits that monetize decarbonization. According to the International Energy Agency, certification mechanisms such as these have supported average annual growth of 28pc in transport-sector biomethane consumption over the past five years in countries where they have been adopted.

Brazil's CGOB framework follows the same principle by separating the physical molecule from its environmental attribute. However, the system is still at an early stage, with implementing regulations issued only in 2026.

What lessons have emerged from fleets already using biomethane?

Experience to date suggests biomethane performs best in captive fleets operating fixed routes with centralized refueling infrastructure. This reduces dependence on a broader station network, which remains concentrated near production hubs. Municipal transit and waste collection operations in Sao Paulo demonstrate that biomethane can be deployed successfully at urban scale.

The most common challenges involve the geographic concentration of supply, the limited maturity of long-term supply contracts and the need for specialized vehicle maintenance. On the positive side, operators frequently report favorable operating costs on routes where biomethane or natural gas is already competitive with diesel. The fuel also provides reputational and ESG (environmental-social-governmental) benefits for shippers seeking lower-carbon logistics solutions.

Which regions are best positioned to lead biomethane growth in heavy-duty transport?

Sao Paulo remains the clear frontrunner. It is Brazil's largest biogas producer, directs around one-third of production to biomethane and benefits from a relatively advanced regulatory framework. Several interconnection projects are also under development.

Parana and Minas Gerais are the next wave of growth, having grown by 26pc/yr and 25pc/yr, respectively, over the past five years. Pernambuco is also posting steady growth, while Ceara stands out for hosting the country's first biomethane plant connected to the natural gas grid and for converting most local biogas production into biomethane.

Different regions have different strengths, ranging from industrial demand in Sao Paulo to agricultural feedstocks in Parana and Minas Gerais and sanitation-based projects in Ceara and Rio de Janeiro.

CIBiogas also expects green transport corridors to gain traction in Brazil over the medium term, particularly in the center-west and northeast regions.

How can investment in fueling infrastructure be unlocked?

CIBiogas sees Sao Paulo's green distribution tariff (TUSD Verde) as a potentially replicable model, although implementation should be evaluated on a state-by-state basis.

The framework follows a phased approach that includes calls for interested parties, economic feasibility assessments, public consultation and ultimately network access agreements between distributors and biomethane suppliers. The mechanism enables a more flexible allocation of infrastructure costs between producers and distribution companies.

Infrastructure costs are likely to be shared. Biomethane producers would finance part of the interconnection and upgrade investments. Gas distributors would invest in network expansion and public-sector incentives such as REIDI would reduce project capital costs.

The business models viewed as most promising include clustered interconnection projects, dedicated isolated networks in areas without pipeline access and additional revenue streams generated by CGOB trading.