<article><p class="lead"><i>Brazil's natural gas certification sector has only started developing, with many natural gas-intensive industries eyeing GAS-RECs as a way to decarbonizing production, said </i><b>Fernando Lopes</b><i>, the director of Instituto Totum, which certifies Gas-RECs and I-RECs in Brazil. He spoke to Argus about the status of the industry. Edited highlights follow.</i></p><p class="lead"><b>What is the current state of gas certification in Brazil?</b></p><p class="lead">We launched the biomethane certification, Gas Rec, in Brazil in 2020. Today, we have two registered biogas production units: Adecoagro, which is an ethanol production plant in the sugar-alcoholic sector, turning vinasse into biomethane, and a sanitary landfill owned by MDC, in Fortaleza.</p><p>We went to the International REC Standard Foundation to file this new product and became GAS-REC code managers. </p><p>The first transaction with these certificates [in Brazil] happened last year, for a company called Metso. It is a [metals and mining service company] from Sao Paulo state's countryside that wants to have a renewable origin certificate for its gas demand.<b></b>And in April, we learned about a second transaction between MDC and Heineken. Metso acquired around 50,000 certificates. And Heineken would have acquired around 500,000 certificates.</p><p class="lead"><b>What kind of company is interested in these certificates?</b></p><p class="lead">These are companies that use gas very intensively. For example, industries in the glass, food and beverage and ceramic sectors. Plants that work with ammonia also use natural gas as an important feedstock.</p><p>As they are large gas consumers, their carbon footprint in scope 1 emissions [related to a company's operations] is very high. They want to reduce the carbon footprint of scope 1, appropriating the environmental attributes of biomethane. So, they are looking for the sustainable origin guarantee for this gas, acquiring the biomethane certificates.</p><p class="lead"><b>Can we expect more plants to be certified soon?</b></p><p class="lead">We have three or four plants in the registration process.</p><p>Taking this biogas and upgrading it to biomethane, so that it can be used, for example, as a substitute for natural gas, is a more complicated and expensive process [than biogas generation]. It requires a certain scale that is present mainly in the sanitary landfills and sugarcane sector.</p><p>Some small plants, mainly agricultural and livestock waste, make use of biogas, but for some of them it is not worth it upgrading to biomethane. They usually burn gas in engines for electricity generation and generate I-RECs instead of Gas-RECs.</p><p>What some people are already working on is the creation of [biomethane production] hubs. In Santa Catarina state, which has a lot of swine livestock, producers are not able to individually upgrade [the waste stream] to biomethane. However, if several producers come together, a biomethane production hub can be created.</p><p class="lead"><b>How has the IREC market been advancing in Brazil?</b></p><p class="lead">This year we expect to double the number of IRECs issued from 2022 to around 40mn-50mn.</p><p>There is a type of transaction in which companies buy IRECs in the first quarter to account for their power consumption during the year in their sustainability reports. There are other companies that sign contracts for buying certificates every month. Seasonality still exists, but as new players enter the market, old players migrate from this one-shot approach to a monthly approach. While the market is growing, seasonality should continue to exist.</p><p>IREC prices are at around $0.30-0.50. IRECs from hydrogeneration are closer to $0.30, since there is a larger volume of them, while solar generation IRECs are closer to $0.50. If there is any sustainability certification connected to that IREC, like the REC Brasil stamp, it can add a 20pc premium to the price.</p><p class="bylines">By Rebecca Gompertz</p></article>
