EVs drive Brazil closer to decarbonization goals

Spanish Market: Biofuels
06/10/23

The growing number of electrified vehicles (EVs) in Brazil's passenger car fleet should help move the country towards its 2030 goal of reducing carbon intensity by 10pc, set under Renovabio, the country's national biofuel policy.

A proposed update to Renovabio, which classifies 2024 and 2025 as "years of transition," envisages a steep reduction in the target for Cbio carbon credits. The mines and energy ministry has proposed a 24pc reduction in next year's target to 38.78mn Cbios from the previous 50.8mn target. The revision considered the risks of increasing the regulatory cost to the distributors — known as the "obligated party" — and rising fuel prices, according to the ministry.

The ministry noted that the 50.8mn goal carried a risk of anticipating the intended reduction in carbon intensity, Argus has learned. In the face of the discussion about the decarbonization cost, the ministry chose to smooth the intensity curve on the way to the 2030 goal of 64mn Cbios, a target with a 10pc decrease in carbon intensity from 2018.

Although indirect, Brazil's increased acceptance of EVs should help the country reach its Renovabio goals. "There is a very high expectation that part of the decarbonization will be done through a greater penetration of EVs, especially among light vehicles," the mines and energy ministry's biofuels department director Marlon Arraes said.

The greater presence of EVs tends to reduce demand for fossil fuels, contributing to the decline in carbon intensity. The ministry estimates that EVs may represent about 25pc of the market in 2030. In 2022, electric or hybrid cars accounted for 2.5pc of total sales in Brazil, according to the national association of motor vehicle manufacturers (Anfavea).

On the supply side of Cbios under Renovabio, the government works with the prospect of increasing the eligibility of corn ethanol and biodiesel, which have struggled to meet place-of-origin requirements for raw materials. Better traceability of corn and soybeans tends to increase the volume eligible to generate Cbios. Around 42pc of biodiesel production is eligible to generate Cbios, compared with around 90pc of sugarcane-based hydrous ethanol output.

"Biodiesel is the main vector for decarbonization of the fleet of heavy vehicles," Arraes said. The ministry considers that each percentage point of mixing biodiesel with diesel results in an additional 500,000 Cbios/yr. That figure could increase with a biodiesel industry proposal to increase the blending mandate to 15pc from the current 12pc.

In addition to the measurement of carbon intensity throughout the cycle, the proposed Renovabio update also includes the introduction of tolerance intervals 20pc above or below annual targets.

The ministry's proposed updates to the 2024-2033 cycle are now open to public comments. Contributions will be considered by the Renovabio Committee before a final proposal is submitted for approval by the national energy policy council CNPE.

Growing delinquency

The deadline for proving Cbio targets for the year 2022 ended on 30 September. Of the 141 covered distributors, 90 retired the Cbios within the deadline, while 51 did not meet the goal, according to information from hydrocarbons regulator ANP.

The number of delinquent distributors is double that from the 2021 and 2020 cycles and reflects increased criticism of the Renovabio program among distributors. Partial or complete non-compliance with the goal is subject to a fine.

"I confess that I was a little surprised by this high number, because exceptionally we had a very long period, 21 months, to comply with this cycle," ANP's deputy superintendent for biofuels and product quality Fabio Vinhado said earlier this week on a panel at a biodiesel conference in Sao Paulo state.

The retirement of Cbios — the end of the credits lifecycle — between January 2022 and the end of September totaled 100pc of the 36.7mn target for 2022 target. There are 28mn Cbios available on the market, equivalent to about 75pc of the 37.5mn target for 2023.

The previous government had adjusted deadlines for 2022 and 2023 from the initial 31 December cutoff. The target for 2023 must be met by March 2024. The return of the calendar-year cycle will resume in 2024, when the target must be met by 31 December.

Under Renovabio, each Cbio generated from the sale of biofuel represents one ton of avoided CO2. The program sets annual targets for reducing greenhouse gas emissions for fuel distributors. The goals are achieved through the acquisition of Cbios marketed by biofuel producers.

By Conrado Mazzoni

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