Brazil carbon credits miss price expectations

Brazil's B3 commodities exchange registered its second sale of Cbio carbon credits at prices below initial market expectations, as the biofuels industry awaits a revised 2020 official target for sales of the credits to better match lower demand in the Covid-19 scenario.

The sale of 2,000 Cbios at R15 ($2.75) per credit was registered under the non-required section of the credits' trading platform, well below the estimated price of $10 that had been projected as their likely price prior to open trading.

Brazil's fuel distributors must buy the credits to offset their annual sales of fossil fuels as part of the Renovabio biofuels law that took effect this year.

The exchange specifies volumes and prices, but not the identity of buyers and sellers of the credits.

So far, biofuel producers have registered over 1mn Cbios on the B3 exchange.

Each credit is equivalent to one metric ton of CO2 removed from the atmosphere through the use of biofuels such as ethanol and biodiesel instead of gasoline and other fossil fuels.

The first sale of the credits registered was for 100 Cbios at a price of R50 per credit on 12 June, but it was seen as a symbolic trade.

In April, the mines and energy ministry called for a review of the official target of 28.7mn Cbios this year, saying there was no guarantee that biofuel producers will sell enough biofuel to generate the targeted number of credits.

On 5 June, the ministry began public hearings to revise the target after proposing to reduce it by 50pc to 14.5mn for this year.

Despite the slow start to trading, the industry remains optimistic about Renovabio. "This is a game-changing program for the cane sector, regardless of the target for 2020," said Luiz Carlos Carvalho, the president of cane consultancy firm Canaplan.