Brazil cuts carbon credit tax after veto override

Brazilian lawmakers upheld a sharp tax cut on Cbio carbon credits after overturning a presidential veto that had cast a cloud over early trading in the main financial instrument driving a new Renovabio biofuels program.

President Jair Bolsonaro had vetoed an amendment tacked on to a broader farm bill in early April that would have slashed the tax on Cbios to 15pc from 40pc, but with a promise to the biofuels industry of presenting separate legislation with the same effect.

But no new government-sponsored tax-cut bill materialized, leaving a void after Cbios trading on the B3 stock exchange kicked off in late April. Liquidity has remained thin because of uncertainty over future tax liabilities.

Brazil's leading sugar and ethanol association Unica celebrated the near-unanimous congressional vote to override the veto, adding that the lower tax will help to attract more low-carbon investment.

For congressman Arnaldo Jardim, president of the sugar and ethanol caucus in the lower house, the vote helps the sector to overcome an obstacle to fully implementing Renovabio.

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.