Brazil to cut carbon credit goals for fuel distributors

Brazil's hydrocarbons regulator ANP will reduce individual carbon credit targets for fuel distribution companies for 2020, after it halved the industry's overall pre-pandemic target as a result of the economic slowdown.

On 10 September, Brazil's energy policy council CNPE slashed the overall 2020 target for the sale of Cbios – financial instruments traded on the B3 exchange that are issued to biofuel producers as carbon credits – to 14.53mn credits from the previous 28.7mn.

Each Cbio is equivalent to removing one metric ton of CO2 from the atmosphere through the substitution of fossil fuels by biofuels.

The ANP said its next task is to adjust the individual Cbio targets for fuel distributors, which are required to purchase the credits from biofuel producers to offset the greenhouse gas emissions of their fossil fuel sales in the previous calendar year.

Cbios are the main pillar of Renovabio biofuels law that aims to slash Brazil's greenhouse gas emissions by 43pc from 2005 levels by 2030.

Soon after the pandemic restrictions were imposed in mid-March, fuel sales plummeted, but have since bounced back. Gasoline sales were down by just 0.5pc and diesel sales were 0.6pc lower in the first two weeks of September compared to the same period of 2019, according to preliminary data from the mines and energy ministry.

Cbios sales have also rebounded, according to data compiled by sugar and ethanol producers' association Unica. Over 16-22 September, nearly 550,000 Cbios were sold to distributors at between R23.50 ($4.22) and R32 each. This is equivalent to roughly 50pc of the total number of Cbios purchased by distributors since the end of April, according to Unica.

Some fuel distributors have called for the temporary suspension of the program because of rising uncertainty owing to the Covid-19 pandemic, but the government is so far staying the course, with more modest targets.