The Brazilian carbon credit program Cbios survived its 2020 rollout despite the Covid-19-impact on motor fuels demand, and should continue to grow in 2021.
Biofuel producers exceeded the 2020 target of issuing 14.5mn carbon credits, known as Cbios, set in early September. The original goal for 2020 was established at 28.7mn Cbios but was halved by the Brazilian energy policy council (CNPE) due to the pandemic.
Biofuel producers in Brazil issued a total of 18.2mn Cbios from April 27 until 29 December, according to figures from Brazilian stock exchange B3, which handles the carbon credit trade.Each Cbio is equivalent to removing one metric ton of CO2 from the atmosphere by increased biofuel production. Cbios trading is the main milestone of the Renovabio law, started in 2017 and officially enacted in December 2019.
The program should continue to consolidate in 2021 as regulators seek to adapt decarbonization targets to the post-pandemic reality and meet a growing demand for non-obligated parties to use the credits to offset their carbon footprints.
The first Cbio transaction was made on 15 June at an average cost of R50 ($9.70). The price hit a low of R15 by the end of June and reached its peak on 4 November of R72. On 15 December trades were made at an average of R41, while the average price from all trades so far stood at R34.5. During the same period, B3 reported negotiations of 22.3mn Cbios and 6.4mn retired credits.
"We are offering more Cbios than distributors were obliged to acquire, while we are confident that the program's target will be fulfilled," said the technical director of sugar and ethanol industry association Unica, Antonio de Padua Rodrigues.
The Brazilian government also reviewed the targets of Cbios acquisitions for the following years, setting a target of 24.8mn for 2021 and 34.1mn for 2022. Estimates by certifier Green Domus point for 32mn-35mn Cbios in 2021, while a higher level of issuance could be required by 2022.
Further reviews in sight
Brazil's oil regulator ANP is currently conducting a public consultation to evaluate whether Cbios acquisition targets for designated parties should be reviewed, given that individuals and companies outside the initial scope of Brazil's fuels market are allowed to acquire credits. Some companies other than fuel retailers could be seeking to acquire Cbios to tackle their carbon footprint, according to ANP. The agency plans to regulate procedures for individual target reductions in line with the amount of Cbios acquired by non-obligated parties.
The current Renovabio framework foresees this issue, stating that individual targets should consider the 12-month period ending in September each year, enabling revisions in the obligated parties target before the deadline at the end of the year. One of the proposals would discount retired Cbios acquired by non-obliged parts from the target by distributors. The regulator would then publish the amount of retired credits on 1 November so distributors would have time to adjust their yearly objective. The regulator is also discussing whether distributors that surpass targets in a calendar year may use those credits for the following year.
Some distributors have already disclosed their goal of reducing acquisition targets. Brazilian fuel distributor association Brasilcom filed a lawsuit to further reduce Cbios acquisition targets by 50pc, even after the September target reduction. In early December Brazil´s second highest court STJ rejected Brasilcom's allegation of insufficient market supply of Cbios.
