Brazil lifts biodiesel blending mandate to 12pc

Brazil's national energy policy council CNPE settled the biodiesel blending mandate for April at 12pc, up from 10pc, after a meeting with the president Luiz Inacio Lula da Silva today.

The mandatory biodiesel blending mandate for diesel fuel will rise every April through 2026, starting at 12pc this year and climbing to 13pc in 2024, 14pc in 2025, and 15pc in 2026.

The ministry of mines and energy said it could consider speeding up the pace of the blending mandate increase, based on the CNPE's assessments of supply, demand and economic impacts.

Mines and energy minister Alexandre Silveira said the decision "rescues the national program for biodiesel production and use and reinforces the national energy transition strategy."

Silveira estimates Brazil's biodiesel output will rise to more than 10bn l/yr (173,424 b/d) from 6.3bn l/yr currently. The minister also expects diesel imports to drop by 1bn l (17,232 b/d) this year and by 4bn l (68,929 b/d) in 2026.

Former president Jair Bolsonaro in November 2021 reduced the blend mandate to 10pc through 2022 as part of an effort to contain retail diesel prices, and that level that was extended last November through March this year.

CNPE's decision was welcomed by producers and fuel distributors, as the majority expected an increase to 12pc in April.

But the decision to increase the mixture by 1 percentage point per year until 2026 to reach 15pc came as a surprise, as most producers expected the mandate to reach 15pc in March 2024.

Plant operators expect that biofuel inventories that built up in February and March will be used to fulfill the increase in demand in early April.

"This initiative brings predictability and security for the biodiesel sector to increase investments and places Brazil on the path of world leadership in the decarbonization of diesel," Brazil's vegetable oil industries association Abiove told.

The government's much-awaited decision will unlock negotiations to supply the market next month. The deadline to send contract data to oil regulator ANP is 25 March.

By Laura Guedes and Alexandre Melo