Brazil's biodiesel sector anticipates that a planned March increase in the blend mandate to 16pc from 15pc will be delayed because technical feasibility tests are not expected to be completed until the second half of the year.
The mines and energy ministry MME in November outlined a two-phase schedule for testing higher biodiesel blends. The first phase will evaluate blends of up to 20pc, with completion expected between August 2026 and January 2027, while the second phase will focus on blends of up to 25pc, scheduled for testing from August to December 2027.
Brazil's Future Fuels Law proposes annual increases of 1 percentage point in the mandatory biodiesel blend, reaching 20pc by 2030. The government also intends to increase the biodiesel blend to 25pc by 2035, but this is a future goal and not yet mandatory.
The initiative aims to decarbonize the transportation sector by fostering the production and consumption of advanced biofuels. Most biodiesel producers expect feasibility tests to follow the timeline set by the ministry, with no early completion likely. Consequently, they are keeping production plans aligned with the current mandate. To minimize risk, producers have avoided purchasing additional feedstocks for a 16pc blend and are adjusting profit expectations for 2026.
Brazil's inflation is also a factor in the delay for a 16pc blend. In February, the national energy policy council (CNPE) postponed raising the biodiesel mix to 15pc from 14pc until August, citing concerns that biofuel costs might drive higher inflation. With 2026 as an election year in Brazil, the biodiesel blend mandate will likely slide to the bottom of the government's priority list.
Maintaining the current 15pc mandate in 2026 could eliminate about 592mn litres (10,220 b/d) of biodiesel demand, resulting in 10.47bn l of total demand, according to estimates from state-owned energy research firm EPE.
Biodiesel sales totaled 9.02bn l in 2024, according to oil regulator ANP. For 2025, EPE expects a 9.6pc increase to 9.89bn l. If the 16pc mandate takes effect in March 2026 as scheduled, annual demand could climb nearly 12pc to 11.06bn l.
Long-term optimism
Biodiesel producers are investing in capacity expansions and new plants, eyeing long-term profits, despite prospects of blend hike delays in the short term.
Brazil's current biodiesel production can supply up to 15.5bn l/y at full capacity. Investments in new plants and units in various regions should increase capacity to 18.8bn l by 2028, according to ANP.
The current biodiesel production capacity could already meet a blend exceeding 25pc in 2026, considering the diesel consumption projection from EPE. However, in view of the hike in diesel consumption and increase of 1 percentage point/yr in the biodiesel blending mandate until 2035, biofuel production capacity would need to exceed 22.2bn l/yr, EPE studies show.
The sector's optimism is reinforced by tests already conducted in the market that have proved the possibility of using higher levels of biodiesel. Studies that make a case against increasing blend levels do not follow appropriate protocols, sources familiar with the matter said.
Producers are also investing in certifications to export biodiesel. Europe is the main target market, given its higher demand compared to regions that already produce their own biofuels. Brazilian biodiesel exports totaled more than 83mn l in January-October 2025, up from 67mn l in 2024, according to data from the industry and trade ministry.
