The two largest associations representing the biofuels sector have intensified pressure on the federal government in recent weeks, criticizing the granting subsidies to import of fossil dieselwhile reluctant to meet the biodiesel blend produced in Brazil.
In the request sent last week to the Ministries of Finance, Civil House, Development and Planning, Abiove (Brazilian Association of Oil Industries Vegetais) and Aprobio (Association of Biofuel Producers of Brazil) argue that biodiesel is currently cheaper than its fossil and imported equivalent. A liter of vegetable fuel was priced at R$ 5.10, compared to R$ 6.20 for fossil diesel, in the price until the beginning of this month.
The subsidy for diesel brought from outside the country was one of the measures taken by the Lula (PT) government to try to prevent the war between the United States and Israel against Iran. increase the price of fuel in the country — what can negatively impact the president’s popularity on the eve of the election. Around 25% of the diesel consumed in Brazil is imported.
According to the associations, there is “a lack of equality in the treatment of public policy given to biodiesel compared to fossil diesel”.
At the head of the “Biodiesel Alliance”, Abiove and Aprobio recall that “the tax reform expressly establishes that it is necessary to maintain a competitive differential in favor of biofuels” in relation to fossil fuels.
“Furthermore, at times in the market when the price of biodiesel is above the price of diesel A (fossil), it was never considered to use a subsidy mechanism to guarantee a competitive advantage”, they state, in a letter sent to the government to which the Sheet had access.
In the associations’ assessment, increasing the mixture of biodiesel in the fossil product would be the best way to control the price. The demand is that the country moves towards the mandatory blend of 16% biodiesel, called B16. Today the percentage is 15%.
This change is defined in the Fuel of the Future law, which established a progressive increase schedule year by year. It was predicted that Brazil would move from B15 to B16 by the end of March, which did not happen, due to the council’s postponement.
Behind the government’s resistance would be the fact that, at certain times, biodiesel is more expensive than fossil diesel, due to the volatility of soybean prices, the main raw material for biodiesel. Therefore, increasing its participation in the mandatory mixture can increase the final cost to the consumer in the long term, putting pressure on inflation.
Instead of expanding the use of biodiesel, the Ministries of Mines and Energy, Finance and Budget decided, first, exempt fossil fuel from PIS and Cofins (which also included biodiesel) and then announced the fossil fuel subsidy, which reached R$1.52 per liter in April (for imported diesel).
“Our entities are not coming to you to request an economic subsidy for biodiesel. In our understanding, the correct mechanism for encouraging the use of biodiesel, replacing fossil diesel, already exists in Brazilian public policy: it is about meeting the mandatory addition targets. In this case, the mixture should already be at 16% (B16)”, say Abiove and Aprobio.
Agribusiness entities complain that the government chose to help international companies —especially Argentine, which should be the producers most benefiting from the measure— instead of strengthening the national sustainable fuel industry, a market in which Brazil is one of the main players in the world.
Sector representatives calculate that this could solve one of the current industry’s problems, the high degree of production idleness, at around 40% of its factories.
According to agribusiness calculations, just with these factories that are ready today, but are not in operation, it would be possible to produce 4 billion to 5 billion liters of biodiesel. Today the country imports around 17 billion liters of fossil diesel per year.
With this increase in production, according to these entities, it would be possible to increase the mixture to up to 18%. The current scenario, however, say the producers, is “generating non-equal competitiveness in relation to biodiesel and at the expense of the Brazilian taxpayer.”
“It is undeniable that an increase in the mandatory addition of biodiesel to diesel would generate two effects that the economic subsidy seeks to deliver: reduction in diesel prices for consumers” and “less dependence on diesel imports”, say the associations.
Producers also defend the increase in the mixture of ethanol in gasoline, currently at 30%. The calculations show that an increase to 32% would reduce the amount of fuel imported by 5%.
The Minister of Mines and Energy, Alexandre Silveira, promised that, in the case of gasoline, this increase will be given in the first half of this year, but again the measure faces the need for approval by the CNPE (National Energy Policy Council).
Members of the department state that, for this decision to be taken, it is necessary to complete a feasibility study, which is not yet ready, but is in the final stages of preparation. This study also includes engine producers talking about energy efficiency with higher levels of vegetable fraction.
Asked about the request to increase the blend of biodiesel, the MDIC stated that, “since 2023, the Brazilian government has been progressively increasing the blend of biodiesel in diesel, which went from 10% to 15% in these three years, in line with the Fuel of the Future Program” and other federal decarbonization policies.
Regarding the schedule for new elevations, the department suggested contacting the Ministry of Mines and Energy, which did not respond to the report’s request. The Civil House and the Treasury also did not comment.
Biodiesel is made from organic raw materials. Its main inputs are soybean, palm, sunflower, canola and cotton oils. The sector estimates that an increase of one percentage point in the diesel mixture would generate an increase of around 1 billion additional liters of biodiesel per year, moving a market estimated between R$5 billion and R$6 billion annually.
