Biofuels in Latin America: Brazil and Argentina on the path forward

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Commodities News and Trends


Latin America has set out on the path of sustainable, greener energy, and in recent years has built tremendous momentum in the biofuels market. 

Two countries in particular – Brazil and Argentina – have taken important steps forward.

Biofuels are renewable energy sources derived from plant and animal products. Among the raw materials used to manufacture biofuels are palm, sunflower and peanut oils, sugar cane, beets, corn, and animal fat.

Brazil mainly focuses its liquid biofuels production on ethanol and biodiesel. Brazil’s biodiesel industry has more than 50 plants. Currently, its largest international markets are Germany, the United States, Argentina, and Brazil are currently the world’s largest markets for biodiesel. In addition, Brazil is recognized for its pioneering introduction of ethanol, manufactured sugar cane, which is considered to be one of the most efficient feedstocks for biofuel production.  In recent years, ethanol production in other countries has expanded to encompass other biomass sources – for instance, in the US, most domestically produced ethanol is manufactured from corn or switchgrass, 

In an effort to increase the use of biofuels and reduce greenhouse gas emissions, in 2018 Brazil’s energy ministry launched its national biofuels policy, RenovaBio. The key concept of RenovaBio is to reduce carbon emissions and improve the life-cycle performance of biofuels through a carbon credit market. To be able to participate in the program, producers of ethanol, biodiesel, biokerosene, or biogasses are evaluated according to the carbon absorption and emission levels in their various production stages. The program sets out a framework to certify biofuel production according to its efficiency in reducing GHG emissions. It also requires fossil fuel distributors to compensate for carbon emissions through the acquisition of decarbonization certificates in this newly created market. Each decarbonization credit under the RenovaBio program is equivalent to 1 metric ton of avoided emissions. The decarbonization credits are then commercialized to distributors on the stock market to meet their decarbonization targets. In addition to establishing decarbonization targets for fossil fuel distributors, the program offers incentives for the biofuel producers to improve conditions and efficiency of their production chains.

As a result of the program, 241 biofuel plants in Brazil are certified to issue decarbonization credits most of these are sugarcane-based ethanol plans, which are treated as the most efficient biofuel source under program. In 2020, RenovaBio program aided in the reduction of 15 million metric tons of carbon emission and despite the rocky start of the year with COVID-19, the policy was a success with almost 98 percent of decarbonization targets being fulfilled.

As a further expansion of the biofuel market in Latin America, on August 4, 2021, Argentina enacted its Biofuels Act, which regulates the activity of production of biofuels and creates a framework for investing in the production of biofuels and establishing mandatory uses for biofuels.

The Biofuels Act establishes that all liquid fuel classified as diesel or diesel oil that is marketed within the national territory must contain a mandatory percentage of biodiesel of 5 percent by volume, measured using the total amount of the final product. The enforcement authority may raise the referred mandatory percentage when it deems it appropriate. In addition, the Act establishes that all liquid fuel classified as naphtha that is marketed within Argentina must contain a mandatory percentage of bioethanol of 12 percent by volume, measured over the total amount of the final product.

In a complementary way to the mandatory cut that is in force, and when market conditions allow it, the enforcement authority will arbitrate the necessary means to substitute the importation of fossil fuels with biofuels, in order to avoid the outflow of foreign currency, promote investments for the industrialization of national raw materials and encourage job creation.

Brazil and Argentina’s growing biofuel markets are achieving their goals via established programs and enacted legislation, demonstrating a path forward for the Latin American markets in their reduction of carbon emissions and their work towards clean energy.   Other countries will soon join them.