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BIOFUELS

Brazil moves to increase oversight in biofuels compensation scheme

By way of regulators and the courts, the Brazilian government is cracking down on fuel distributors that violate the national biofuels policy, known as RenovaBio. The relatively young federal program establishes decarbonization targets and an emission compensation mechanism for the country's transportation sector, but its impacts have so far been curbed by litigation and sluggish participation.   

In the past month, the Mines and Energy Ministry published a decree tightening regulations and increasing fines for distributors that fail to comply with the program's mandatory compensation scheme. It has also pushed for the Superior Court of Justice (STJ), Brazil’s second-highest judicial body, to suspend injunctions that benefit noncompliant distributors. 

Supported by important players in Brazil's agriculture sector, such as sugarcane and soybean producer and trader associations, the moves are being met with pushback from distributors' lobbying groups, which are proposing their own changes to the program.  

Brazil began blending sugarcane ethanol with gasoline as long ago as the 1930s, but the biofuel gained real momentum in the 1970s, with the launch of the Proálcool program to reduce dependence on imported oil.

Since then, the mandatory ethanol share in gasoline has steadily grown, helping the country withstand global oil price shocks and bolster the ethanol industry. The most recent move in that regard was the Future Fuel Law, ratified in 2024. 

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