Understanding Brazil’s RenovaBio: A Sustainable Biofuels Policy

Brazil’s National Biofuels Policy, known as RenovaBio, aims to reduce the carbon intensity of the transportation fuel matrix by increasing the production and utilization of biofuels. Enacted by the National Energy Policy Council (CNPE), RenovaBio sets annual national decarbonization targets for a period of ten years. These targets are then allocated by the National Agency of Petroleum, Natural Gas, and Biofuels (ANP) to all fuel distributors, who are obligated participants in the policy, based on their market share of fossil fuels.

Individual targets are defined in Decarbonization Credits (CBIOs), an environmental asset equivalent to the avoidance of 1 (one) ton of CO2eq emissions (carbon dioxide equivalent). The calculation takes into account the difference in greenhouse gas emissions between the biofuel and the substitute fossil fuel based on the Life Cycle Assessment (LCA) from “well to wheel.”

CBIO generation falls to biofuel producers (primary emitters), who voluntarily certify their production based on auditable LCA. Certifying companies, inspection firms, accredited by the ANP, are responsible for verifying and submitting the biofuel producer’s certification process.

Upon certification completion, biofuel producers receive energy-environmental efficiency ratings. With the certification process concluded, producers can then issue CBIOs from biofuel sales.

Subsequently, sales invoices for biofuels are validated on the CBIO Platform, managed by the Federal Data Processing Service (SERPRO) in partnership with ANP. The invoice is then multiplied by the volume of biofuel sold, according to validated invoices meeting program eligibility criteria, resulting in the quantity of CBIOs that a particular producer can issue and trade in the financial market.

The platform also monitors and controls the compulsory annual targets for reducing greenhouse gas emissions from fuel distributors. Distributors must access the platform to track compliance with their individual targets and purchase CBIOs to meet them.

The regulation, issuance, reporting, registration, trading, and retirement of CBIOs are governed by Ministerial Order MME No. 56/2022, pursuant to Decree No. 9,888/2019.

CBIO trading occurs on the Stock Exchange (B3), where all issuances and transactions are recorded. B3 publishes information on the CBIO market in Brazil on its website, including stock levels, deposited volume, definitive transactions, and asset retirement.

CBIOs have no expiration date but can be retired at the request of obligated parties to meet their decarbonization targets. To retire a CBIO, it must be taken out of circulation. It is precisely the removal of these credits from the market that demonstrates the compensation of CO2 emissions by obligated parties.

In summary, RenovaBio represents a significant step towards sustainability in Brazil’s energy sector, incentivizing the production and consumption of biofuels while reducing carbon emissions in the transportation sector. With its comprehensive framework and market mechanisms, RenovaBio sets a model for effective environmental policy implementation globally.