New law ensures Brazilian sugarcane producers benefit from RenovaBio credits

Brazil's President Luiz Inácio Lula da Silva enacted Law 15.082/2024, guaranteeing sugarcane producers a share of revenues from trading Decarbonization Credits (CBIOs). The law amends the National Biofuels Policy (RenovaBio), which previously limited CBIO revenues to ethanol-producing mills, to include independent sugarcane producers.

Published in the Official Gazette on Dec. 31, the law also revises Law 9.478/1997 to strengthen sector regulations. Measures include increased fines for unmet decarbonization targets, now classified as environmental crimes. Fuel distributors failing to meet their annual targets by Dec. 31 face penalties ranging from Real 100,000 to Real 500 million, along with potential revocation of their authorization by the National Petroleum Agency (ANP).

Sugarcane producers are entitled to receive at least 60% of CBIO revenues generated from the sugarcane they deliver to mills. Producers who provide the primary data required for calculating energy-environmental efficiency scores will receive an additional 85% of the revenue from credit differences, after emission costs are deducted.

The legislation aims to enhance compliance with RenovaBio's decarbonization targets, which support Brazil's commitments under the Paris Agreement. The CBIO is the equivalent of 1 mt of CO2 not released into the atmosphere.

President Lula vetoed two provisions in the law. One provision, which allowed distributors to claim tax credits for CBIO purchases, was deemed unconstitutional as it created a revenue waiver without a clear fiscal impact assessment. The other veto rejected the classification of CBIOs as equivalent to other securities. Both vetoes were requested by the Ministry of Finance.

Law 15.082/2024 originated as PL 3.149/2020, authored by then-deputy and current senator Efraim Filho. Approved by the Senate on December 4, it marks a significant step forward for the biofuels sector, ensuring broader participation and stricter compliance with decarbonization goals.

Platts assessed The Crédito de Descarbonização (CBIO) at Real 77/mtC02e Jan. 2, down Real 2.00 on the week.