Brazil SAF rules leave market racing to resolve key issues before 2027 mandate

Brazil's new sustainable aviation fuel decree has established the framework for the country's first SAF mandate, but key market rules remain undefined less than five months before the program is scheduled to begin in 2027.

Questions remain over certification, feedstock eligibility, pricing and financing, while oil regulator ANP and civil aviation regulator Anac have until Dec. 18 to issue complementary rules, leaving the industry a narrow window to adapt before the mandate, announced Aug. 13, takes effect in January.

The Fuel of the Future law requires airlines to reduce aviation greenhouse gas emissions by 1% in 2027 through SAF use, with the target increasing gradually in subsequent years.

Market participants said much of the framework was in line with expectations, with the decree establishing the broader architecture of the program while leaving implementation details to subsequent regulation.

Certification and feedstocks

One issue under scrutiny is how Brazil's certification system will interact with the Carbon Offsetting and Reduction Scheme for International Aviation, or CORSIA, as its mandatory phase also begins in 2027.

The decree allows producers to certify SAF either through the national system to be developed by ANP or under CORSIA-approved schemes. CORSIA-certified SAF will automatically qualify under the Brazilian system, but the regulation does not establish whether Brazilian CS-SAF certificates will similarly support CORSIA Eligible Fuel claims.

According to a SAF market source, aligning Brazil's certification with CORSIA could provide greater market predictability, although traceability remains a challenge for Brazilian soy. The source said a less stringent domestic certification could, on the other hand, broaden the pool of feedstocks eligible to supply domestic SAF demand.

Brazil's pool of CORSIA-certified soybean feedstocks remains limited. Bunge supplies certified SAF-grade soybeans, while ADM's soybean processing unit in Rondonópolis, Mato Grosso, is also listed as certified. State-controlled oil company Petrobras has commercially produced co-processed SAF using technical corn oil and Bunge's certified soybean oil.

Traceability remains a challenge for other potential feedstocks, particularly used cooking oil, where collection is fragmented. Brazil also currently restricts UCO imports, although the government has been reviewing the issue.

Book-and-claim raises pricing questions

The book-and-claim structure also introduces a new pricing dynamic. Under the decree, CS-SAF can be traded independently from the physical fuel until the certificate is retired. Once separated, the purchaser of the physical SAF cannot claim the associated emissions reduction.

Although most of the decree was anticipated by the market, some participants were surprised by the inclusion of book-and-claim in the national policy. Market players told Platts, part of S&P Global Energy, they are now assessing how the system could split SAF value between the physical molecule and its environmental attribute.

The structure could streamline compliance logistics because Brazil's mandate is based on annual emissions reductions rather than requiring each airline to physically blend a fixed percentage of SAF. Physical SAF could therefore be supplied where logistics are most efficient while airlines acquire certificates separately.

That flexibility could be particularly relevant in Brazil, where long-distance fuel transportation can significantly add to delivered costs.

Costs remain key concern

Financing and taxation remain another unresolved part of the framework. The decree provides for access to financing programs and credit lines for SAF production and purchases but does not yet define participating institutions or credit conditions.

Before the decree was published, market participants had expected greater clarity on costs and incentives for new projects. José Magalhães Fernandes, Latin America president at SAF technology provider Honeywell, said at an industry event in São Paulo state Aug. 12 that advanced fuel refineries projects were waiting for greater clarity over Brazil's tax framework.

Fernandes said a robust legal and tax framework would be needed for Brazil to fulfill its potential to become what he described as "the OPEC of biofuels."

SAF also lacks a dedicated international Harmonized System classification, complicating differentiated taxation and tariff treatment. Brazilian government representatives said they are working toward a specific classification under the Mercosur Common Nomenclature and participating in international discussions over changes to the Harmonized System.

For airlines, costs remain central to the implementation debate. The Brazilian Airlines Association, or Abear, told Platts that large-scale SAF adoption would be viable only "if cost neutrality is guaranteed." Fuel accounts for about 40% of airlines' total costs, according to the association, which supports economic incentives for SAF production and consumption.

The decree also leaves operational details of the CS-SAF trading platform to be defined, including its operator and mechanisms for liquidity, price transparency and prevention of double-counting.

With the mandate less than five months away, those decisions will determine how quickly Brazil can turn its new regulatory framework into a functioning SAF market.