Rio de Janeiro — Brazil's National Petroleum Agency, or ANP, approved a measure that allows fuel distributors and retailers to blend up to 15% biodiesel with diesel sold at the pump, including a minimum 11% mandate that will go into effect September 1, according to the regulator and the Mines and Energy Ministry.
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The implementation of the minimum 11% biodiesel mandate, which was initially expected to start June 1, was delayed by motor tests that the ministry completed last week, the two institutions said in separate statements late Tuesday. Automakers, trade groups and the government conducted tests on motor performance with biodiesel blends of up 15%, with the tests showing no ill effects of the higher mandate.
Diesel sold at the pump in Brazil currently includes a 10% biodiesel blend.
The latest increase to the minimum biodiesel blend is part of a wider plan by Brazil to boost biofuel consumption to support local agricultural production, reduce the country's dependence on imports and meet targets to cut greenhouse-gas emissions under the Paris climate agreement. Brazil is in the process of implementing the RenovaBio program to support sugarcane-based ethanol and biodiesel production, including a carbon-credit system and trading market.
About 77% of biodiesel production comes from soybeans, with 17% produced from animal fats and the remaining amount from raw materials such as cotton and recycled cooking oil.
While the newly approved resolution allows use of biodiesel blends of up to 15% immediately, the minimum level of biodiesel mixed with diesel sold at the pump will still adhere to the previous timeline issued by Brazil's National Energy Policy Council, or CNPE, in October 2018, the ANP said. The minimum biodiesel mandate in diesel sold at the pump will rise to 12% on March 1, 2020; 13% on March 1, 2021; 14% on March 1, 2022; and 15% on March 1, 2023, the ANP said.
Each 1% increase in the biodiesel-diesel blend sold at the pump represents about 600 million liters of additional production per year, according to the Brazilian Biodiesel and Biokerosene Union, or Ubrabio, and Brazilian Vegetable Oil Industry Association, or Abiove. The two trade groups represent biodiesel producers in Brazil.
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The government, meanwhile, expects the 15% mandate to increase Brazil's biodiesel output to an annual rate of 10 billion liters by end-2023.
In addition to the higher biodiesel blends, the ANP also approved an increase to the oxidation stability of biodiesel to 12 hours from eight hours previously, the ANP said. Biodiesel producers will also be required to use antioxidant additives during production of the biofuel, the ANP said.
The implementation of the new mandate also came less than a week before Brazil's next biodiesel auction on August 12, the ANP said. The ANP will make the necessary changes to the sales and tender rules for the auction, which should feature higher sales volumes and discounts to the minimum reference price for biodiesel set at the auction, the ANP said.
Brazilian biodiesel producers sold 984.4 million liters of biodiesel at the previous auction held in early June, with the average price set at Real 2.3329/liter, or about 62 cents/l, the ANP said. That was a 23.6% discount to the average maximum regional reference price for the sale at Real 3.050/liter, the ANP said.
Lower biodiesel prices reduce the costs of consuming the fuel and blending it with diesel sold at the pump, which should help offset the impact of rising refined-product prices. The previous auction was for biodiesel delivered July 1-August 31, which makes next week's biodiesel sale the first under the new mandate.
The delayed implementation of the 11% biodiesel mandate also undermined biodiesel production in June, the ANP said.
Biodiesel output slipped 1.3% to 460.9 million liters in June compared with 467.1 million liters in June 2018, the ANP said. That was the first decrease in the year-on-year comparison since April 2017, the ANP data showed. June's biodiesel output, however, was up 2.8% from May's 448.4 million liters, the ANP said.
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