Through Ordinance No. 235/2020, the Ministry of Mines and Energy (MME) opened the 3rd cycle of public consultion on the proposal to define the annual mandatory targets regarding the reduction of greenhouse gas emissions for the trading of fuels, for the period 2021 to 2030, as well as the revision of the 2020 targets, due to the impacts of the COVID-19 pandemic. These targets are applicable to all fuel distributors.
The Brazilian National Biofuels Policy (RenovaBio) was instituted in 2017 (Law No. 13,567/2017) as a result of Brazil’s ratification of the Paris Agreement in 2016. Through the incentive to generate energy from renewed sources, RenovaBio seeks to encourage the participation of biofuels in the national energy matrix and expand its presence to more sustainable standards.
To this end, RenovaBio relies on two instruments:
i. the establishment of national targets for the reduction of greenhouse gas emissions within the fuel matrix; and
ii. certification of biofuel production.
In summary, such instruments depend on and result from each other. A compulsory annual target is established every year and it is divided into individual targets applied to all fuel distributors in proportion to their market participation in the sale of fossil fuels based on the previous year.
These targets are converted into Biofuel Carbon Credits (“CBios”), an environmental asset issued by certified biofuel producers or importers, based on the volume of biofuel produced, imported and traded by the respective producer.
In practice, fossil fuel distributors can buy the CBios in the financial market in order to reach the targets and not be subjected to the sanctions provided for in the RenovaBio Law.
For the 2020 year, many fossil fuel distributors would be subjected to such sanctions due to the impacts of the COVID-19 pandemic, which has resulted the revision of the 2020 targets by the MME.
Moreover, RenovaBio determines that before approval of the compulsory targets, they must be submitted for public consultation for at least 30 days. This is an interlocution mechanism between the Public Administration and civil society, enabling public participation in political or legal decision-making on issues of public interest.
It is important to clarify that the information and claims included in the public consultation are not legally binding, but rather take on a consultative nature. Notwithstanding, such information should be analysed according to the convenience and opportunity requirements, in order to be accepted or rejected by the administrative authority. The final deadline to submit any contributions is July 4, 2020.
Demarest’s Environmental and Energy practice areas are available to provide any clarification on this and other matters.