Showcase with biodiesel at other COPs, Brazil reduces use of renewable fuel

Every year, Brazil has at least one good card up its sleeve to present at the United Nations (UN) Climate Conference: the national policy on non-fossil fuels. This has always been the case with ethanol and, later, biodiesel.

“If anyone doubts the potential of these fuels, consider Brazil,” said former US President Barack Obama ten years ago, when he launched a plan for the energy future of the United States. In 2013, the World Bank also carried out a study extolling the national biofuels policy. As well as the United Nations (UN), which considered the Brazilian model for the use of non-fossil fuels a world example.

But at this COP26, in Glasgow, Scotland, Brazil presents a very different scenario. Since the beginning of this year, the percentage of biodiesel mixed with diesel has been falling.

It was 13% and is now 10%. It was the first time that the percentage was deliberately lowered since 2008, when biodiesel was added to the fuel of heavy vehicles.

The government claims that, due to the global increase in demand for commodities, the price of biodiesel raw materials – soy and beef tallow – has risen a lot. And that would hurt both the blending of biodiesel into diesel and the cost of fuel at the pump.

So much so that the price of biodiesel jumped: this year alone, the readjustment was 28.8%, with a liter reaching R$ 5.90 (it is not sold alone, only in a mixture). The liter of diesel, in turn, varies from R$ 2.40 (national) and R$ 3.20 (imported).

In this context, diesel consumption has really grown. It was 37.8 billion liters between January and August 2019. It dropped to 37.1 billion in the same months of last year and now, in the first eight months of 2021, it has already reached 39.3 billion liters, according to the National Agency Oil, Natural Gas and Biofuels (ANP).

an old dilemma

Here we have a long-standing dilemma: economic and cyclical factors on the one hand, and long-term climate and policies on the other.

“Losing the good reputation gained by Brazil’s biodiesel policy means losing business opportunities, in addition to making our energy matrix immensely dirty,” says Alexandre Prado, director of green economy at WWF-Brasil, a non-governmental organization dedicated to conservation from nature.

The Brazilian biodiesel program was named RenovaBio and effectively began in 2018, when the mixture was implemented, at the rate of 2%. The idea was to gradually increase this amount and thus reduce the harmful effects of pollution from buses, trucks and agricultural machinery. That was what had been happening.

The country reached the beginning of the year with 13% of biodiesel mixed with diesel, a total very close to the goal of the National Energy Policy Council (CNPE), which is to make the mixture of fuel based on soy and beef tallow reach 15% until 2023. The CNPE is the agency of the Ministry of Mines and Energy (MME) that advises the Presidency of the Republic in relation to energy policies.

However, last March, the government turned around: it reduced the percentage from 13% to 10% – a proportion that remained until the end of August. In September, with a momentary stabilization in the price of soybeans, it rose to 12%. But in November, the CNPE reduced the percentage to 10%.

At the time, the MME defended the decision in a note. “Brazil defends and will continue to defend the role of bioenergy in the energy transition (…) However, it appears during 2021 that the world market continues with a strong demand for soy, raising the price of the commodity on the international scene. In the domestic market, the price of soybeans is also driven by the devaluation of the Brazilian currency against the dollar”

But – with the Brazilian economy weakened by the pandemic – which causes the real to lose value against the dollar – the price of both domestic and imported diesel also rises. The high is already 65.3% in refineries this year. So why cut back on biodiesel and not imported diesel?

Some experts say it’s because this is the weakest end of the chain. “In fact, we are using the same policy implemented in 2013 to contain inflation: holding fuel prices. Only now, the focus is on diesel. Instead of using the Petrobras fund, as has been done in the past, we are going with biodiesel”, analyzes Professor Hugo Ferreira Braga Tadeu, leader of the Reference Center for National Innovation at the Dom Cabral Foundation (FDC).

“This is an unacceptable logic, but it is the one that has been adopted”, adds Donizete Tokarski, superintendent director of the Brazilian Union of Biodiesel and Biokerosene (Ubrabio), which represents the 54 biofuel production industries in Brazil.

For him, economic issues could call into question the country’s biodiesel policy. “It looks like an economy, but, in fact, it is an expense because Brazil loses every year – at the other end – around R$ 20 billion in health costs to treat diseases caused by vehicular pollution. It’s the cost of fossil diesel,” he says, citing a February this year study by the Energy Research Company, linked to the Ministry of Mines and Energy.

“We are giving up an industry that produces renewable fuels and generates 800,000 jobs in the country due to a momentary drop in prices, which would be swallowed up in the next high of the dollar”, says Ricardo Fujii, conservation analyst at WWF-Brasil.

But not everyone agrees. “There is a possibility of a lack of diesel in the market, because consumption has been rising. And biodiesel costs much more than the price of imported diesel. It pays more to import”, says Sergio Araujo, executive president of the Brazilian Association of Fuel Importers (Abicom). “In Brazil, national refineries can only meet 75% of the demand. Therefore, 25% of diesel is imported”, explains Araujo.

Wanted by CNN, Petrobras said it does not comment on the matter. Through its press office, the company recommended that the report seek the ANP. The agency, in turn, also through an advisory, informed that the percentage of biodiesel mixed with diesel is determined by the National Energy Policy Council (CNPE) and that the report should seek the Ministry of Mines and Energy. Until the closing of this edition, the MME and CNPE had not responded to the report.

Long history of investments

Brazil has been seeking to consolidate policies to expand the production and use of biofuels since the 1970s, with the National Alcohol Program (ProAlcool). In 2003, flex fuel technology was adopted. In 2005, it was the turn of the National Program for the Production and Use of Biodiesel (PNPB).

The blending of biodiesel to diesel started in January 2008. Well before the creation of RenovaBio, which was only imagined after COP21, in Paris, in 2015. In that year, Brazil signed goals to reduce the use of fossil fuels and for that needed biodiesel and a schedule to increase the percentage of the mixture. The project was designed in October 2016. Officially, it was created in 2017 (federal law 13,576), but it only went into operation in April 2020.

Biodiesel is not a panacea that solves the whole issue of pollution from fossil fuels. On the international scene, Brazil is even more recognized for its use of ethanol than for its diesel from soy and beef tallow. The UN, many times, came to criticize the biodiesel policy, for the possibility of aggravating hunger in the world: there would be more cultivated area for the production of soy for fuel than for food.

But, in countries that depend on cargo transportation, such as Brazil, the United States and also Europe, biodiesel is a viable solution. “It has the same energy efficiency as diesel and pollutes much less. And it can also be done by reusing frying oil,” says Tokarski.

“In the same study by the Energy Research Company, it was proven that the addition of 12% of biodiesel would prevent, in the Metropolitan Region of São Paulo alone, the death of 244 people a year with lung problems”, says the director of Ubrabio.

The big issue, according to Tadeu, from Fundação Dom Cabral, is that Brazil is attached to the oil and gas sector. “Most government incentives and subsidies for research and development are for this sector. The country should invest in technology to generate energy in other matrices”, says the researcher.

For 24 years, for example, ANP has guaranteed, through Law No. 9,478/1997, 1% of the gross revenue from the production of oil fields for research and development in this sector – something around R$ 470 million.

Prado, from WWF-Brasil, endorses that the country should invest more in other sources. “Brazil has space to develop solar, wind and bioenergy generation, in addition to biofuel”, he says.