Created in 2017, the National Biofuels Policy (RenovaBio) is a key tool in reducing greenhouse gas emissions and helping Brazil fulfill its commitments accepted under the Paris Agreement, with the sustainable expansion of the domestic biofuel market — from production to utilization of cleaner fuels, in substitution of fossil fuels. RenovaBio went into effect in December 2019.
Guided by annual goals, the program is expected to prevent the release of more than 600 million tonnes of CO2 into the atmosphere in the next 10 years, by increasing the use of renewable fuels in the transport matrix.
To join the program, mills must audit their production process, including the origin of their biomass, which must not come from deforested areas. Based on this information and the product lifecycle, an energy environmental efficiency score (NEEA) is generated. The more efficient and sustainable the production, the higher the NEEA.
Based on the NEEA score, which is validated by the National Agency for Petroleum, Natural Gas and Biofuels (ANP), the producing units are allowed to generate Decarbonization Credits (CBios). In the case of ethanol, for example, companies with less carbon intensity need around 650 litrers of biofuel to generate one Decarbonization Credit, which is an exchange-tradable security.Under the program, any agent (individual or legal entity) can buy CBios on the exchange market. However, RenovaBio establishes that fuel distributors are obliged to purchase these securities, as they must meet individual emission reduction targets. These targets take into account the volume of fossil fuel traded by the distributor.
Participation in RenovaBio is not restricted to Brazilian biofuel producers. International producers can join the program as long as they complete the production certification process.
The Decarbonization Credit (CBio) is considered the main asset to reduce greenhouse gas emissions. Each credit represents one ton of CO2 equivalent that was prevented from being emitted by fossil fuel.
Being an exchange-tradable security, the CBio will allow biofuel production in Brazil to be even more sustainable, with investments in new technologies and efficiency.
The credit can also be used by any company, as a way of neutralizing their CO2 emissions, for example.
RenovaBio is the new National Biofuel Policy, instituted by Law No. 13576/2017, created to serve parts of Brazil’s Nationally Determined Contributions (NDCs) under the Paris Agreement. Its goal is to reduce the carbon intensity of the Brazilian transportation matrix by expanding the use of biofuels and creating a carbon credit market to offset emissions of greenhouse gases by fossil fuels. RenovaBio includes ethanol, biodiesel, biomethane, biokerosene, second-generation ethanol, among others. As a side effect, the policy increases energy security in the country.
RenovaBio establishes long-term guidelines to introduce mechanisms in the market to recognize the capacity of each biofuel to reduce emissions, individually and by production unit.
10-year goals: Nationwide emission reduction targets for the fuel matrix are defined for a 10-year period. The target is an important tool to provide predictability in terms of the volumetric need for fuels (fossil and renewable) during the period, and thus allow private agents to make their investment plans and analysis amid less uncertainty. National targets will be broken down into individual targets, annually, which are mandatory for all fuel distributors, according to their participation in the fossil fuel market;
Life cycle assessment (LCA): Emission levels will be assessed according to the lifecycle analysis, expressed in the parameters disclosed by the National Agency of Petroleum, Natural Gas and Biofuels (ANP) in Resolution No. 758/2018. The certification of biofuel production will be audited by private inspection firms, based on data provided by RenovaCalc, which will assign a different environmental energy efficiency score (NEEA) for each production unit (producers who produce energy with lower CO2eq emissions in the productive lifecycle get higher scores). The score will accurately reflect the individual contribution of each production agent to the mitigation of a specific amount of greenhouse gases, in relation to its fossil substitute (in terms of tonnes of CO2eq).
The score based on the certification process will serve as a parameter for issuing a
decarbonization credit in an organized market. This security represents the reduction of one tonne of CO2eq derived from the consumption of the renewable source compared to fossil. The security can be traded with any agent (individual or legal entity), and compliance with emission reduction targets is associated with the purchase, by fuel distributors, of the security issued by renewable source producers.
The RenovaBio Committee and the National Energy Policy Council (CNPE) are responsible for defining global targets and guidelines for decarbonization of the fuel matrix. The National Agency of Petroleum, Natural Gas and Biofuels (ANP) must safeguard the eligibility of certifying firms, validation of invoices as CBIO’s collateral, individualization of the global targets among distributors, and oversee compliance with the targets at the end of each year, applying penalties to companies with insufficient volume of securities purchased.
The Ministry of Mines and Energy (MME) is responsible for regulating the CBIO market in Brazil.
National targets are broken down into individual targets annually, which are mandatory for all fuel distributors, according to their participation in the fossil fuel market in the previous year. The definitive annual individual target for each fuel
distributor is published by March 31 of the year in which it will be in force, as established by Resolution No. 791/2019.
National emission reduction targets for the fuel matrix are defined for the 10-year period and established by CNPE.
TThe biofuel producer must hire an inspection firm accredited by ANP to audit the carbon footprint of its production process. Information and analysis of the life cycle of products are used to reach the energy environmental efficiency (NEEA, the portuguese acronym) scores of production units, which are submitted for validation by ANP, which also makes the report available for 30 days for public hearing should any questions arise.
Once the validity of the NEEA is recognized, the producer will be able to issue CBIOs after selling biofuel in the physical market by submitting an invoice that is collateral to the security. The security will be registered by financial institutions and made available for sale on the exchange. Distributors should acquire CBIOs to achieve the targets defined by the program. Buyers “retire” CBIOs at ANP to effectively offset CO2 emissions.
Decarbonization Credits are traded in an organized market. The bookkeeper (financial institution) is responsible for keeping records of the chain of deals that take place while the securities are registered on the exchange. Any agent (individual or legal entity) can acquire CBIOs by simply contacting one of the brokers who sell them. Once completed, the trade is registered on the exchange. The buyer may sell the security in the future (acting as speculator) or retire it (using the security to neutralize emissions).
Yes. The certification process is supported by an analysis of the lifecycle of products to quantify the intensity of carbon derived from the production process of each agent. The execution of these calculations is concentrated on the RenovaBio calculator, known as RenovaCalc. This analysis methodology is well-known and accepted worldwide.
Good management practices are reflected in the producer’s energy efficiency score. The purpose of the program is to encourage production processes with lower carbon intensity. For example, the replacement of chemical fertilizers by organic options
or by vinasse (residue from ethanol production) leads to lower CO2eq emission and reduces water consumption.
Vinasse can still be used to produce biogas for energy consumption by the mill itself or for sale to the distribution system, in a process that also paves the way for issuing CBIOs. Thus, RenovaBio recognizes and encourages the best practices and the expansion of the circular economy in sugarcane crops.