Senator Fernando Bezerra Coelho (MDB-PE) presented a proposal to amend the Constitution (PEC) that aims to stimulate the competitiveness of biofuels in relation to fossil competitors, such as gasoline and diesel. PEC 15/2022 provides tax benefits for clean energy sources for at least 20 years.

Bezerra is the rapporteur of PLP 18/2022, which sets a ceiling of 17% for the ICMS on fuels, with the aim of trying to contain the rise in prices.

The proposal to be presented by the senator foresees two strategies to ensure "the competitive edge". The first one is the creation of a favorable tax regime for biofuels, which would depend on the approval of a complementary law by the National Congress. Under the proposal, rates on renewable sources would be lower than those for fossil fuels.

The rule would be valid for at least 20 years and would apply to the following taxes: Contribution to the Financing of Social Security (Cofins) paid by the company on revenue or billing and by the importer of goods or services from abroad; Contribution to the Social Integration and Public Servant Asset Formation Programs (PIS/Pasep); and Tax on the Circulation of Goods and Services (ICMS).

The second strategy would be provisional. Between the enactment of the constitutional amendment arising from the PEC and the entry into force of the future complementary law, the current tax benefits applied to biofuels would be maintained.

According to the National Federation of Fuels and Lubricants (Fecombustíveis), gasoline paid 27.1% ICMS and 10.6% PIS/Cofins in 2021. The rates on ethanol were 18.7% and 5, 6%, respectively. Fernando Bezerra Coelho suggests maintaining the difference between the rates, in percentage terms, at a level equal to or higher than the one in force on May 15, 2022.

Also according to the PEC, if it cannot be determined through the rates, the competitive differential must be guaranteed by maintaining the effective tax difference between clean and fossil fuels. Also according to Fecombustíveis, the average taxation on gasoline was 39% in 2021, compared to 24.3% charged on ethanol.

According to the proposal, if the rate on a fossil fuel is modified by federal or state law or even by a court decision, there will be an "automatic change" in the percentage applied to the equivalent biofuel. The objective is to maintain the previously existing difference in rates.

Fernando Bezerra Coelho recalls that the differentiated tax burden between clean and fossil sources "is adopted in dozens of countries and regions of the globe". For the parliamentarian, the PEC seeks to enshrine in the Constitution "an effective and fair tax differential between these products".

"The tax structure must preserve the competitiveness between the biofuel and its fossil competitor, avoiding disincentives to the clean, renewable and domestically produced product, generating income and jobs, to the detriment of the consumption of imported petroleum derivatives with greater impact on the climate and the environment", argues the senator in the justification of the proposal.