Brazil's fuel distributors will have to increase the percentage of biodiesel blended into regular diesel from 5 percent to 6 percent as of June as part of a push to cut fuel imports and reduce pollution, the government said.

President Dilma Rousseff signed an executive order on Wednesday that changes the diesel blend and requires the percentage of biodiesel in the fuel to rise to 7 percent in November.

The executive order also provides production incentives for the small-scale growers of cotton, sunflowers and other plants from whom the government buys the raw materials used to produce biodiesel.

Each percentage-point increase in the amount of biodiesel in the diesel blend boosts demand for the plant-based fuel by 600 million liters, the Energy and Mines Ministry said.

Brazil has the capacity to supply the biodiesel needed to achieve a 7 percent blend "without stress," the president said.

Increasing the amount of biodiesel in diesel fuel will cut CO2 emissions by 23 million tons by 2020, Energy and Mines Minister Edison Lobao said.

The policy change will also cut Brazil's diesel imports by 1.2 billion liters, the energy minister said.

Brazil will shave $1 billion off its fuel-import bill and improve its balance of trade by upping the biodiesel content, Lobao said.