The distributors and producers of biofuels have an arm wrestling over how the new decarbonization goals of the federal RenovaBio program will look. Under the program, distributors are required to meet emission reduction targets through the purchase of Decarbonization Certificates (CBios) sold by renewable fuel producers, but the government is revising the figures for the next ten years because of the impacts of the pandemic on consumption.

In a public consultation carried out by the Ministry of Mines and Energy (MME), there was a distributor that defended that the targets were not even mandatory in 2020, and others that claimed reductions more relevant than those proposed by the government group that deals with the subject, the RenovaBio Committee. Ethanol producers, on the other hand, considered the official proposal high and suggested milder reductions.

The difference between the positions is regarding the amount of CBios that will be offered in the coming years. Each CBio is equivalent to the emission of 1 ton of carbon avoided with the consumption of renewable fuel instead of the fossil.

The distributors fear that the productive sector will not be able to offer the necessary quantity of CBios to meet the goals and that they will be penalized for the imbalance, since the punishment for non-compliance could reach the suspension of the company. The biggest fear, however, is that the price of CBios fluctuates a lot in the face of uncertainty and compresses its margins. Since the purchase of CBio is not linked to the purchase of biofuel, there are uncertainties about how the cost will be passed on to the pumps.

The distributors' concern is not new, but it has grown after the pandemic has mixed up the outlook for the economy. In the face of uncertainty, companies argued that the government should guarantee a minimum supply of CBios 50% higher than the target. It would be a way to ensure that the target is met by the entire segment and keep bond prices under control.

Initially, distributors would be required to buy 28.7 million CBios by the end of this year, but the government has proposed a 50% cut to 14.53 million. Even so, the amount of Cbios offered by producers so far is below. Until yesterday, there were just over 1.6 million securities offered at B3, where these securities are traded, and only 12 thousand had been traded.

BR Distribuidora used an estimate by consultancy Pecege to defend that this year's CBios target is 8.5 million and that the government guarantee the offer of 50% more (12.7 million). Ipiranga, in turn, argued that the target should drop to 7 million, considering that CBios will only be more available in the last quarter. Brasilcom, which represents smaller distributors, argued that this year's target is 5 million CBios. Redepetro, in turn, presented a suggestion to the party defending an exemption this year. The distributors also proposed that the targets for between 2021 and 2030 be lower than the new proposals.

Diametrically opposed is the position of biofuel producers, especially those of ethanol, which should be the main beneficiaries of RenovaBio. The Union of Sugarcane Industries (Unica) stated that there will be more CBios offered than the government calculates and defended that the target for this year is 16 million.

The entity included in its calculations the "pre-CBios" (which are the rights to issue CBios from the sales made) generated from January to March, the sales potential according to the plants' production capacities and higher CBio generation indexes . Raízen, which although it operates in distribution, is also the largest ethanol producer in the country and has aligned itself with Unica's proposal for this year.

For 2021, Unica argued that distributors could buy CBios that are "left over" from 2020 and argued that the target should be 37 million CBios, in addition to suggesting more ambitious goals for the following years. The National Corn Ethanol Union (Unem) defended a target of 17 million for this year, and 37.2 million for 2021, and the Brazilian Union of Biodiesel and Biokerosene (Ubrabio), of 21.7 million this year and 37, 2 million in 2021.

The most critical of the producers were the Americans. Three representations of the United States ethanol chain - an important constituency of Donald Trump four years ago - expressed, in a joint letter, "concerns" that the emergency by covid-19 "is being used to limit the liability of Brazilian fuel distributors" . They proposed a target of 17 million CBios for this year and 35 million for 2021.