On Monday this week (6 September) Brazil’s National Energy Policy Council (CNPE) approved a reduction of required biofuel content in diesel from 10% to 13%. The rising price of soy was identified as a key motivator for the change, as it is a crucial ingredient for Brazilian biodiesel.
Brazil is currently the world’s largest soybean producer and reporting in May this year found the country had achieved a record harvest, producing 8.5% more soybeans than the previous year and exporting more of the produce than ever before. The same report said soybean farmers in the region received a 66.8% increase in prices from June 2020 to May 2021.
At the same time, the country has been seeing problems with sugarcane cultivation (used in the production of ethanol) due to drought and frost damage, generating 7.48% less yield than the previous year according to UNICA. Producers also were seen to rush to crush and sell the cane crops they did cultivate before any further damages were seen.
As a result of these factors, the country has been seeing a rise in energy and commodity prices which Reuters says has been driving inflation and increasing interest rates. Despite this, projects developing fuel alternatives have been springing up across the country, with the International Finance Corporation (IFC) last week investing $70m in a ethanol and biogas production project. The Grupo Cocal scheme will reportedly contribute to renewing sugarcane plantations using ‘climate smart’ methods.
The Brazilian biofuel market is projected to expand by more than 4% between 2020-2025, driven primarily by the government’s newfound focus on fuel diversity and sustainability. The country is currently the second largest biofuels producer in the world, coming in behind the US and despite the recent dip in biofuel content, the blend is expected to increase to 15% by 2023.