Government reduces biodiesel blend to contain high diesel in 2022

The government decided to change the mandatory percentage of biodiesel blending with petroleum diesel in 2022, claiming that the measure protects consumer interests by containing the rise in the price of fuel at the pumps.

In a statement released this Monday (29), the CNPE (National Energy Policy Council) said that the mandatory percentage will remain at 10%, the same level in effect for a third this year, but lower than the 14% originally planned.

According to the council, the decision “is in line with the interests of society, reconciling measures to contain the price of diesel with the maintenance of the National Biofuels Policy, providing predictability, transparency, legal and regulatory security to the sector”.

Associations of vegetable oil producers said, in a statement, that the measure “destroys” the national biodiesel program and signals the opposite of the commitments made by the government at COP26.

With the devaluation of the real and the increase in international soybean prices, the price of biodiesel has soared in recent years. In the last auction promoted by the ANP (National Oil, Gas and Biofuels Agency), in October, a liter of the product was sold, on average, for R$ 5.907.

The value is 4.4% higher than that verified in the previous auction, held two months earlier. It is much higher than the BRL 3.34 charged by Petrobras for a liter of petroleum diesel in its refineries.

The mixture sold at gas stations should have, in 2021, 13% biodiesel and 87% petroleum diesel. With the escalation of the price of biofuel, however, the government has already changed this percentage a few times. Currently, the percentage is worth 10%.

The CNPE defends that one of the principles of the National Energy Policy is “to protect the interests of the consumer regarding the price, quality and offer of products”. The council is formed by members of the Ministries of Mines and Energy, Economy, Agriculture and Environment, among others.

The decision to lower the percentage was defended by the Economy, with resistance from the Ministry of Agriculture. The fuel sector supports the lower percentage, claiming that there are quality problems in the product offered.

The rise in diesel prices is a focus of tension between the Jair Bolsonaro government and the truck drivers, an important base of electoral support for the president. During the year, the category held several demonstrations across the country, but none with the size of the strike that paralyzed the country in 2018.

On the other hand, the frequent changes in diesel content are a target for agribusiness’ dissatisfaction with the government. In recent days, there has been strong pressure from the Parliamentary Biodiesel Front to try to avoid cutting the percentage.

Producers defend themselves from criticisms about quality and claim that the impact of the price of biodiesel on the amount charged at pumps was negligible in 2021. “The growth was basically due to the increase in the price of fossil diesel,” they said in a statement.

The criticisms were made in a joint note signed by Abiove (Brazilian Association of Vegetable Oil Industries), Aprobio (Association of Biofuel Producers in Brazil and Ubrabio (Brazilian Union of Biodiesel and Biokerosene).

“By adopting the 10% blend content, the government penalizes the sector, generates unemployment throughout the agribusiness chain, promotes disinvestment, increases pollution, inflation, harms the economy and moves the country away from decarbonization commitments”, they say .

A study by Cepea (Center for Advanced Studies in Applied Economics), based on numbers from the PNAD-Continua from IBGE, which indicates that the reduction in the mix has already had effects on the sector’s labor market.

The agro-industrial segment of oils and fats, says Cepea, had a reduction of 7.5% in the employed population in the second quarter of this year, compared to the first.

The change takes place on the eve of the implementation of a new model for marketing biodiesel in the country, which until this year was carried out at auctions organized by the ANP. In 2022, the product starts to be freely negotiated between fuel distributors and producers.

The sector says it has the capacity to supply a mixture of up to 18%. “The decision of the Federal Government reflects a position of defense of imported fossil diesel and reverberates the interests of the oil sector, distribution and the automotive sector.”