Fuel price may rise further as carbon credits soar

The price of carbon credits in the fuel sector, known as Cbios, has soared in recent weeks, putting more pressure on gasoline and diesel prices in the country, as the mandatory purchase of bonds impacts the costs of distributors of the products.

On Monday (7), the average price of Cbio reached R$ 78.79, in the seventh trading session with a quotation above R$ 70. The value represents a 34% increase in relation to the last trading session of 2021 and is equivalent to almost double the average of that year, of R$ 39.

The rise worries the fuel sector, mainly because it occurs in an atypical period, with few negotiations. Generally, prices tend to rise towards the end of the year, when distributors rush to the market to buy the missing bonds to meet their annual quotas.

The program provides for fuel distributors to buy certificates to offset the emission of pollutants in the consumption of products. The objective is to transfer resources from the sale of fossil fuels to the production of renewable energy, reducing its cost and encouraging consumption.

Cbios began to be traded in 2020, at a troubled moment after the beginning of the pandemic and amid a clash between the fuel sector and ethanol and biodiesel producers, who are the sellers of the bonds. With the drop in consumption, the government even reduced the targets in the first year of the program.

Each Cbio is equivalent to the emission of one ton of carbon into the atmosphere. The goals of each distributor are calculated according to the volume of fossil fuels that each one puts on the market. In 2022, they will have to buy around 36 million bonds.

“We are very concerned about the unexplained escalation of Cbios prices and the impact on the financial health of regional distribution companies and on the final price of fuels”, says Abel Leitão, president of Brasilcom, a federation that brings together medium and small distributors. .

For the sector, the lack of time for trading the securities may be one of the factors behind the price escalation. The rules require biofuel producers to issue Cbios according to their production, but do not define when the papers must be brought to market.

The market calculates that around 12 million Cbios have already been issued in 2022, but only 7 million were offered to distributors. The definition of deadlines for commercialization is defended by companies as a measure to solve the problem.

The MME (Ministry of Mines and Energy) says that the price is formed by supply and demand mechanisms. “The price increase is justified by the greater demand for the product at the beginning of the year”, he says, in a note sent to leafin which he denies that there is a lack of securities in the market.

According to the ministry, 7.5 million Cbios have already been traded in 2022, equivalent to 20.9% of the target set for the year.

For experts, the uptrend in prices should be maintained. Datagro consultancy, for example, talks about a reduction in the supply of securities as a factor of pressure on quotations. In 2022, he says, the volume issued should be 12% below that recorded in the previous year.

Evolving conversations about implementing a global carbon market are also putting pressure on quotes. Although it should not be the main security in this market in the country, Cbio is already used by companies that want to offset part of their emissions.

“As we advance, at the national level, in market regulation [de carbono]the price trend is up”, adds Leonardo Werneck, CEO of consultancy I Care. “And this is not just in Brazil, we see prices increasing in Europe and elsewhere.”

With Cbios approaching BRL 80, the market calculates that the impact on fuel prices will be around BRL 0.06 per liter, also double the 2021 average. bond purchase cost bombs.

The rise in fuel prices is the focus of attention of the Jair Bolsonaro government (PL), due to the risk of contamination of the electoral debate, and has been generating disagreements between the political wing and the economic wing of the government.

Last week, with support from the Planalto, federal deputy Christino Áureo (PP-RJ) presented a bill that overturns the Ministry of Economy by providing for the reduction or exemption of taxes on gasoline, diesel, ethanol and bottled gas without the need for compensation for lost revenue.

The scope of the project generated criticism from the team of Minister Paulo Guedes (Economy), who wanted to limit the subsidy to diesel, reducing the impact of the benefit on public accounts.