Brazil lower house passes bill aimed at boosting biofuels use

A chemical engineer places a hand on a pipe filled biofuel at Oleoplan factory in Passo Fundo, 300 km (186 miles) southwest of Porto Alegre, May 21, 2010. REUTERS/Bruno Domingos

BRASILIA (Reuters) - Brazil’s lower house of Congress approved on Tuesday a bill to set up a program to boost the use of biofuels, a move that could sharply change the way fuel distributors operate in the country.

The program, called RenovaBio, will give fuel distributors in Brazil targets to cut carbon emissions, which they will meet by selling increasing volumes of ethanol and biodiesel over the coming years.

The bill has yet to be approved by the Senate before it could be signed into law by President Michel Temer.

RenovaBio could be a lifeline to Brazilian ethanol producers struggling in recent years to compete with gasoline. It could also bolster sugar prices by encouraging mills to produce more ethanol and less sweetener.

Sugar and ethanol consultancy Datagro estimates the new policy could result in domestic demand for as much as 40 billion liters of ethanol by 2030, up sharply from just over 26 billion liters in 2016.

The program will force fuel distributors to show they are cutting carbon emissions based on certificates issued by biofuel producers. The certificates will estimate the emissions cut compared with equivalent petroleum products.

The program would allow distributors to buy and sell the certificates on a secondary market to meet emissions targets that will grow stricter, tracking Brazil’s commitments within the Paris climate agreement.

The proposal was delayed by concerns in the Finance Ministry that it could have a negative impact on the economy by raising fuel prices and spurring inflation. Biofuel industry groups dismissed those fears, saying RenovaBio would increase investments in the sector and lead to gains in productivity.

Companies expected to benefit from the program include Brazilian sugar and ethanol producer Biosev SA BSEV3.SA, a unit of French commodities firm Louis Dreyfus Corp. The program will also likely help Brazil's largest sugar producer Cosan CSAN3.SA, and Royal Dutch Shell Plc RDSa.L, which has a joint venture with Cosan called Raizen that produces ethanol from a cellulose plant.

Reporting by Anthony Boadle; Writing by Marcelo Teixeira; Editing by Leslie Adler and Lisa Shumaker