Government Signs Future Fuel Program Bill

On September 14th, President Luiz Inácio Lula da Silva and other government members formalized the signing of the  Bill for the Future Fuel Program (“Bill“), which shall now proceed to the initial legislative process in the Chamber of Deputies.

The Bill addresses a variety of converging questions, all aimed at decarbonizing the transportation energy matrix, industrialization, and improving vehicle energy efficiency. The primary objective is to promote sustainable low-carbon mobility and meet international greenhouse gas (“GHG”) emissions reduction targets set for Brazil.

Among the provisions contained in the Bill are the establishment of new programs and other regulations related to GHG emissions reduction, including:

• National Sustainable Aviation Fuel Program (ProBioQAV): this program aims to stimulate research, production, commercialization, and use of Sustainable Aviation Fuel (“SAF“). The new policy requires airlines to reduce carbon dioxide emissions by 1% by 2027, reaching a 10% reduction by 2037. This reduction shall be achieved through the gradual increase of SAF blending into fossil aviation kerosene. The well-to-burning cycle analysis methodology shall be adopted, with the National Agency for Petroleum, Natural Gas, and Biofuels (“ANP“) being responsible for establishing the values of total equivalent emissions per energy unit computed in the cycle.
• National Green Diesel Program (PNDV): this program promotes research, production, commercialization, and use of green diesel, gradually incorporating this fuel into the national energy matrix. The National Energy Policy Council (“CNPE“) shall be responsible for evaluating supply conditions, including raw material availability and production capacity and location to determine the mandatory percentage of green diesel addition to fossil diesel (“Minimum Mandatory Participation“), which cannot exceed 3% annually. CNPE shall also assess the impact of the Minimum Mandatory Participation on prices for end consumers and the competitiveness of domestically produced green diesel in international markets. ANP shall define the mandatory percentages of green diesel addition to diesel oil sold to end consumers in each Federative Unit of Brazil, ensuring compliance with the Minimum Mandatory Participations nationwide.
• Increase in the maximum and minimum ethanol anhydrous blending limits in gasoline C: the minimum content of anhydrous ethanol to be blended in gasoline C shall be set at 22%, and the maximum percentage at 30%, subject to technical feasibility.
• Establishment of the regulatory framework for synthetic fuels in Brazil: the Bill provides for the regulation and inspection of synthetic fuel production and commercialization, with its regulation being assigned to ANP. The Bill defines synthetic fuel as that produced from alternative sources that can partially or fully replace fossil-derived fuels, such as gasoline and diesel produced without petroleum – using renewable energy sources like hydrogen in its production.
• Establishment of the regulatory framework for Carbon Capture and Storage (“CCS”) activities: CCS activities shall be carried out at the discretion and risk of the interested parties, which can only be companies or consortium of companies established under Brazilian laws, with headquarters and management in the country. The regulation of this activity shall also be assigned to ANP.

In addition to the aforementioned provisions, the Bill also proposes the integration of the National Biofuels Policy (“RenovaBio”), the Rota 2030 – Mobility and Logistics Program, and the Brazilian Vehicle Labeling Program (“PBE Veicular”) to promote sustainable low-carbon mobility.

This integration shall be accomplished through the adoption of the well-to-wheel cycle analysis methodology, encompassing all stages of the cycle, from energy generation to extraction, production, and fuel use, with CNPE and the Ministry of Development, Industry, Trade, and Services defining the new values and goals of the programs.

Finally, the Bill amends Article 7 of Law No. 9,478/1997 to include among ANP’s authority the regulation of the synthetic fuel industry and carbon dioxide geological capture and storage.

Our team is available for further information.

Main Contacts:

Alexandre Calmon
Sócio | Partner
E: acalmon@cmalaw.com

Fabiano Gallo
Sócio | Partner
E: fabiano.gallo@cmalaw.com

Marcelo Frazão
Sócio | Partner
E: mfrazao@cmalaw.com 

Rogerio Campos
Sócio | Partner
E: rogerio.campos@cmalaw.com

Isabela Morbach
Of Counsel
E: isabela.morbach@cmalaw.com