Germany, Argentina, Brazil, Belgium, Colombia, Croatia, the United States, Finland, Indonesia, the Czech Republic and Sweden are the countries that have so far backed down -- or are proposing revisions -- in biofuel policies this year.

A survey by the International Energy Agency (IEA) shows that Russia's invasion of Ukraine is causing shocks in the energy and agriculture markets, worsening already high prices.

As a result, growth in demand for biofuels is expected to slow by 20 percent in 2022, equivalent to 2.2 billion liters, compared to the previous forecast of an increase of 11 billion liters.

Brazil accounts for most of the global decline, with -663 million liters per year.

On the demand side, there was a down revision in all transport fuels compared to pre-invasion estimates for January, with gasoline now -0.2% and diesel at -0.7% in 2022 compared to 2021 levels.

The lower use of transport fuel is expected to slow the growth of Brazilian demand for biofuels by 40% in 2022 compared to january projections.

In addition, since 2020 the country does not meet the schedule of biodiesel mixing in diesel, and established for the whole of 2022 the percentage of 10% (B10), when it should be at 14%.

And any hope of resumption was further apart with the change of command in the Ministry of Mines and Energy (MME).

In the last month, the sector even expressed optimism with the promise of then Minister Bento Albuquerque, to return with the mandate after the elections. And it had been mobilizing parliamentarians and agribusiness associations to convince the government to gradually increase the mix later this year.

But the game changed, and the appointment of Adolfo Sachsida to the MME after Benedict Albuquerque's dismissal sparked an alert in the biofuels sector last week.

One of Paulo Guedes' right arms, the former Secretary of Economic Policy is known for advocating a reduction in the mixture of ethanol in gasoline and biodiesel in diesel as a mechanism to lower the final price of fuels.

On Friday (13/5), Aprobio (association of the biodiesel sector) released a note in which it "reinforces the importance of the new Minister of the MME reaffirming RenovaBio as State Policy".

"By going back to RenovaBio, for example, by reducing the biodiesel mixture, the country needs to import more fossil diesel at the cost that is already known throughout society," says the text signed by the president of the association, Francisco Turra.

According to Aprobio, Brazil spent US$ 1.4 billion on the import of fossil diesel in April 2022 alone, the largest monthly expenditure on diesel imports since November 2012. The accumulated in the four months of 2022 exceeds US$ 3.4 billion.

USA

In the United States, there was also a down revision in demand growth for biofuels in 2022, to 15% compared to the January forecast.

Earlier this month, the United States Environmental Protection Agency (EPA) sent for final White House review a rule on biofuel blending mandates.

According to Reuters, the oil and biofuels industries, which in the past were at odds with the requirements, eagerly await the decision on the mandates, which comes amid high prices of oil products.

Under the proposal released last December, the EPA would retroactively set total renewable fuel volumes at 17.13 billion gallons by 2020 -- down from the 20.09 billion gallons set before the pandemic began -- and 18.52 billion gallons for 2021, also a reduction.

By 2022 there would be a slight increase, with a volume of 20.77 billion gallons. In addition, the United States is allowing the mixing of 15% ethanol as part of efforts to lower the price of gasoline.

Europe

In Europe, demand for petrol and diesel in 2022 is expected to be 1.5% and 1.1%, respectively, below what is forecast in January this year.

Several governments are also proposing or have already reduced mixing obligations because of high biofuel prices, but the impact of these changes is uncertain, as states will still have to comply with other policies, such as the EU Fuel Quality Directive, which requires greenhouse gas reduction.

Belgium, Croatia, the Czech Republic, Finland, Germany and Sweden have announced changes that, if implemented, will help reduce demand for biofuels in 2022 and 2023.

Germany's Ministry of the Environment is working on a proposal to phase out the use of biofuels produced from food crops and feed by 2030.

The suggestion is to reduce the use of these biofuels to meet the emission reduction quota to 2.5% in 2023, from 4.4% this year. With gradual falls in the following years to reach zero.

To compensate, the government wants to increase the multiplier for electricity used to charge electric cars to four, from three currently, and the multiplier for the use of green hydrogen to three, from two. Argus

Other policy changes for biofuels

Argentina: passed a law to reduce the biodiesel blend rate from the original 10% to 5% due to high crop costs. The law also authorizes the government to reduce the biodiesel mixing rate to 3% and halve the volume of corn ethanol if necessary;

Belgium: has a proposal to temporarily remove current mandates to reduce fuel and food costs and then slowly eliminate food-based fuels by 2030;

Colombia: the government reduced the ethanol blend mandate from 10% to 4% from April 2021, with the goal of returning the mixture to 10% in September 2021. However, in August, the deadline was extended until January 2022. Now the proposal is 6% by August 2022;

Croatia: will remove penalties for fuel mixers who err on the minimum percentages in blends;

Finland: will reduce mixing obligations by 7.5% points in 2022 and 2023;

Indonesia: postponed to 2023 plans to increase its mixing mandate to 40%;

Czech Republic: studies removing the mixing targets, but this will not be confirmed until the end of the year and the greenhouse gas reduction requirements would still apply;

Sweden: is proposing a pause in its GHG targets for the transport sector for 2023 at 2022 levels. The increases will continue after 2023.

Source: epbr