How biofuels could help Brazil mitigate greenhouse gas emissions

Regulation of Brazil’s carbon credit market could stimulate the development of local biofuels. 

That is according to Rodolfo Taveira and Rodrigo Borges, principal and manager of energy and natural resources, respectively, at consultancy firm Oliver Wyman.

The consultants say the environmental benefits of low-carbon fuels could be better perceived if there was a carbon price. 

"Currently, in the case of ethanol, for example, the benefit is only analyzed in terms of energy equivalence. With a price on carbon, ethanol could be [economically] viable in states where it isn't today," Borges told BNamericas.

Another growth front for biofuels in Brazil is the increase in the mandatory mix for ethanol and biodiesel in gasoline and diesel. 

Today, the mandatory portion of anhydrous ethanol in gasoline is 27.5%, and the government is studying increasing it to 30%. 

The mandatory mix of biodiesel in diesel is 12%, and the plan is to increase it to 13% next April, 14% in April 2025 and 15% in April 2026.

Taveira said current ethanol production capacity is sufficient to meet future mix increases. 

“With regard to biodiesel, we’ll eventually need to increase production capacity,” he said, stressing that Brazil should invest in palm oil, which is more efficient than soy oil – the country’s main biodiesel source.

While ethanol has the potential to support the production of sustainable aviation fuels (SAF) and be combined with electricity in hybrid car engines, biodiesel could help Brazil reduce its diesel imports.  

In a recently launched report, Taveira and Borges projected that expanding the use of biofuels (mainly ethanol and biodiesel) in Brazil's transport sector could reduce carbon dioxide equivalent (CO2eq) emissions by between 27.4Mt and 71.6Mt by end-2030.

The report provides an overview of three decarbonization scenarios – current, moderate and accelerated – based on ethanol, biodiesel, renewable diesel, sustainable aviation fuel and compressed natural gas (biogas).

According to Oliver Wyman’s estimates, if implemented the proposed scenarios could reduce diesel consumption by 30.4Bl (billion liters) by 2030.

Here are the main highlights of the study. 

ETHANOL

By encouraging ethanol consumption and increasing the proportion of ethanol consumed in existing flex-fuel cars from 33% to 66%, Brazil will increase biofuel consumption by 29% by 2030 and reduce carbon dioxide equivalent (CO2eq) emissions by 11.6Mt, the report states.

If this happens at a fast pace, and 100% of flex-fuel engines consume ethanol by 2030, with sales of flex-fuel vehicles reaching 80%, the country could cut emissions by 24.9MtCO2eq, which would require ethanol to have a 62% share of fuel for light vehicles.

BIODIESEL

At the current rate, biodiesel could reach a blend of 20% by 2030. This would represent an additional 5% substitution of diesel A, the country's main source of CO2 emissions. This change would offset approximately 7.1MtCO2eq.

Today, around 25% of the diesel consumed in Brazil is imported and, if the country manages to reach blending levels similar to Indonesia's (35%), it could reduce imports to 5% and increase biodiesel's total contribution to the nationally determined contribution (NDC) under the Paris Agreement. 

RENEWABLE DIESEL

Encouraging the production of RD/HVO (hydrogenated vegetable oil or green diesel) can have an important economic and environmental benefit. For example, a 5% RD/HVO blend mandated in diesel would cut 7.2MtCO2eq in a moderate scenario, according to the report. 

In an accelerated scenario, if the country implements a 10% HVO mandate, this would increase the demand for RD/HVO to 5.8Bl by 2030, equivalent to approximately eight new biorefineries. 

Some players are already taking advantage of the RD/HVO window of opportunity and announcing new plants, potentially leading to replacing 3.5% of diesel demand by 2030. 

SAF

The European Union recently set a target to replace 6% of aviation fuel with SAF by 2030. Considering the abundance of raw materials, if a similar target were set in Brazil, consultancy estimates show that it would be possible to replace 300Ml of aviation fuel and decarbonize 0.6MtCO2eq.

To limit emissions from air travel to 2019 levels, around 15% of the aviation fuel consumed in 2030 would have to be SAF. In a fast-paced scenario, if the country reaches this mark, the impact on greenhouse gas emissions would be 1.6MtCO2eq.

BIOGAS 

If 15% of the biogas/biomethane produced is destined for the transportation sector, this would represent 2.4Mm3/d, replacing 42% of the projected demand for liquefied natural gas (LNG) and reducing greenhouse gas emissions by 0.8MtCO2eq by end-2030.

At an accelerated pace, Brazil could reach the International Energy Agency (IEA) benchmark and allocate 30% of biomethane to the transport sector and double the impact on greenhouse gas emissions to 1.6MtCO2eq.