Proposed higher ethanol blend seen fueling Brazil's economic outlook

Brazil's government plans to submit a proposal to congress by the end of this year to increase the ethanol mix in gasoline from 27% to 30%.

A local expert consulted by BNamericas said that while the measure could have positive economic impacts, it may also pose risks for vehicle owners.

The announcement was made on Monday during a presentation of test results conducted by the Mauá institute of technology (IMT), which confirmed the technical viability of the new fuel mix.

According to the mines and energy ministry (MME), adopting the E30 blend could reduce gasoline prices by up to 0.13 reais (US$0.02) per liter and reduce the need to import 760Ml of gasoline annually, boosting domestic biofuel production.

This would lead to an additional demand of 1.5Bl of ethanol and an estimated US$9bn in investments in the sector.

Furthermore, the new blend could cut greenhouse gas emissions by 1.7Mt/y – the equivalent of removing 720,000 vehicles from the roads annually.

In a press release, the MME emphasized that testing E30 marks another step forward in implementing the fuel for the future law, which outlines guidelines for decarbonizing and modernizing Brazil's energy matrix.

Rodolfo Taveira, director of energy and natural resources at consultancy Oliver Wyman, highlighted that increasing the ethanol blend in gasoline has economic benefits, including reducing imported gasoline, which reached close to 4Bl in 2023, directly impacting the trade balance.

According to Taveira, another advantage of the measure is the increased demand for ethanol, which could drive investments in production capacity, the potential reactivation of idle plants, greater tax revenue and job creation in Brazil.

Taveira noted that the fuel for the future law permits ethanol-gasoline blends of up to 35% and sets similar guidelines for diesel and biodiesel, though these were not addressed in the recent announcement.

"In this way, there is still room for this policy to advance in the future," he told BNamericas.

However, the consultant warned that higher ethanol and biodiesel blends – especially in diesel – could affect engine performance and increase maintenance costs.

"For this reason, it is essential for research and tests to be carried out to assess the technical feasibility of the new blend levels," said Taveira.

Context

The MME's announcement comes as congress debates a bill to eliminate the mandatory blending of ethanol and biodiesel in fossil fuels. At the same time, fuel distributors are pushing to suspend biodiesel sales due to inspection challenges.

During the E30 event, mines and energy minister Alexandre Silveira made it clear that he opposes the distributors' request.

"Under the pretext of non-compliance with the law by some, wanting to destroy an industry is something completely unusual and absurd," he said.