Brazil increased the volume of biodiesel blended with diesel sold at the pump to 12% from 11% on Sunday, the latest increase to a biofuels mandate that aims to decrease Latin America's largest economy's dependence on imported barrels.
The service stations that had diesel containing 11% biodiesel acquired before March 1 can continue to sell the product until stocks are exhausted, Brazil's National Petroleum Agency, or ANP, said on Monday.
Brazil wants to expand biofuels production and consumption amid efforts to reduce imports and meet targets to cut greenhouse gas emissions under the Paris climate agreement. The country created the RenovaBio program in 2016 in a move to support production of sugarcane-based ethanol and biodiesel, which includes creation of a carbon-credit system and trading market.
The program also laid out plans to increase the biodiesel-diesel blend sold at the pump to 15% by March 2023 via annual 1% increases implemented on March 1 of each year.
Brazil last increased the biodiesel mandate to 11% from 10% on September 1, 2019. The rise, however, was expected to go into effect March 1, 2019, but was delayed for six months by motor testing of the 15% maximum outlined by the government.
The increased biodiesel-diesel blend is also expected to soak up the country's excess biodiesel production capacity, which was about 40% unused before the current string of increases were started in 2017. Each 1% boost in the biodiesel-diesel blend sold at the pump represents about 600 million liters of additional production per year, according to the Brazilian Biodiesel and Biokerosene Union, or Ubrabio, and Brazilian Vegetable Oil Industry Association, or Abiove. The two trade groups represent biodiesel producers in Brazil.
The government, meanwhile, expects the 15% mandate to increase Brazil's biodiesel output to an annual rate of 10 billion liters by end-2023.
Brazil produced a record 5.9 billion liters of biodiesel in 2019, an increase of 10.3% from 5.35 billion liters in 2018, according to the ANP. Abiove expects the new mandate to boost output to 7 billion liters in 2020, while Ubrabio forecast an increase to 6.9 billion liters.
About 77% of Brazil's biodiesel production comes from soybeans, with 17% produced from animal fats and the remaining amount from raw materials such as cotton and recycled cooking oil.