Government target for biodiesel opens new crisis between Prates and Silveira

After disagreements over Petrobras’ extra dividends, the “Future of the Future” bill, which defines green goals for the sector, opens a new chapter in the crisis in the government of Luiz Inácio Lula da Silva (PT) between the president of the state-owned company , Jean Paul Prates, and the Minister of Mines and Energy (MME), Alexandre Silveira.

This week, during CERAWeek 2024, one of the largest energy events in the world, held in Texas, in the United States, Prates stated in an interview with EPBR Agency which will request changes to the project. The text was approved in the Chamber of Deputies last week and is now being processed in the Senate.

In addition to criticizing biodiesel targets, Prates defended the inclusion of co-processed diesel in the program. Called “R diesel”, it is produced from the co-processing of fossil diesel with vegetable oil or animal fat in the refinery. Prates argued that “R” should be considered biodiesel, as, although it has mineral content, it is renewable.

The following day, speaking at the same event and to the same agency, Silveira took a stand against the inclusion of diesel R in the program. The Minister of Mines and Energy said that this was a position adopted by the government in favor of generating employment and income, in support of the expansion of agroindustry, and in favor of the exclusivity of biodiesel.

“It is a new industry, an industry that we want to strengthen, that generates employment, generates income, generates foreign currency, strengthens our great vocation as producers both in family farming, which we strengthened on the issue of biodiesel, already in the first meeting of the National Council of Energy Policy [em 2023]”, defended Silveira to EPBR.

Biodiesel and ethanol blends

The support – and crux of the issue – that the minister refers to is related to the increase in blends of biodiesel and ethanol in fuels. The subject has been causing controversy and has already had several twists and turns.

The agribusiness sector says that Petrobras’ diesel cannot be compared with biodiesel, as it still contains oil.

The Fuel of the Future bill was approved on March 13th with ease in the Chamber of Deputies and with changes to the original text, after pressure from agribusiness – which had support from Mines and Energy and the Civil House. Initially, the proposal provided for a gradual increase in the mixture of biodiesel in diesel from 14% to 20% by 2030. The measure, however, was questioned by the sector.

In the final version, deputies approved this part. However, the addition must consider the total volume and it will be up to the National Energy Policy Council (CNPE) to evaluate the feasibility of the targets for increasing the mixture, reducing or increasing the biodiesel mixture by up to two percentage points. From 2031, the mixture should be between 13% and 25%.

The margin for mixing ethanol with gasoline will increase from 22% to 27%, and could reach 35%. Currently, gasoline must have a minimum of 18% ethanol, and a maximum of 27.5%.

According to ValuePetrobras argued, during the proceedings in the Chamber, that the increase in the mixture of biodiesel in diesel could harm the state-owned company in the market, especially at this time of recovery and robust investments, such as that of the Abreu e Lima refinery, in Pernambuco, whose forecast of contributions totals between R$6 billion and R$8 billion.

The bill now goes to the Senate, where Prates is betting that he will be able to make changes to the text that were not successful in the Chamber. The choice of the rapporteur in the house is already seen as a victory.

According to the Value, there was an expectation that Senator Vanderlan Cardoso (PSD-GO), president of the Economic Affairs Committee, would be the rapporteur for the Fuel of the Future in the House, and that he would maintain the approved points. Prates, however, articulated the nomination of Veneziano Vital do Rêgo (MDB-PB), 1st vice-president of the Senate, considered more open to dialogue on these topics.

“These things have to be talked about a lot. I believe that the work of Senator Veneziano, appointed as a possible PL rapporteur now, […] will probably try to do a truly rapporteur work more concerned with this second phase […] That’s why it’s good to have bicameralism, you have to have that calibration there. The principle of induction is good, but the calibration of these induction instruments also has to be discussed outside the issue of establishing a technological route,” Prates told EPBR.

Another question from Prates was regarding the technological route that is being chosen to replace entirely fossil diesel. In his opinion, companies should be free to choose their technologies, sources and fuels in the process.

“Legislation cannot be transformed into an instrument to protect technological routes. The entire history of the energy transition has one objective, which is to reduce emissions. And not take people out of the game”, assessed the president of Petrobras.

President Lula has not yet officially taken a position on the issue of biodiesel, nor has he declared clear support for either side of this dispute, which also involves members of the government.

Regarding dividends, however, the Chief Executive followed Silveira’s opinion of withholding the payment of extraordinary dividends.