Brazil’s Geographic Division

1. Executive Summary

The report includes the following sections: 1 Executive Summary; 2 Policy and Programs; 3 Fuel Use; 4 Ethanol; 5 Biodiesel; 6 Advanced Biofuels; 7 Notes on Statistical Data; 8 Exchange Rate.

1.1. Brazil’s Geographic Division

The map belo w shows Brazil’s division by regions and states. 2. Policy and Programs 2.1.1 RenovaBio Program Brazilian Commitment to Control Climate Change In December 2015, Brazil joined the 21 st Conference of the Parties COP21 of the United Nations Framework Convention on Climate Change UNFCCC in Paris, where governments from 190 countries discussed potential agreement to prevent global climate change. Each country submitted a plan to reduce domestic emissions of greenhouse gases GHG, called an Intended Nationally Determined Contribution iNDC, with the intention to limit the overall rise in global temperatures to a maximum of 2ºC by 2100. As a result of COP21 commitments and several voluntary goals set by Brazil, the country committed to reduce its domestic emissions of GHG 37 percent by 2025 and 43 percent by 2030, both based on 2005 levels. With regard to energy production and use, the Brazilian iNDC makes the following commitments: • Increase the share of sustainable bioenergy in the Brazilian energy matrix to approximately 18 percent by 2030, by expanding biofuel consumption, increasing ethanol supply - including the proportion of advanced biofuels second generation and the share of biodiesel in the diesel mix; • Achieve an estimated 45 percent share of renewables in the energy matrix by 2030; • Obtain at least a 66 percent share of hydropower in electricity generation by 2030, not considering self-produced electricity; • Expand the use of renewable energy sources other than hydropower in the total energy mix to between 28 and 33 percent by 2030; • Expand the domestic use of non-fossil energy sources domestically, increasing the share of renewables other than hydropower in the power supply to at least 23 percent by 2030, including by increasing the share of wind, biomass, and solar energy; • Achieve 10 percent efficiency gains in the electricity sector by 2030. RenovaBio Program As part of the ambitious goals set at COP21, in December 2016, the Minister of Mines and Energy MME announced the creation of the RenovaBio Program, which aims to create a regulatory framework to revitalize the biofuels sector. The stated goals of the program are: 1. Encourage energy efficiency gains in biofuels production and use; and, 2. Recognize that different biofuels have different capacities to contribute to the de- carbonization goals set at COP21. As of the date of this report, the RenovaBio regulatory framework remains under development and is expected to be announced by the President in a Provisional Meas ure “Medida Provisoria”. It is expected to set goals for carbon emission reduction for the fuels market in accordance with the commitments of COP21, creating more market predictability; which the sector currently lacks. The program is not expected to include the creation of carbon taxes or any kind of subsidy to biofuels. According to industry sources, RenovaBio is based on California’s Low Carbon Fuel Standard LCFS Program and the U.S. Renewable Fuels Standard RFS. The program should include the creation of Certificates of Emission Reduction Certificados de Reducao de Emissoes – CREs issued by biofuel producers, which will be transferred to fuel distributors at the time of purchase. Fuel distributors will likely have mandates to acquire a certain volume of CREs. A secondary market for the CREs is likely to be created, since fuel distributors that do not have enough certificates would have to buy them to fulfill annual mandates. 2.1.2 The Old Proalcool Program For a historical perspective of the Brazilian Ethanol Program Proalcool, please refer to the Brazil Biofuels Annual Report from 2010 GAIN Report BR10006 2.2. Government Support Programs for Ethanol 2.2.1. Regional Producer Subsidy