According to International Energy Agency (IEA) website publication on Renewables 2022 Analysis and forecast to 2027 report:
Brazil’s biofuel demand grows 40% to 47 000 MLPY, and production climbs to 49 000 MLPY over 2022-2027. Ethanol accounts for 70% of this expansion, with the rest coming from biodiesel and renewable diesel. Brazil’s ethanol and biodiesel mandates, discretionary blending, the RenovaBio mechanism (a carbon intensity reduction scheme), and increasing diesel and gasoline demand drive biofuel expansion.
We expect ethanol demand to expand 8 500 MLPY over the forecast period. Brazil’s 27% compulsory ethanol blending mandate, a 3% increase in gasoline consumption, the RenovaBio programme and discretionary blending support this growth. We estimate discretionary ethanol purchases will account for 23% of gasoline and ethanol sales by volume in 2022 and 34% by 2027. Brazil has a large flex-fuel vehicle fleet, which allows drivers to choose high- or low-ethanol-blended gasoline depending on the price. In 2022, ethanol prices hovered around the level at which consumers would choose ethanol over gasoline.
Over the forecast period, we expect more discretionary blending to result from continued tax incentives and rising GHG emissions intensity targets under the RenovaBio programme. Existing and planned ethanol production capacity will be more than sufficient to meet expected demand. We also anticipate a decline in ethanol exports as Brazilian consumption increases and demand growth outside of Brazil is met by domestic production.
The higher cost of biodiesel relative to diesel led Brazil to reduce its blending mandate from 13% to 10% in 2021, and to maintain it at 10% in 2022. Assuming the price differential narrows, we expect Brazil to achieve 15% blending in 2024 and thereafter, one year behind its initial schedule. Renewable diesel and biojet fuel consumption expand little in the main case since there are no specific targets or support programmes. To help address this issue, Brazil announced its Fuel of the Future Program last year to expand biofuel blending in aviation fuels and diesel. It also released technical specifications for renewable diesel, but further support policies have yet to be announced.
The accelerated case assumes Brazil supports both biojet fuel and renewable diesel, achieving 2% biojet blending and expanding its biodiesel blending to 18% by 2027. This is consistent with statements that Brazil is considering mandating a 1% cut to aviation GHG emissions in 2027. (14) We also assume Brazil’s own production will satisfy domestic demand, given its soybean and palm oil feedstock potential and its focus on internal ethanol and biodiesel development in the past. Ethanol consumption rises slightly, based on a 3-percentage-point increase in discretionary blending, and production outpaces domestic demand to take advantage of growing export opportunities.
(14) Ministry of Mines and Energy (2022), Statement from Renato Dutra, head of biodiesel and other biofuels.
