The new biofuels revolution will play a key role in Brazil's energy transition

One of the main global challenges in recent years, and also in the coming years, is to make structural changes to the energy matrix with the aim of replacing fossil fuels with renewable sources, especially those with low or no carbon emissions - the so-called clean energies. Brazil has the potential to become one of the main exponents of this movement, which has earned the name of energy transition.

Historically, the most widely used energy sources in Brazil have been fossil fuels, derived from oil. Although the national matrix has a share of renewables above the world average (46% against 14%), there is still a long way to go towards decarbonization. The case of fuels is emblematic: according to the Ministry of Mines and Energy (MME), only 25% of them currently come from renewable sources, yet our country has the potential and desire to become one of the world leaders in "green energy". In 2021, the MME announced the goal of reaching 30% by 2030.

Brazil has a tradition of using renewable energy sources. Back in 1975, the National Alcohol Program (Pró-Álcool) was created, the first movement in the biofuels market. The production of hydrated ethanol has taken off over the decades: in 2021 it was approximately 16.8 billion liters, according to the National Agency of Petroleum, Natural Gas and Biofuels (ANP).

The second movement took place in 2008 with the start of the sale of biodiesel in Brazil, a "partially" renewable option for heavy fleet vehicles. In 2017, the National Biofuels Policy - RenovaBio - was implemented. Among its main achievements, we can list the contribution to the creation of a carbon market in the country, with the Decarbonization Credit (CBIO), and the compulsory blending of biodiesel into diesel, whose percentage has gradually increased. Today, the blend approved by the MME is 10%, making the measure essential for the maturity of the biodiesel industry in the country in recent years.

Currently, 70% of biodiesel production uses soy as a raw material. On the other hand, Brazil has a range of oilseeds with great energy potential that are still little used. Just to cite one example, oil palm can yield an annual average of 5 tons of oil per hectare, compared to 0.4 tons of oil from soy. In addition, the palm has a positive balance in terms of carbon emissions and has the Oil Palm Agroecological Zoning, defined in 2010 by the Government, determining that planting can only be done in degraded areas until 2007, with the aim of recovering them. Diversifying biodiesel production can boost the sector, bring more environmental benefits and make the market more dynamic.

These are steps to be celebrated, no doubt, but there is still timidity in the development of 100% renewable biofuels, especially if we consider the variety of available technologies to be explored. One of the main exponents of this revolution is green diesel (HVO), a product of the second generation of biofuels, which is an innovation in the sector and has great growth potential.

Green diesel is a 100% renewable biofuel that does not require any mixing with fossil fuels and also does not require any adaptation in vehicle engines. It is produced by processing renewable raw materials, such as palm oil.

Already in use in European countries and in the United States, green diesel is the result of technological improvements to accompany vehicle innovations, which require a better quality fuel, with high stability and minimum levels of pollutants. The product is the third most used biofuel in the world and the one whose production is growing the most. The advantage of green diesel is its efficiency in solving the challenge of reducing pollutant gas emissions.

Just as important as eliminating the use of fossil diesel is developing a sustainable alternative for the aviation market, which still lacks renewable solutions in Brazil. Sustainable aviation fuel (SAF) is emerging around the world. The European Union is considering making it compulsory to use 2% SAF by 2025 in airplanes departing from airports in its territory. The United Kingdom has bigger ambitions: to achieve a 10% SAF requirement by 2030. The United States is going further and has announced the goal of completely decarbonizing the civil aviation sector by 2050. According to the US government's plans, the country will already be producing three billion gallons of sustainable aviation fuel by 2030.

Brazil, a nation with an infinite wealth of resources, still doesn't have a plan to decarbonize the aviation sector. The segment consumes 17 billion liters of aviation kerosene a year, which emits around 10 million tons of CO2 in the same period. Fortunately, there are initiatives to change this and we can already see the first steps of this new biofuels revolution in the country.

A partnership between Grupo BBF (Brasil BioFuels) and Vibra Energia will enable Brazil's first biorefinery to produce SAF and HVO, in the Manaus Free Trade Zone, with operations scheduled to begin in 2025. The project will use oil palm as a raw material and will produce around 250 million liters/year of green diesel (HVO) and 280 million liters/year of Aviation Fuel (SAF). Grupo BBF will invest more than 2.2 billion reais in the new business and Vibra will be the exclusive marketer of the products.

The maturity already achieved by the national biofuels market and society's growing desire to decarbonize its activities should accelerate Brazil's biofuels revolution and make it faster than its predecessors. According to Emergen Research, the global biofuels market will reach 247.38 billion dollars by 2027. Brazil is a protagonist in this sector and can exploit various segments and raw materials, contributing effectively to achieving decarbonization targets in sectors other than the automobile and road transport sectors, and thus boosting the energy transition in Brazil and worldwide.

*Milton Steagall is CEO of Grupo BBF.