Brazil's biodiesel mandate comes into effect - data show success of 'Social Fuel Program'

All diesel sold in Brazil's 35,000 fuel stations will contain 2% biodiesel from today onwards. The B2 blend announces the start of president Lula's Pro-Biodiesel Program, which tries to replicate the success of the country's much feted Pro-Alcool Program, but which also aims to bring social and rural development to the poor. Preliminary data from the Agência Nacional do Petróleo (ANP) now show that the so-called 'Social Fuel Program' which plays a key role in biodiesel supplies is becoming a success, benefiting tens of thousands of Brazil's poorest farmers.

According ANP, the B2 blend - the first step of the Programa Nacional de Produção e Uso de Biodiesel (PNPB, 'Pro-Biodiesel') - will mean savings of around US$410 million per annum and a reduction of Brazil's dependency on imported diesel from 7 to 5%. The biodiesel blend will not affect the price of the fuel for the consumer, who will pay the same for a liter at the pump. According to the minister of Mines and Energy, Nelson Hubner, the compulsory mixing of the biofuel won't increase costs for fuel marketing companies either.

Importantly, the Ministry for Agricultural Development announces that 99% of the volume of the most recent biodiesel auctions, commercializing 380 million liters in anticipation of the B2 mandate, were based on fuel produced by companies who have obtained the 'Social Fuel Seal' (Selo Combustível Social).

This social fuel stamp is granted to biodiesel producers who buy their feedstock from small, family-run farms located in some of the country's most impoverished regions. The policy is based on interesting incentives (tax breaks) and access to finance from the Brazilian Development Bank (BNDES) and other participating financial institutions. An estimated 90,000 families are now registered and benefiting from the program. They are united in cooperatives and trained by extension workers and agricultural experts. The program is one of president Lula's social inclusion policies aimed at alleviating poverty and hunger.

The preliminary data on the 'social fuel' supplies were offered by the ANP, which carried out the auctions on December 13 and 14 in Rio De Janeiro. Out of a total of 27 manufacturers participating in the auctions, 24 operated under the Social Fuel Seal. According to Arnoldo De Campos, director of the department of Income and Value Creation at the Secretariat of Family-Run Agriculture (Geração de Renda e Agregação de Valor da Secretaria da Agricultura Familiar), "this demonstrates that it is a sufficiently competitive mechanism".

Inclusion of the Nordeste
According to the Ministry for Agricultural Development, currently about 90,000 families are benefiting from the pro-poor Pro-Biodiesel program. Around half of them can be found in the semi-arid Northeast of the country (the Nordeste), Brazil's poorest region. The Nordeste is notoriously difficult when it comes to rooting out poverty, with successive governments failing to improve the livelihoods of the region's largely rural population. However, with the new program, the Nordeste families now have an opportunity to sell products to a new and growing market; they are directly involved in the production of oil-seed crops for the manufacture of biodiesel (such as castor and jatropha) and have guaranteed access to buyers.

What is more, during the auctions, biodiesel produced in the Nordeste even took the major share of the sales with a percentage of 27,4%, followed by fuel produced in the Center-West (27,1%). With regard to states, the biggest participation came from the Rio Grande Do Sul (with a percentage of 21,6), followed by Goiás (20%) and Bahia (16,1%).

"These data show the force of family-run agriculture, since these states have the highest concentration of small-scale farmers in the country", says Campos.

The first signs of major success for Brazil's 'Social Fuel Policy' are important, because the scheme provides a potential model for replication in developing countries that want to produce biofuels while including small farmers:
energy :: sustainability :: biomass :: bioenergy :: biofuels :: biodiesel :: rural development :: poverty alleviation :: Brazil ::

The B2 blend now compulsory in Brazil is hailed as a step towards a new era of relying on low carbon fuels, combining the best aspects of the highly successful Pro-Alcool program (which led to all gasoline in Brazil currently containing 25% of sugarcane ethanol), with a new vision on social and environmental sustainability. The biofuel is said to have a positive impact on the environment, as it reduces greenhouse gas emissions responsible for climate change.

The government is so optimistic about the adaptation of the market to the B2 mixture that it predicts it could give permission for a non-compulsory 3% blend in 2008, ahead of schedule.

To support its optimism, the government says Brazilian manufacturers already produced 450 million liters of biodiesel in 2007 with Petrobras having managed a strategic supply of 100 million liters which it distributed to 35,000 fuel stations across the country. The main barriers to distribution have now been overcome.

Brazil wants to have a mandatory 5% biodiesel blend in place by 2013. According to Hubner, the capacity expansion needed to achieve this target is being planned and commitments have been made by several companies to build biodiesel plants (note, Petrobras will be one of those, as it recently announced it will be building 10 biodiesel facilities over the coming years).

From today onwards, the B2 will be distributed with chemical markers that allow laboratories to track both the fuel's original manufacturer as well as the raw materials used to produce it. In Brazil, biodiesel is made from a range of vegetable oil feedstocks, with sunflower, soya, jatropha, palm oil and castor being the leading crops.

Picture: Small farmer from the semi-arid, impoverished Nordeste state participating in the Social Fuel policy. Credit: Petrobras.

References:
Ministério do Desenvolvimento Agrário: Empresas com Selo Combustível Social vendem 99% do biodiesel comercializado nos leilões - December 2007.

Globo: Diesel com 2% de biodiesel começa a ser vendido nos postos - January 1, 2007.

Biopact: An in-depth look at Brazil's "Social Fuel Seal" - March 23, 2007.