The carbon credits (CBIOs) average prices ended the uptrend and now they are traded at an average price of BRL 108.
In one week, the CBIO price dropped 45%
Although unofficial, the market fell amid news of the government wanting to extend for the next year the mandatory 2022 targets.

CBIO in Free Fall

Since the end of May, the price of the CBIO has been growing dramatically, with its average price exceeding BRL 200.
However, the tables turned this week when the price moved from BRL 194 to BRL 108
In one week, the CBIO devalued 45%.
This happene during a move by the government to try to postpone this year’s target of RenovaBio, in another effort to lower fuel prices.

The RenovaBio Committee recommended extending the deadline for meeting the distributors’ 2022 targets to 2023.
In principle, the deadline for meeting the annual target would end on December 31.
With the extension, companies will only need to meet their targets at the end of next year in conjunction with their 2023 obligations.
In this case they would have to buy instead of the pre-set 42.4 mm Cbios, a total of 54.2 mm Cbios.
The committee’s recommendation vote has not yet been effective and will only had any effect after approval by the The Energy Policy Council, which should happen by the end of this month.

The justification for the extension of the target is based on two fronts:

1. The State of Emergency situation of the government

2. Accusations of market manipulation, which would have led to a rise in CBIO prices – CADE (The Administrative Council for Economic Defense) is investigating it.

Sugar and Ethanol Parity

With the changes in sight, uncertainties arise about the demand for CBIOs for the coming years.
Lower demand could lead to a market with a large surplus, which could prevent prices from reaching levels as attractive as they are today.
This affects the parity between sugar and ethanol, as already seen this week.
Before, when the CBIO was at BRL 200, this resulted in around 100 points in favor of ethanol.
Today, with the fall in the market, this value has dropped to less than 75 points.

But still, due to the resilience of No.11 and the exchange rate devaluation, sugar is paying almost 200 points more than ethanol+CBIO.

Reminder: What is RenovaBio?

RenovaBio is the Brazilian national biofuels program launched in 2016
The main instrument of the program, in accordance with the Paris Agreement, is the establishment of annual national decarbonization targets for the fuel sector.
The national targets will be divided into mandatory individual targets for fuel distributors
To meet their goal, fuel distributors will need to acquire CBIO certificates on the stock exchange
Each CBIO corresponds to a tonne of carbon that is not released into the atmosphere.
Biofuel producers voluntarily issue CBIOs, and the amount each mill can issue is based on their energy-environmental efficiency rating of the volume of biofuels sold.