Main points

With The dry weather, a crop failure is estimated – sugarcane processed below 535 mmt.
The mix should remain sugary, impacting ethanol production.
Less ethanol, less CBIO emission – will we have a CBIO supply shortage?

RenovaBio in Numbers

In 2020, the RenovaBio program avoided the emission of 15mmt of CO2.
Despite the troubled start, the first year of the policy was a success with almost 98% of the decarbonization targets fulfilled:

For this, 14.9 million CBIOs were traded, generating a financial volume exceeding 650 million reais.

For the year 2021, the goal requires that 24.86 mm CBIOs are acquired by 136 distributors:

It is estimated that the CS Brazil will processed this season 535 mmt of cane.
The mills are advanced in sugar pricing, which makes it difficult to change the mix to ethanol – market conditions are necessary to allow positive washout operations.
Consequently a smaller volume of ethanol will be produced (24.2 billion l).
And due to the structure of the RenovaBio program, less ethanol production, less Cbios to be emitted by the mills.
With that, the question remains, will the crop failure impact the CBIO market?

Until June 23, total Cbios issued by biofuel producers this year were 13.97 mm;
Added to the 2020 surplus (3.97 mm CBIOs), the available volume so far is 17.93 mm, – and capable of covering 72% of the target.
Distributors have already purchased more than 8 mm of Cbios, with approximately 16 mm remaining to be purchased by the end of 2021

It is important to remember that the Cbio volume per distributor is based on their fuel sales in the previous year.
Therefore, the current behavior of the Otto cycle does not impact the 2021 targets.
If we take into account that:

This year’s total Cbio offer would be 29 million, added to the 2020 surplus, this would have a balance 8 mm higher than the target required for 2021.

Since April, an average of 176,000 CBios are traded per day, far from the liquidity seen at the end of last year
As a result, the price remains stable at around 30 reais/CBIO.
The price trend should remain stable, depending of course on the obligated parties’ buying curve.

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 emitted by biofuel producers corresponds to one ton of carbon that is not released into the atmosphere.
Biofuel producers voluntarily issue CBIOs, based on their energy-environmental efficiency rating of the volume of biofuels sold.