Brazil SAF mandate to target emissions reductions starting in 2027

A Brazilian sustainable aviation fuel mandate that will take effect in January 2027 will target cutting Brazil's airline emissions by 1% of the sector's 2026's total emissions, with the possibility of raising that figure to 10%, Renato Dutra, national head of biodiesel and other biofuels from the Ministry of Mines and Energy, said May 18.

Dutra said at a conference that the Brazilian mandate will be based on an emissions reduction scheme -- which is expected to encourage SAF producers to look for the best life cycle emissions route from the perspective of less greenhouse gas emissions -- and not the volume blended, as with ethanol and biodiesel mandates.

Brazil will also try to connect the current decarbonization program, Renovabio, with the Carbon Offsetting and Reduction Scheme for International Aviation, or CORSIA, program, which would potentially increase the international liquidity of CBIO decarbonization credits, Dutra said. Each credit is equivalent to 1 ton of CO2 avoided.

Brazilian SAF production

Brazil is one of the largest global producers and consumers of ethanol and biodiesel. It has an energy matrix sourced 48.3% from renewables, much higher than the world's average of 19%.

All market stakeholders are rushing to meet the 2027 deadline, when aviation companies operating in Brazil will also need to commit to the decarbonization targets set under CORSIA.

According to a Brazilian investor, it takes at least five years to build an SAF plant, and so far in South America, there are just two SAF plants under construction.

The Omega Green plant in Paraguay, owned by the Brazilian group ECB, is the first, and it is expected to be operating by 2024. Omega Green has an estimated production capacity of 75,700 liters/day, shared between renewable diesel, sustainable aviation fuel and green naphtha. ECB Group plans to use soybean oil, animal fats and used cooking oil as feedstock.

The second SAF plant is expected to begin operations in 2025 and is a result of a partnership between Brasil BioFuels and Vibra, Brazil's largest fuel distributor. The plant, in North Brazil, has an estimated production capacity of up to 250 million liters/year of HVO and 280 million liters/year of SAF.

Pricing scenario

While the production routes, regulatory and legislation aspects were broadly discussed, there were concerns from investors over the lack of certainty on how SAF will be priced in Brazil and if there will be federal or state tax incentives for producers.

Platts assessed SAF with credits at $2,728.16/mt or 802.40 cents/gal May 17, 136.3% higher compared with $1,154.67/mt, or 339.61 cents/gal, for SAF without credits, according to S&P Global Commodity Insights data.

It is still not clear if Brazil will consider any credit incentive for the national SAF industry development, but US SAF prices suggest the high relevance of the credit incentive to turn SAF into an economic and sustainable option for companies committing to emissions reductions.

Jet Kero Los Angeles CA Pipeline was assessed at 369.93 cts/gal, or a 30.32 cents/gal discount to SAF without credits, but 432 cents/gal lower than SAF with credits, S&P Global data showed.