Q&A: Brazil's RNG needs regulated carbon

Brazil's biomethane market continues to struggle to find ways to price its green attribute. Argus spoke to Gustavo Soares, a biomethane specialist and collaborator at market-focused research and opinion publishing site Ensaio Energetico about possible solutions, including a regulated carbon market. Edited highlights follow.

What is the biggest challenge to price biomethane's green attribute?

The biggest challenge is the lack of a regulated carbon market. If there were a carbon market, we would have companies with reduction commitments. It would be easy to calculate their demand for decarbonization and, consequently, for renewables or energy efficiency.

This would make pricing the green attribute much easier. We would move in a direction closer to the European market, where there is a reference price.

Can voluntary certificates, such as Gas-Rec, be a viable solution for this pricing?

[With voluntary certificates] it is up to the company to define its mandate and, if any cyclical or structural conditions change, they can simply review their commitment. Now, the certification helps in a certain way. The Gas-Rec is a traceability certificate that can meet some of the company's objectives.

Customers' willingness to pay more or less for a green attribute will depend on a series of factors, such as the company's own profile. A publicly traded company must have a lot of transparency, it has creditors who are concerned about decarbonization. An exporting company is possibly serving more demanding markets regarding environmental issues, for example.

In addition to creating a regulated carbon market, what other types of public policies could support Brazil's biomethane market development ?

There are many possibilities. A carbon tax [where consumers would be taxed for carbon emissions, instead of having decarbonization targets] would be one possibility. Tax exemptions for biomethane are another path. Taxes on LPG and diesel are often heavy. If there is an exemption or a large tax differentiation for biomethane, it creates a competitive advantage. The government can create a target obligation for public entities to consume biomethane.

Regarding infrastructure, the creation of incentives for connecting plants in distribution and to inject biomethane into transportation.

We must think about a set of policies. When we think about the development of biomethane, it will not be a policy that saves us, but a set of policies that will boost this industry.

By Rebecca Gompertz