Widespread demand for carbon credits two months ahead of the year-end deadline for meeting 2024 goals under Brazil's Renovabio national biofuel policy helped push October Cbio prices up by 17pc over two weeks to R91 ($16), the highest level since May.
Heightened demand from fuel distributors increased the volume of Cbio credits traded on the B3 Brazilian stock exchange. The sum of trades from 1-23 October totaled R742mn, second only to the R1bn reported in February — one month ahead of the 2023 goal deadline. In October 2023, the financial volume of trades was around R691mn.
The Cbio price rally lost momentum after reaching R91 on 21 October, with prices retreating recently. The short-term outlook is positive.
The approaching 31 December deadline for 2024 acquisition goals and potential stricter penalties for non-compliance are driving the increased demand.
An amendment to proposed legislation would include rural producers in Renovabio and make non-compliance with decarbonization goals a crime against the environment. The bill is being processed urgently and could be voted on soon.
"Without news, the [Cbio] market does not have the strength to move," a source from a financial institution linked to Renovabio said, skeptical of the sustainability of the recent price increase.
One issue that has intrigued buyers is the high Cbio inventories among biofuel producers. Producers are holding around 11mn credits, the most since the program started. But it is unclear whether producers are willing to sell or intend to hold the credits.
As of 23 October, the sum of Cbios in the hands of distributors plus the number of credits already retired in the current cycle was 32.3mn, 69pc of the revised 2024 target of 46.4mn credits. Cbio retirement marks the end of its market life under Renovabio. The market is monitoring the 2025 goal, proposed at 40.4mn. The Renovabio committee is reviewing public hearing comments to send to the CNPE in November. The CNPE must approve and publish the 2025 goals by 31 December.
Biofuel associations Unica and Abiogas support a 2025 goal of 42.6mn credits, but warn of a 12.5mn credit surplus by the end of 2024 if defaulting distributors do not change.
