hEDGEpoint Global Markets assesses the impact of Cbios on the sugar and ethanol market

The RenovaBio committee recommended last Friday (15/07) the extension of the date to prove compliance with the distributors' decarbonization target within one year, that is, until the end of 2023. The expectation of an extension of the deadline had a strong impact on the price of Cbio, assesses hEDGEpoint Global Markets.

“The impact of the fall in Cbio prices was also felt in the sugar market. Since Brazil is the main supplier of the sweetener at the moment, a reduction in the price of ethanol means a drop in the sugar floor and, therefore, can be understood as bearish”, says Yuri Renni, senior energy market intelligence analyst. renewable energy from hEDGEpoint Global Markets.   

What are Cbios and why are they important? 

The RenovaBio Program establishes annual national decarbonization targets for the fuel sector, in order to encourage increased production and participation of biofuels in Brazil's transport energy matrix.

RenovaBio works as cap-and-trade, where the CNPE defines the goals and the market negotiates the Cbios (Decarbonization Credit). These are generated by biofuel producers and importers and must be purchased by fossil fuel distributors, who have individual abatement targets. The Cbio does not have an expiration date and is only withdrawn from circulation when retirement is requested. Market compliance in 2021 was 98% of the target of 24,86 million Cbios. Thus, Cbio remunerates the biofuel producer, having a direct impact on fuel prices.