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(Bloomberg) -- The world’s second-largest producer of ethanol Brazil is set to increase the blend of biofuel in gasoline, in a move to aid local industry as supply booms.
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Authorities are recommending an increase in the blend of ethanol in regular gasoline to 30% from the current level of 27.5%. That’s after technical tests sponsored by the country’s Ministry of Mines and Energy indicated there would be no harm to car engines.
The increase in the ethanol blend was first planned in a law that passed Congress last year. A final green light from the National Energy Policy Council is still pending, but that’s anticipated to happen sometime this year as the agency is expected to follow recommendations from the technical study.
According to consultancy Datagro, the new 30% blend will add 1.3 billion liters of ethanol demand annually.
The move is set to reduce demand for gasoline, potentially easing the need for fuel imports. Gasoline prices to Brazilian consumers should fall as a result and the country could even have excess gasoline to export, minister Alexandre Silveira told journalists on Monday.
The higher blend also comes as biofuel supplies are getting a boost from the startup of new plants that process corn, with industry group Unem listing as many as 12 new units currently in project phase or under construction. While production from corn is booming, Brazil makes most of its ethanol from sugar cane.
Datagro’s President Plinio Nastari expects some sugar-cane plants could chose to switch production to ethanol as a result of the increased biofuel demand. That’s especially true for mills outside of the top sugar-cane producing state of Sao Paulo, as a longer distance to Brazil’s main ports make it more expensive for those companies to export sugar.
(Updates with expected timing in third paragraph.)
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