Argentina promotes new biofuels law

Bnamericas Published: Thursday, March 25, 2021

Argentina seeks to pass a new biofuels law to reactivate an industry that was battered by a rate freeze last year.

"The government's objective is to achieve the greatest synergy between all the realities of the local situation, taking care of each job and the impact on the environment," energy secretary Darío Martínez said while presenting the text to legislators.

The lower house’s energy and fuels committee is analyzing the bill. The current regulations will expire in May.

Under the bill, the mandatory minimum of corn or soy biodiesel in the mix would fall to 5% from 10%. This figure could fall to 3% if basic input prices rise so much that they distort the fuel price, or when raw materials are in short supply.

For gasoline, the mandatory minimum would fall to 10% bioethanol, compared to 12% currently. This figure includes 6% of sugarcane bioethanol that mixers must buy from producers at quotas and prices determined by the state; 2.5% of corn bioethanol they can buy from SMEs and cooperatives, and 1.5% that will be free of restrictions.

These percentages may be reduced to 1.5% for small companies if basic supply prices rise or supply is restricted.

“Thinking about lowering the cut would be a hard blow to the industry and with very debatable arguments,” the president of biofuels chamberCarbio, Luis Zubizarreta, told Agrofynews.

Under the bill, only plants with permits as of December 31, 2020 may produce biofuels in Argentina. Multiple subsidiaries belonging to the same group will be barred from producing, although this measure will not be retroactive.

The draft of the bill also establishes that liquid fuels and carbon dioxide taxes will only be charged proportionally before the fossil fuel mixture process.

The government aims for a lower house and a senate debate in coming weeks, so the law could enter into force by May 13, and remain valid through 2027. The Executive Branch will have the right to extend it once for a three-year period.

Senator Roberto Mirabella presented a separate biofuels bill in November.

As reported by BNamericas, Mirabella proposed that diesel should be mixed with at least 12% biodiesel. The share could increase by 1% annually, depending on the domestic market, and reach 27% in 15 years.

Gasoline would contain a minimum of 15% bioethanol, which could increase by at least 1% annually each year to 30% by 2026.

Mirabella’s proposal included VAT and income tax benefits for buying capital goods, and civil, electromechanical and assembly works, and related plant services.

Industry alert

The biofuels sector experienced its worst year in history last year as sales prices remained frozen for 10 months, forcing plant closures and layoffs.

In October, the government authorized a first increase of 10% for sugarcane and corn bioethanol to 32.78 pesos/l and soybean oil biodiesel to 48,533 pesos/t.

But to offset the losses, the industry had required a 25-28% increase. On January 2, another price increase, of 90.7% for biodiesel and 55.9% for bioethanol, was authorized, which will materialize gradually by May.

With its latest proposal, the government aims to support SMEs and create a regime better attuned to the local and global context.

But the law still requires consensus across several industrial and political sectors, especially with players the changes disadvantage.

“The challenge we have for the coming weeks is to find the greatest consensus, and that is the line the energy secretary also proposed: a multisectoral debate, which generates broad agreement to achieve a law that surpasses the one in force,” lawmaker Guillermo Carnaghi said after the energy committee meeting.

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