¶ Intro / Opening
Hello, welcome to Falando de Mercado, a series of podcasts weekly brought up by Arbus on the sector of commodities and energy in Brazil and in the world.
¶ Introduction to Falando de Mercado
I am Camilla Fontana, head of the production of Arbus in Brazil, and who is with me today is Rebecca Gompertz, a special guest in biometano and CBILS, the publication Arbus Brazil Gas Markets. The topic of this episode is a talk about the list of distributors of combustion and inadimplents with the goals of carbonization of the National Biocombustible, known as Renovabil.
Rebecca, what is the role of this list of inadimplents in the policy of carbonization of Renovabil and why this publication has generated such controversy?
Well, Camila, I'll go back and explain a little bit about what is the Renovabil and what is the CBIL. The Renovabil established that the liquid distributors would have to buy an annual determined by the government of certificates of carbonization. They are not exactly carbon credits, they are created specifically for this program that doesn't exactly cost a emission, but that the distributors would have, according to the law, to buy every year the quantity that the government determines.
The problem starts when some distributors stop buying these bills, either because they managed to eliminate the justice question the obligation, or because they simply decided to stop buying. There were already sanctions in the law, but this was not impeded that the distributors stop buying and you start to have a claim that's not being fulfilled, even because when the goal of a year is not fulfilled, it's going to be the same thing, that the distribuid doesn't stop buying that she didn't buy.
It will only have to buy more in the next year. With this, the program with Renovabil began to be very question. The distributors that were cumped began to ask for the government a more severe action. And there was a political movement of approval of the new law of CBILS, which altered the dynamic of the market and brought more severe sanctions, much more high and with restrictions.
There is a discussion about if a NP could apply this list, this punition, because once the distributors of energy plants enter in the list, they can't buy combustible from the producers. The producers will be sold if they sell for these energy plants, until they buy them, and see what they sell. So there is a discussion of if a NP can only apply this or if it would be necessary to apply this as a regulation in terms of this.
Today, a NP has a understanding of that a law is auto-applicable, that it can only sell a list and, well, it's not going to sell it to these distributors. Anteriormente, the Procuradoria-Geral da República had a understanding of that, by the way of the retroatian, in reality, this could not happen. You would need to wait the 2025 cycle to apply the new rule. So you have some ideas and wind of what you think about this issue.
With this, of course, you are creating a certain controversy in the market.
So you described a situation that is an impasse between the PGR, the Procurator-Geral of the Republic, and the ANP. Is this any impact on the credibility or the previsibility of Renovabio?
¶ Controversies Surrounding Renovabil
So, initially, as I said, the PGR understood that by retroat, by the way of retroat, it could not be applied to the punishment in this year, in 2005, but then the PGR dá um novo parecer, depois do decreto que o MME solta, permitindo que a agência regule, né, o tema. Não diria, necessariamente, que tem um impasse, porque querendo ou não, agora a ANP está fazendo o último parecer da PGR, entendeu? Mas, para o mercado é muito ruim que tenha essas idas e findas.
Você vai dando subsídio para questionamentos jurídicos, talvez não precisassem existir. Você vai dando motivos so that the market would be the effect of the sanctions and the legitimacy of the sanctions. We also have a question of that the NP announced initially that the list would be divulged on the 7th of July, and then she returned to this date and left without a express date of divulging.
The NP says that it will be divulged in the early, we don't know if it's in the early months, if it's until the end of the year, we don't know, but it's a little bit of this question. And this will and will create a sense in the market of, and then? The NP will even put it in practice. This will be fulfilled? This will be effective? There's a lot of doubt in this sense.
But this has a impact, right, Rebecca? We have 61 distribuidoras that are responsible for more than 10 million of CBIO not acquired in the market. So this has an economic impact, this has an environmental impact. You could talk more about this?
Of course, Camila. Well, the impact ambiental is perhaps the most clear of CBIO. The Renovabil exists to achieve Brazil's objectives climatic, which were assumed in international forums. When you don't deal with the Renovabil, you can't break the position in the world in the climate global discussion. Now, economically, in relation to the market of CBIOS, you create a distorsion. Why?
Because you have many participants of the market cumprindo their program, and so when they buy CBIOS, they have a cost of more, a cost of more, which tends to be repassable for the consumer at the end.
¶ Economic Impacts of CBIO Market
In fact, you have others that don't have a cost of cumprindo and don't have this cost, so they gain a competitive advantage and gain market share. Also, you have a question that the market starts to be confused how much this program will durar, if it goes forward. And this is the value of CBI. So we can now pass.
You already talked about the environmental impact, the economic impact, and we have to discuss
A little bit.
More about the juridical question. We have liminares for 14 distributors, and this, in some way, may affect the efficacy of this list of implants and also, of course, the balance of the sector in terms of competition.
Yes, as I said, you create a simetria when you have some that complements and others that don't. We need to understand that a big part of the dividend today of CBILS is in the hands of these distributors that have liminares. So, even though the list is published, the expectation is that it doesn't include who have a judicial decision that protects them from the price of CBILS, and, yes, just those who don't buy without any law jurídica.
With this, we don't know how much the list would be efficient, because we're talking about more than half of the debt in the hands of these distributors that have liminares.
¶ Legal Challenges in the CBIO Sector
So, until that point you don't be able to sell combustible just for distributors that don't have liminares It will, in fact, force the inadimplentes to enter in the contra. This is something that we only will know when the list will be released and we will see the effects neocrats.
And we have now, talking about the price of CBILS, we already covered a series of aspects, but we have the volatility of the price of CBILS. Is this a reaction, in your opinion, a reaction of the market or is a speculation that is prejudicial?
I think it's a sign of that the market responds to the regulatory incentives. It's important that we note that the main stakeholders continue outside the market. There are no reports that they are buying, there is no one who knows about it in this moment in the market. What can we suggest that this is a speculative movement? It gives us to understand that we are aposting in a future valorization.
Future, that in the future we will have more agents entering the market, trying to buy this dividend, that the price will grow more than, and trying to protect this increase in price.
¶ Price Volatility and Market Reactions
With this, it's natural that there is a volatility of prices. For this year, specifically, we have also a question of that the stock is very high. We had a generation of CBUs very strong in the past, this year also has been a generation of CBUs very strong, so you have a number of C-bills accumulated. Which is difficult to make a goal be apertable, and that it is difficult to make the C-bills be generated to reach the number that we need to all cumprir a goal.
So, the tendency is that the price is lower. This controls, in a certain way, the volatility. We don't talk about the level of C-bills, as we already saw before, above the 100, even in this moment of entry of agents in the market, to buy credit for a possible volatilization future, a possible volatilization future, you don't have the price to reach 70 reais, which historically, for the Sebil, it still is a low price.
So it's a moment that has, yes, volatilization, at the same time that you hardly find someone in this market today that believes that the price will reach 100 reais this year. Thank you, Rebecca.
¶ Conclusion and Future Insights
Rebecca, thank you for listening to our podcast. The Argus will continue to bring to the audience the main challenges and opportunities of energy transition, which is the topic of expertise of Rebecca. If you want to watch other episodes of our podcast, follow me on the market on the biggest platforms of streaming or on the site www.argusmedia.com. We'll see you next week. See you next week.