Bloomberg News

Brazil Biodiesel May Be More Competitive After Planned Tax Cut

December 15, 2011

Dec. 15 (Bloomberg) -- Brazilian lawmakers may abolish a federal tax on biodiesel next year that would allow the renewable fuel to compete in price with petroleum-based diesel.

The legislation would rescind the industrial products tax on biodiesel sales and may take effect in the first half of 2012, Congressman Jeronimo Goergen said today in a telephone interview from Brasilia.

“Biodiesel would become competitive,” Goergen said. “We need to reduce production costs because for everyone, producers and consumers, it’s too expensive.” Goergen didn’t say how much the proposed legislation would bring down production costs.

Brazil started running its vehicle fleet on biodiesel at the start of 2008 to reduce dependence on fuel imports. Distributors are obligated to buy the fuel in auctions because it’s more expensive than normal diesel, said Goergen, who represents Brazil’s southern state of Rio Grande do Sul.

Brazilian diesel cost 1.36 reais (73 cents) a liter on average at the pump for the week ended Nov. 13, according to information compiled by Bloomberg.

Biodiesel plants sold output at an average of 2.40 reais a liter at an auction for the fuel held on Aug. 24, fuel regulator Agencia Nacional do Petroleo, Gas Natural e Biocombustiveis said on its website.

“There are taxes one on top of another in Brazil making everything more expensive,” Goergen said. The legislation “would mark an end for federal taxes on biodiesel across the supply chain.”

--Editors: Jasmina Kelemen, Tina Davis

To contact the reporter on this story: Stephan Nielsen in Sao Paulo at snielsen8@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net


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