ARTICLE IN PRESS

Energy Policy 35 (2007) 5393–5398

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History and policy of biodiesel in Brazil

Gabriella P.A.G. Pousa, André L.F. Santos, Paulo A.Z. Suarez
Laboratório de Materiais e Combustı´veis, Instituto de Quı´mica, Universidade de Brası´lia, CP 4478, 70919-970 Brası´lia-DF, Brazil
Received 20 March 2007; accepted 9 May 2007
Available online 12 July 2007

Abstract

Historically, during petroleum shortage, vegetable oils and their derivatives have been proposed as alternatives to petroleum diesel
fuel. Since 1930, different approaches have been proposed by Brazilian’s universities and research institutes, including the use of neat
vegetable oils (pure or in blends) or their derivatives, such as hydrocarbons obtained by thermal-catalytic cracking and fatty acids’
methyl or ethyl esters (nowadays known as ‘‘biodiesel’’) produced by alcoholysis. Recently, the external dependence on imported diesel
fuel and the present petroleum crisis have increased the discussion in Brazil in the sense of starting to use alternatives to diesel fuel,
biodiesel being the main alternative for a large petroleum diesel substitution program.
r 2007 Elsevier Ltd. All rights reserved.

Keywords: Brazil; Biodiesel; Renewable energy

1. Brief history of usage of oils and fats as fuel in Brazil
The first record of the use of vegetable oils as liquid fuels
in internal combustion engines is from 1900 when Rudolf
Diesel used peanut oil (Shay, 1993). However, because of
its low cost and easy availability, petroleum became the
dominant energy source and petroleum diesel was then
developed as the primary fuel for diesel engines. None-
theless, petroleum and its derivatives fuels have periodi-
cally been through short supply and, consequently, the
search for alternative energy sources has emerged (Parente,
2003; Schuchardt et al., 1998; Zanin et. al., 2000). Thus, in
the 1930s and 1940s, neat vegetable oils were used in diesel
engines under an emergency situation (Ma and Hanna,
1999). At that time, the pyrolysis of different triglycerides
was also used for liquid fuel supply in different countries.
For example, hydrocarbons were produced in China by a
tung oil pyrolysis batch system and used as liquid fuels
(Chang and Wan, 1947). Another approach proposed at
this time was the use of fatty acids’ ethyl or methyl esters,
obtained by transesterification or alcoholysis of vegetable
Corresponding author. Tel.: +55 61 33072162.
E-mail address: psuarez@unb.br (P.A.Z. Suarez).
oils (Chavanne, 1937, 1942) or esterification of fatty acids
combined with transesterification of triglycerides (Keim,
1945). Furthermore, the petroleum international crises in
the 1970s and 1990s, as well as an increasing concern about
the depletion of the world’s non-renewable resources and
environmental awareness, provided new enthusiasm in the
search for renewable fuel sources (Hill, 2000; Parente,
2003; Schuchardt et al., 2001).
In Brazil, this history was not different. During the 1940
decade occurred our first attempts of energy exploitation
from oils and fats in internal combustion engines. Indeed,
there are reports of many studies about the use of neat
vegetable oils, such as babassu, coconut, castor seed and
cotton seed (for instance, see Borges, 1944), or hydro-
carbons produced by their thermal-catalytic cracking (Otto,
1945). It is worth mentioning that during the Second World
War the exportation of cottonseed oil, which was the main
vegetable oil produced in Brazil at that time, was forbidden
in order to force a drop in its price and, thus, to make
possible its use as fuel in trains (Chemical & Metallurgical
Engineering, 1943), which is probably the first govern-
mental program concerning the use of biofuels.
Afterwards, in response to the petroleum shortage
during the decades of 1970 and 1980, Brazil’s Federal
Government created in the 1980s a program called

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 ARTICLE IN PRESS
5394 G.P.A.G. Pousa et al. / Energy Policy 35 (2007) 5393–5398
PROALCOOL (Goldemberg et al., 2004), which imple-
mented and regulated the use of hydrated ethanol as fuel
(engine’s adaptations were needed to use this fuel) and
anhydrous ethanol that could be blended with petroleum
gasoline. It is important to mention that since 1980 no pure
petroleum gasoline is used, only the ethanol/gasoline
blends is being used as fuel in Brazil. The ethanol content
in those blends started as 5% and has been increased
during the three decades of PROALCOOL and actually
varies from 20% to 25%.
During this petroleum crisis mentioned above, the
production of vegetables oils with carbureting purposes
plan (PRO-ÓLEO) was also created, elaborated by the
National Energy Commission, through Resolution No. 007
dated October 22, 1980. It was expected a 30% mixture of
vegetable oils or derivatives in diesel and a full substitution
at long term. At that time, the transesterification (also
known as alcoholysis) of several vegetable oils, resultants
of agricultural activities and the extractive sector, was
proposed as a technological alternative. Unfortunately,
after the drop of petroleum prices in the international
market, this program was abandoned in 1986.
At the end of 20th century, the Federal Government
restarted the discussion about the use of biodiesel, and
many studies were made by inter-ministerial commissions
in partnership with universities and research centers. In
2002, ethanolysis of vegetable oils was considered as the
main route to a petroleum diesel substitution program
called PROBIODIESEL. This program was presented by
the Ministry of Science and Technology (MCT) and by
Decree No. 702 dated October 30, 2002. Until 2005, the
substitution of all diesel consumed in Brazil by B5 (a 5%
biodiesel and 95% diesel blend) and within 15 years by B20
(a 20% biodiesel and 80% diesel blend), using fatty acids
ethyl esters (Vigliano, 2003), was suggested. Although
ethanolysis has technological limitations when compared
with methanolysis, it was the chosen route due to Brazil’s
great ethanol production. In that period, biodiesel stopped
being a pure experimental fuel and so began the initial
phases of industrial production when the first industry of
esters from fatty acids was installed in Mato Grosso State
in November 2000, starting a production of 1400 ton/
month of ethylic ester from soybean oil (Sant’anna, 2003).
It is important to highlight that the use of biofuels is not
only an economical and secure alternative to fossil fuels but
it also has many favorable environmental and social
aspects: (i) biodiesel is biodegradable and harmless; (ii) it
can be produced from renewable materials; (iii) ethyl or
methyl fatty acid esters contain no sulfur; (iv) biodiesel
decreases soot emission considerably (up to 50%);
(v) biodiesel emits about the same amount of CO2 that is
absorbed during cultivation of the oilseed; (vi) it does not
contain any of the carcinogens found in diesel oil;
(vii) biodiesel is not considered a hazardous material;
(viii) there are numerous social and economic advantages
from its use, particularly in developing countries such as
Brazil; (ix) biodiesel represents a suitable outlet for
vegetable oil industry, serving as an important tool for
market regulation; and (x) it increases engine lifetime
owing to a superior lubrication capability (Parente, 2003;
Schuchardt et al., 1998; Ramos et al., 2003; NBB, 2004).
2. Current biodiesel policy in Brazil
Brazil’s Federal Government created an Inter-ministerial
Work Group, by the Presidential Decree dated July 2,
2003, which was in charge of presenting studies on the
viability of using oil, fats, and their derivatives as fuel and
indicating the necessary actions for its implementation. In
its final report, on December 4, 2003, this commission
considered that biodiesel should be introduced immediately
in the Brazilian energy matrix and recommended that:
(i) the use should not be mandatory, (ii) there should not be
a preferential technological route or raw material for the
production of biodiesel, and (iii) the social–economic
development of the poorest regions should be included.
To implement these suggestions, an Executive Inter-Mini-
sterial Commission (CEIB) was created by the Presidential
Decree dated December 23, 2003. This Commission was
composed of 14 ministries and coordinated by the Civil
House and had a Managing Group as executive unit, which
is coordinated by the Ministry of Mines and Energy
and composed of representatives of 10 ministries and
members from the Brazilian National Agency for Petro-
leum, Natural Gas and Biofuels (ANP), the Brazilian
Agricultural Research Corporation (Embrapa), the Brazi-
lian Development Bank (BNDES), and the Brazilian
semipublic petroleum corporation Petróleo Brasileiro S/A
(PETROBRAS). One year later, the National Program of
Production and Use of Biodiesel (PNPB) was launched in
solemn session at the Palácio do Planalto (Government
seat) on December 4, 2004, its main objective being to
guarantee the economically viable production of biodiesel,
and its major goal being social inclusion and regional
development.
The most important action from PNPB was the
introduction of biofuels derived from oils and fats in the
Brazilian energy matrix by means of Law No. 11097 dated
January 13, 2005. In this law, the optional use of B2 until
the beginning of 2008 is foreseen; after that year, B2 will be
mandatory. Between 2008 and 2013, it will be possible to
use blends up to 5% of biodiesel, and after this period B5
will be mandatory.
In its article 4, this law defines biodiesel as a ‘‘biofuel
derived from renewable biomass for use in engines of
internal combustion with ignition by compression or for
generation of another type of energy, that can partially or
totally substitute fossil fuels’’. According to this definition,
there is no restriction in regard to the technological route
of choice for biodiesel production, it being possible to use
as biodiesel the products obtained by the transesterifica-
tion, esterification and pyrolysis processes. However, the
ANP, in resolution ANP 42 dated November 24, 2004,
regulated only the use of methyl or ethyl fatty acids’ esters,
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G.P.A.G. Pousa et al. / Energy Policy 35 (2007) 5393–5398
which can be prepared by transesterification or esterifica-
tion (ANP, 2004). By this resolution, 26 parameters were
specified for pure biodiesel (B100): aspect, density, kine-
matics viscosity, water and sediments, flash point, ester
content, distillation, carbon residue, sulfated ash, total
sulfur, sodium plus potassium, calcium plus magnesium,
phosphorous, copper corrosion, cetane number, cold filter
plugging point, acid index, free glycerin, total glycerin,
monoglycerides, diglycerides, triglycerides, methanol or
ethanol, iodine index, and oxidation stability.
Recently in resolution ANP 15, dated July 17, 2006, the
specifications for diesel and diesel/biodiesel blend (B2) for
road use were established, as also the rules for commercia-
lization in all national territories and the economic agents’
obligations concerning the product quality were defined. In
this resolution, eight parameters were established in order
to control the quality of diesel and diesel/biodiesel blend
(B2): oxidation stability, composition, volatility, viscosity,
combustion, copper corrosion, contaminants, and lubricity
(ANP, 2006).
The current diesel consumption in Brazil being approxi-
mately 40 billion liters per year, the potential market for
biodiesel is currently 800 million liters, being able to
achieve 2 billion liters up to 2013. Due to its great
biodiversity and diversified climate and soil conditions,
Brazil has different vegetable oils sources, including
soybean, coconut, castor seed, cottonseed, palm trees,
and others. Undoubtedly, since Brazil is today the second
largest soybean producer in the world and has a well-
developed soybean-processing industry, this source occu-
pies a prominent position in the development of vegetable
oil-based fuels. However, in semi-arid northeast states and
in Amazonian states, castor seed oil and palm-tree oils,
respectively, seem to be the alternatives of choice. Indeed,
castor culture appears to be excellently adaptable to semi-
arid lands, which will promote a sustainable agriculture in
the poorest Brazilian region. On the other hand, extra-
ctivism of native palm trees in Amazon rainforests, as well
as palm trees growing in already degraded areas, will
probably represent a good alternative in order to promote
a sustainable occupation and social and economic devel-
opment. In this sense, the Brazilian Government’s plans to
use the PNPB also for developing familiar and sustainable
agriculture where underdeveloped areas is critical.
The tributary rules for biodiesel use referring to Federal
contributions were established by Law No. 11116, dated
May 18, 2005, and Decrees No. 5297, dated December 6,
2004, and No. 5457, dated June 6, 2005. It was determined
that these tributes were to be charged only once and that
the contributor is the industrial producer of biodiesel, the
incident value being equal to that collected in the
production of diesel from petroleum. In order to promote
regional and social–economical development, three distinct
levels of reduction of these tributes were established,
according to the oil seeds acquired by the industry:
(i) 100% reduction in the case of castor seeds (Ricinus
sp.) or palm tree (Elaeis sp.) produced in the north and
5395
semi-arid northeast by familiar agriculture; (ii) 67.9% for
any raw material produced by familiar agriculture, regard-
less of the region; and (iii) 30.5% for castor seeds or palm
produced in the regions north, northeast, and semi-arid by
the agro-business.
Biodiesel producers who acquire raw material in
productive arrangements that include familiar agriculture
with a purchase guarantee receive the social fuel label. This
label, regulated by the Ministry of Agrarian Development
in the Normative Instructions numbers 01 and 02, dated
July 5 and September 30, 2005, guarantees for industries
not only fiscal exemptions, but also better conditions for
financing from BNDES and other public banks. Several
industries have already acquired the social label, such as
Agropalma S/A and AMAPALMA S/A. Indeed, those
biodiesel industries have made a contract with familiar
agriculturists (Association of Comunitary Development
from Ramal Arauai), compromising themselves to buy
palm produced by this familiar agriculture group from the
north region.
In order to stimulate the biofuel market before the
beginning of the obligatoriness of its use, biodiesel auctions
were idealized, under the responsibility of ANP, where
PETROBRAS ensures to purchase the necessary volume of
biodiesel for B2 from industrials with the social label. Until
now there have been five auctions, from November 23,
2005 to February 15, 2006, when up to 885 millions liters of
the biodiesel were commercialized, which are more than the
800 millions liters necessaries to ensure the B2 blend. This
is certainly a guarantee of the beginning of biodiesel
market in Brazil. Table 1 shows the amount of biodiesel
(in m3) purchased in these five auctions, as well as the
average prices (in R$/m3), the maximum reference prices
(in R$/m3), the number of companies that participated in
the auctions, and the delivery date (ANP, 2007).
Unfortunately, producers do not report biodiesel pro-
duction costs, so it is difficult to distinguish production
costs from company profits. In a work by Barros et al.
(2006), the production costs for biodiesel obtained from
different raw materials (soybean oil, palm oil, castor oil,
cottonseed oil and sunflower oil) by each Brazilian region
were estimated, considering: (i) raw material production
costs, (ii) oil production cost, and (iii) biodiesel production
cost (see Fig. 1).
The set of measures that the PNPB Managing Group has
been taking establishes the rules to the production and
consumption of biodiesel in Brazil. As a result, the
biodiesel productive chain is being structured, not only
by the many small installations for proper consumption
that emerged after 2000, but also in commercial scale. It is
worth mentioning that the first commercial scale industry,
located in Cássia—MG, received, from ANP, the author-
ization for operating, on March 24, 2005, and at the same
day the commercialization of B2 began in a gas station in
Belo Horizonte—MG. Since 2 years, ANP has authorized
the operation of five industries in several Brazilian States
and more than 4000 gas stations are commercializing B2.
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Table 1
Biodiesel auctions results

First auction Second auction Third auction Fourth auction Fifth auction
11/23/2005 03/30/2006 07/11/2006 07/12/2006 02/14/2007 and 02/
15/2007

Number of participating companiesa 4 6 6 25 3

Volume of biodiesel sold (m3)a 70,000 170,000 50,000 550,000 45,000
Maximum reference price (R$/m3)a 1920.00 1908.00 1900.00 1799.56 1904.51
Average selling price (R$/m3)a 1890.00 1859.65 1828.97 1747.26 1853.19
Delivery datea January–December/ July/2006–June/ January–December/ January–December/ February–December/
2006 2007 2007 2007 2007
Exchange rates American dollar 1/2.238 1/2.195 1/2.185 1/2.191 1/2.100
(US$)/Brazilian real (R$)b
Exchange rates euro (h)/Brazilian 1/2.640 1/2.669 1/2.793 1/2.783 1/2.755
real (R$)b
a
Based on ANP (2007).
b
Based on BC (2007).

Fig. 1. Estimated biodiesel production costs by region, in US$/L (source: Barros et al., 2006).

Furthermore, five more industries are under regulation
process and 24 others are being installed or designed.
Another action of PNPB was the creation of a research
network involving scientists from university and research
institutes from all Brazilian regions (Suarez et al., 2006).
The aim of this network is to develop science and
technology for all the biodiesel production chain.
3. Brazilian energy market and possible impact of biodiesel
The Brazilian internal energy market is shown in Fig. 2.
As one can see in this figure, differently from other
countries, renewable energy sources represent almost one
half of the energy supply, and biomass has become the
second most important source of energy in Brazil. The
introduction of biodiesel in the Brazilian energy market
will certainly reduce the use of fossil fuels and increase the
use of biomass.
Fig. 3 shows Brazil’s demand and production of
petroleum and diesel from 1989 to 2005. It is clear from
this figure that, although there has been an increase in the
consumption, the decline in petroleum importation was
caused by a significant growth in internal production. On
the other hand, diesel consumption increased considerably
and Brazilian diesel production is being complemented by a
direct importation of diesel fuel. Indeed, although the
increasing production of petroleum in Brazil has been
significant, external dependence on diesel has been quite
stable in the last decade. Since 80% of diesel consumption
is due to public and goods transportation (BEB/MME,
2006), the increasing or maintenance of external depen-
dence of this fuel would probably become dramatic to the
 ARTICLE IN PRESS
G.P.A.G. Pousa et al. / Energy Policy 35 (2007) 5393–5398 5397

Fig. 2. Internal energy offer in Brazil—year 2005 (source: BEB/MME, 2006).

40200
91500
81500
30200
Amount 103 (m3)

71500
Amount (103 m3)

61500
51500 20200
41500
31500
10200
21500
11500
1500 200
1988 1991 1994 1997 2000 2003 2006 1988 1991 1994 1997 2000 2003 2006
Year Year
petroleum consumption petroleum production imported petroleum
diesel consumption diesel production imported diesel

Fig. 3. Petroleum and diesel market in Brazil (source: BEB/MME, 2006).

Brazilian economy in the case of any further shortage in
the international diesel market. In this sense, the partial
substitution of diesel fuel by biodiesel will not only
contribute to social and agricultural development but also
be important in order to diminish Brazil’s external
dependence on this fossil fuel.
4. Final remarks
The Brazilian government is very engaged in the
biodiesel program, which seems to be an irreversible
process. In this sense, the use of biodiesel in Brazil will
probably provide financial and environmental benefits to
the country, specially diminishing our dependence on
imported diesel fuel and increasing the agricultural
economic segment.
One of the main objectives of the Brazilian biodiesel
program is to promote social and regional development in
the most economically underdeveloped areas, like north-
east semi-arid and Amazonian regions. Indeed, the
government policy trend is to provide social inclusion, by
including familiar agriculture as a partner to biodiesel
producers. Despite fiscal and financial federal subvention,
it is not certain that familiar agriculture will be able to
compete with agribusiness to ensure the supply of raw
materials. Probably, more than subvention, the govern-
ment should provide technical and social assistance to
those agricultures in order to organize their business and
prepare them to be competitive as biodiesel feedstock
suppliers.
Acknowledgments
GPAGP and ALFS express their appreciation for
fellowships granted from CNPq and FBB. PAZS thanks
CNPq for research fellowships.
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