RESUMO
The transition to a low-carbon economy is imperative to reduce reliance on fossil fuels and mitigate pollution emissions. This preposition also aligns with the United Nations Sustainable Development Goals (SDGs-13), which highlight the climate change action. In this vein, Brazil has implemented the Decarbonization Credit (CBIOS) program to incentivize biofuel production and promote environmental sustainability through carbon credit emissions. To this end, the present study evaluates the effectiveness of the CBIO contract as a hedging tool for investors in the face of energy price fluctuations and decarbonization efforts. Specifically, we employ conditional dynamic correlation (DCC-GARCH) and optimal hedge ratio (HR) techniques to assess the relationship between CBIO and the futures and spot prices of sugar, oil, and ethanol. Our findings suggest that the current CBIO contract is not an effective hedge against energy spot and future prices. However, our analysis identifies a strengthening correlation between ethanol traded in Chicago and CBIO over time, highlighting the potential for an underlying contract to serve as an effective hedging tool in the future. Our study adds to the existing literature on carbon pricing mechanisms and their impact on financial markets, emphasizing the importance of sustainable energy policies and their potential to mitigate the risks associated with energy price volatility and decarbonization efforts.
Assuntos
Biocombustíveis , Carbono , Brasil , Mudança Climática , EtanolRESUMO
Brazil is the second-largest ethanol producer in the world, primarily using sugar cane as feedstock. To foster biofuel production, the Brazilian government implemented a national biofuel policy, known as RenovaBio, in which greenhouse gas (GHG) emission reduction credits are provided to biofuel producers based on the carbon intensities (CI) of the fuels they produce. In this study, we configured the GREET model to evaluate life cycle GHG emissions of Brazilian sugar cane ethanol, using data from 67 individual sugar cane mills submitted to RenovaBio in 2019/2020. The average CI per megajoule of sugar cane ethanol produced in Brazil for use in the U.S. was estimated to be 35.2 g of CO2 equivalent, a 62% reduction from U.S. petroleum gasoline blendstock without considering the impacts of land use change. The three major GHG sources were on-field N2O emissions (24.3%), sugar cane farming energy use (24.2%), and sugar cane ethanol transport (19.3%). With the probability density functions for key input parameters derived from individual mill data, we performed stochastic simulations with the GREET model to estimate the variations in sugar cane ethanol CI and confirmed that despite the larger variations in sugar cane ethanol CI, the fuel provided a robust GHG reduction benefit compared to gasoline blendstock.