Developments in Argentina and the MERCOSUR on biofuels regulations

On February 2, 2008, Law No 26,334 was enacted as a complement of the Biofuels regulation introduced earlier by Law No 26,093,[1] by establishing a promotional regime for the production of Bioethanol derived from sugarcane.

This regime aims at meeting the local supply needs of Bioethanol and at generating surpluses available for exportation, by incorporating sugarcane producers and sugar mills in producing Bioethanol. One of the main objectives of this regime is to achieve an adequate and sufficient domestic supply of Bioethanol by the year 2010, the year when Law No 26,093 requires[2] that gasoline, as well as gas oil and diesel oil sold in Argentina, must contain a mandatory minimum of 5% Biofuel.

Individuals, private, public or mixed corporations, or cooperatives which are now producing sugar or which are beginning or resuming said production, or that are beginning Bioethanol production from the date the law becomes effective, are eligible under the promotional regime. Any of the eligible persons presenting a project under Law No 26,334 will enjoy the benefits established under law 26,093, provided they comply with the requirements stated in Articles 13[3] and 14[4] of Law No 26,093 and its Regulatory Decree No 109/2007.[5]

Within the framework of MERCOSUR and aiming at further improving the regional integration process, the Common Market Council approved Decision No 49/07 on December 17, 2007, which establishes an Action Plan elaborated within the Biofuels Special Working Group. 

The member states of MERCOSUR, with a view to strengthen cooperation in strategic areas such as energy, created this working group considering the need to promote the development of secure, renewable and environmentally sustainable energy sources. The Decision is also aimed at encouraging the active participation of the public and private sectors as a means for overcoming existing asymmetries within each of the regions and among the member countries.

As happens within the Argentine regulatory framework, the group focused its work on the development of bio-diesel and ethanol. The special group is particularly working to propose measures to encourage the production and consumption of Biofuels. It also intends to carry out a study of the regulatory frameworks for Biofuels in MERCOSUR, to support the structuring of integrated supply chains, technical cooperation between public and private entities, and joint research programs on the production and use of Biofuels. Its work is taking into account existing bilateral and regional programs, projects, mechanisms and instruments of cooperation, facilitating the exchange of information regarding technical aspects and technological training to promote sustainable production of Biofuels, including environmental impact assessments, land use, and use or recycling of waste disposal, infrastructure of distribution and logistics, among others aspects.

As of the presentation of this group’s report, MERCOSUR established an Ad Hoc Group on Biofuels within the Common Market for the purpose of carrying out this Action Plan that includes several activities, such as the detection of opportunities for technology transfer and human resources training in the area, the identification of business models and management of production projects, and of the adequate tools to promote investment and competitiveness in the area, practicing a survey of the regulatory framework of the member states and promoting the regulations that are best suited for the objectives of the Plan of Action. Based on the work of the Ad Hoc Group on Biofuels, the Common Market Group shall submit an annual report with a description of the actions performed and the progresses achieved.

The actions described herein reflect the interest that the region shows in the development of Biofuels and the intention of the governments of the member countries to generate scenarios for the promotion of investment in this business area.