How the "Fuel of the Future" law reshapes Brazil’s aviation sector.
Brazil enacted Law No. 14,993, the "Fuel of the Future" act, in October 2024 to push its transportation sector toward lower emissions. The legislation broadly mandates higher biofuel blends and incentivizes alternatives like green diesel, biomethane, and carbon capture technologies. However, its sharpest impact lands on aviation: through the new National Sustainable Aviation Fuel Program (ProBioQAV), the law forces major domestic carriers like Azul (B3: AZUL3), Gol, and Latam (NYSE: LTM)
to restructure their balance sheets.
Tracking the program's effect on airlines and the broader economy comes down to four operational shifts:
1. Mandates and "Book & Claim"
Instead of traditional volumetric blending mandates, ProBioQAV imposes progressive Greenhouse Gas (GHG) emission reduction targets on domestic flights. The target starts at a 1% reduction in 2027 and scales to 10% by 2037.
Distributing physical Sustainable Aviation Fuel (SAF) across a continental country is a logistical challenge. To solve this, the law uses a Book & Claim mechanism. Producers will inject SAF into the closest logistical hubs, and airlines will purchase digital Sustainable Fuel Certificates (CS-SAF). Airline treasury departments will need to manage environmental trading to hedge against certificate price volatility.
2. Margin Pressures and the Green Premium
Historically, fossil jet fuel (QAV) accounts for 40% to 45% of a Brazilian airline's operating costs. This metric is vulnerable to foreign exchange fluctuations and international oil pricing. Bio-jet fuel currently costs two to three times more than its fossil counterpart, introducing a Green Premium.
Domestic airlines operate on thin margins and cannot absorb this premium internally. The cost will be passed to the consumer. This forced tariff increase threatens the low-cost volume model that airlines rely on. It could shrink demand in price-sensitive regional routes and undermine programs aimed at universalizing air travel.
3. Supply Capacity and State Financing
Demand for SAF is projected to reach 83 million liters by 2027 and 1.1 billion liters by 2037. Meeting this demand requires capital expenditure from key players:
- Acelen: A US$ 3 billion investment in Bahia utilizing high-yield Macaúba palm, mitigating indirect land-use change (ILUC) risks.
- Petrobras: Co-processing at existing refineries, followed by a dedicated Cubatão plant relying on soy and beef tallow.
- BBF & Summit: Amazon-based palm operations and Ethanol-to-Jet (ATJ) projects in the Midwest.
Bridging the Capex gap will require state intervention. Market analysts point to the need for tax exemptions (such as PIS/COFINS relief) and subsidized credit lines from BNDES (e.g., the Climate Fund) to mirror the economic buffers seen in the US Inflation Reduction Act (IRA).
4. Corporate Impacts
ProBioQAV's benchmarks will force structural changes in Brazilian carriers' operational frameworks. Because emission reductions are measured against a baseline of total fossil fuel usage, airlines have an incentive to accelerate fleet modernization. Phasing out legacy aircraft for more efficient models like the Airbus A320neo, Boeing 737 MAX, or Embraer E2 lowers a carrier’s baseline emissions. This optimization reduces the volume and cost of the digital certificates required for compliance.
Network architectures will also undergo a re-evaluation. Thin, inefficient, or under-occupied regional routes will become heavy financial liabilities under a carbon-penalized ledger. Network planners will likely focus on high-density hub-and-spoke systems, consolidating traffic to maximize load factors and dilute the fixed carbon premium across a larger passenger base.
Navigating this change will require airlines to secure fuel access decades in advance. To hedge against supply volatility and stabilize long-term compliance costs, treasury teams will need to enter into binding 10-to-15-year off-take agreements with emerging local biorefineries. These long-term commitments will turn commercial airlines into financial underwriters of Brazil’s domestic SAF infrastructure.
The Bottom Line
ProBioQAV places Brazilian aviation at the forefront of global decarbonization. However, it risks repeating a familiar pattern: legislating at the ecological vanguard before building the physical infrastructure required to sustain it. To prevent these green ambitions from stalling domestic economic development, the transition must be met with concrete logistical support. Its success will depend on deploying local biorefineries, securing state-backed financing, and modernizing fleets without pricing consumers out of the market.
About the National Sustainable Aviation Fuel Program (ProBioQAV)
Enacted in October 2024, Brazil’s Law No. 14,993—widely known as the "Fuel of the Future" (Combustível do Futuro) act—is a landmark regulatory framework designed to accelerate the country's transition to a low-carbon economy. Its primary objective is to promote sustainable mobility and reduce greenhouse gas emissions across the transportation sector. The legislation achieves this by mandating higher blends of traditional biofuels in fossil fuels, incentivizing next-generation alternatives like green diesel and biomethane.
A central pillar of this legislation is the National Sustainable Aviation Fuel Program (ProBioQAV). This program specifically targets the aviation industry by requiring airline operators to progressively reduce their carbon dioxide emissions on domestic flights through the adoption of Sustainable Aviation Fuel (SAF). Starting in 2027, airlines are mandated to achieve a 1% reduction in emissions, a target that will steadily scale up to 10% by 2037. By shifting reliance away from traditional fossil jet fuel, ProBioQAV aims to drive technological innovation and position Brazil as a global leader in green aviation.
