On February 5, 2024, the Democratic Renewal Party (PRD) filed a Direct Action of Unconstitutionality (ADI) with a preliminary injunction request. The action is seeking for a declaration of unconstitutionality of Articles 4(I), 6, 7, 9, and 10 of Law No. 13,576/2017, which regulates the National Biofuels Policy (RenovaBio) and other provisions. By extension, it seeks a declaration of unconstitutionality of Articles 1 to 8 and 12(IV to VII) of Decree No. 9,888/2019, all articles of National Agency of Petroleum, Natural Gas, and Biofuels (ANP) Resolution No. 791/2019, and Articles 6(II to VII), 8(II), 11(§3), and 13 of Normative Ordinance No. 56/GM/MME/2022, which violate the norms outlined in the Federal Constitution, the principles of reasonableness and proportionality, as well as articles of the Paris Agreement, an international human rights treaty with supra legal force. 

The violation allegedly arises from the discrimination against fossil fuel distributors, as they are the only ones required by the contested norms, individually and under penalty of fines, to purchase CBios (financial obligations) to fulfill the formal duty of proving compliance with the annual mandatory target for reducing greenhouse gas (GHG) emissions. This is alleged to create discrimination among agents, violating the polluter-pays principle, the principle of equality, environmental protection, economic order, and consumer protection. This stems from holding only fossil fuel distributors responsible for decarbonizing the entire fossil fuel chain, despite other agents in the chain also emitting, thereby affirming the inefficacy of the program’s model. It is argued that the current RenovaBio model has created an inefficient and asymmetric public policy with severe negative environmental, social, and economic impacts, such as increased fuel prices, inflation, and GHG emissions—resulting from the undisputed increase in fossil fuel consumption—that produce outcomes contrary to the commitments made under the Paris Agreement and in conflict with constitutional principles. 

As an interim relief, the suspension of the effectiveness of the contested provisions was sought until the action is adjudicated. On the merits, a declaration of unconstitutionality of the contested provisions is requested, with erga omnes effect and retroactive effect (ex tunc), or alternatively, that these normative acts be interpreted in accordance with the Constitution, provided that: (i) the annual and individual mandatory targets are assigned to all agents in the fossil fuel chain, in proportion to their GHG emissions; (ii) the supply of CBios is proportional to the mandatory demand, with penalties for non-compliance with the annual and individual targets prohibited in cases where CBios are unavailable on the market; (iii) an annual and individual mandatory target is established for the production or importation of biofuels; (iv) a transparency system is established to verify the reinvestment in biofuel production from the revenue obtained; and (v) standards of reasonableness and proportionality are met in setting and applying the fines for non-compliance with individual targets, and the provision for suspension of the obligated party’s activities as a sanction for non-compliance with individual targets through the sale of CBios is excluded. 

The Court, unanimously, jointly considered ADIs 7.596 and 7.617, ruling the requests inadmissible and confirming the presumption of constitutionality of the challenged legal provisions, in accordance with the rapporteur's vote. The rapporteur minister argued that RenovaBio fulfills international commitments to mitigate GHG emissions assumed by Brazil in the Paris Agreement, and that imposing decarbonization targets on fossil fuel distributors does not violate the principle of equality, since the differentiation criterion – the commercialization of fossil fuels – is objective and directly linked to the purpose of the rule. He further justified that the polluter-pays principle is observed insofar as the burden of environmental policy falls on consumers who opt for fossil fuels. It concluded that there is no offense to the principles of free enterprise and free competition, since the program establishes uniform rules for all distributors of fossil fuels, and that there is no disproportionality or confiscation in the sanctions foreseen for producers and importers of biofuels who fail to meet the targets established within the scope of the policy.

ADI 7596 (RenovaBio and Unlawful Interference in Economic Activity)

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ADI 7596 (RenovaBio and Unlawful Interference in Economic Activity) - complaint

Filed

Brazil

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Justice is the ethical and political framework that addresses fairness, including issues of responsibility, rights, and structural inequity.

Renewable energy means all forms of energy produced from renewable sources in a sustainable manner.

Fossil fuel is a generic term for non-renewable energy sources such as coal, fossil gas, and oil (including crude oil, and petroleum products), that can be used for electricity and heat generation. Fossil fuels are hydrocarbons formed from pressurised and heated organic material buried over millions of years.

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Area of the economy in which actors engage in identical or related activities.

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A subsidy is a direct or indirect payment to individuals or businesses, typically provided as a government cash payment or a specific tax reduction.

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A company that is owned wholly or partially by the state, typically operating in key sectors.

A target to reduce the prevalence of a greenhouse gas over a specific time frame

Either money or something of monetary value is transferred between two or more organisations, people or countries.

Conditions that enhance the feasibility of adaptation options. Enabling conditions include finance, technological innovation, strengthening policy instruments, institutional capacity, multi-level governance and changes in human behaviour and lifestyles.

The release of heat-trapping gases, primarily from human activities such as burning fossil fuels, agriculture and industry.

A long-lived, colourless gas, chiefly emitted from fossil fuel combustion, deforestation and cement production.

Energy derived from biological compounds that are renewable due to their short life cycle within the carbon dioxide cycle.

Social inclusion is the process of improving the terms on which individuals and groups take part in society—improving the ability, opportunity, and dignity of those disadvantaged on the basis of their identity.

Oil is a combustible liquid fossil fuel composed mainly of hydrocarbons, occurring as crude oil and refined into petroleum products such as petrol, diesel and kerosene.

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Any compulsory, unrequited payment to the government levied on corporations or individuals. This can be for environmental reasons, such as introducing a Carbon tax to set a price that emitters must pay for the greenhouse gases they emit.

The activities of industries involved in the production, distribution, and sale of energy, including electricity, gas, and renewables.

This sector involves the wholesale and retail selling of goods.

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This sector creates and distributes information and entertainment through television, radio, print, and digital platforms.

This sector includes firms and individuals offering specialised expertise in fields such as law, accounting, consulting, science and engineering.

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ADI 7596 (RenovaBio and Unlawful Interference in Economic Activity) - complaint

Target

Policy instrument

Risk

Impacted group

Just transition

Renewable energy

Fossil fuel

Greenhouse gas

Economic sector

Adaptation/resilience

Finance