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) - decision

Filed

Brazil

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

Target

Policy instrument

Risk

Impacted group

Just transition

Renewable energy

Fossil fuel

Greenhouse gas

Economic sector

Adaptation/resilience

Finance