decision

Flexpetro Distribuidora de Derivados de Petróleo Ltda. v. ANP and Federal Union (Acquisition of CBios) - decision

<p>This entry was provided by the Sabin Center for Climate Change Law. Please see the terms of use for citation and licensing of third party data.</p>

Litigation

Sabin

Sabin Litigation

judgment

Flexpetro Distribuidora de Derivados de Petróleo Ltda. v. ANP and Federal Union (Acquisition of CBios) - judgment

petition

Flexpetro Distribuidora de Derivados de Petróleo Ltda. v. ANP and Federal Union (Acquisition of CBios) - petition

appeal

Flexpetro Distribuidora de Derivados de Petróleo Ltda. v. ANP and Federal Union (Acquisition of CBios) - appeal

Filing Year For Action

This is a lawsuit filed as an Ordinary Action, with a request for injunctive relief, by Flexpetro Distribuidora de Derivados de Petróleo Ltda. in the face of the ANP and the Federal Union aiming to move away from the goal of acquiring Decarbonization Credits (CBios) for the plaintiff company. 

CBios were established by the National Biofuels Policy (Federal Law 13.576/2017), known as RenovaBio. The Policy, among other objectives, seeks to contribute to the fulfillment of the commitments assumed by Brazil under the Paris Agreement (enacted by Federal Decree 9,073/2017), to promote the expansion of biofuels in the energy matrix and the reduction of greenhouse gas emissions Greenhouse (GHG) in the production, commercialization and use of biofuels. To this end, the main instrument is the establishment of annual national decarbonization targets for the fuel sector, which are, each year, individualized for fuel distributors and fulfilled by companies through the acquisition of CBios available on the Stock Exchange. (B3), under penalty of sanctions provided for in the Law. The annual reduction targets are set by the National Energy Policy Council (CNPE). The individual goals are indicated by the ANP. CBios are issued by biofuel producers or exporters authorized by the ANP, and the issuance of these assets by all of them is not mandatory. 

The plaintiff company alleges that, when establishing the decarbonization targets in June and July 2019 (referring to the year 2019 and the decade 2020-2029), the ANP acted in disagreement with the RenovaBio Law, since it published them without any parameter. about the availability of CBios in the market and without the regulation of the certification process of these assets. It should be noted that, in December 2019, the ANP established the procedures for generating the necessary ballast for the CBios and that the platform for trading the assets only came into operation in April 2020. It adds that, when establishing the CBios acquisition targets that fuel distributors should achieve in 2020, the ANP failed to observe the availability of assets in the market, with no certainty as to the availability sufficient for the company to meet its stipulated target. 

It argues that this situation had an impact on asset prices, making it impossible to meet the target established by the ANP for the year 2020. It claims that the ANP resolutions and orders established to regulate the subject are illegal, since they failed to observe the provided for by the RenovaBio Law, which determines the establishment of possible and viable goals. The plaintiff company requests, in an injunction, the immediate suspension of its compulsory target stipulated from several ANP Orders of 2019 and 2020, regarding the acquisition of CBios, and that the application of fines and sanctions as a result of the non-acquisition of CBios, in relation to the plaintiff. On the merits, it requires (i) the recognition of the illegality of the CNPE Resolutions, as well as the ANP Dispatches, for contradicting the provisions of the RenovaBio Law by establishing the mandatory targets to be achieved by fuel distributors, or even the nullity of the act administrative, as it lacks legal support and, as a consequence, (ii) that the plaintiff is not compelled to acquire the CBios, as well as the application of fines, sanctions and penalties by the ANP to the plaintiff company as a result of the non-acquisition of the credits. 

A decision was rendered that considered the probability of the right present, since the existence of obstacles to the regular fulfillment of the established goals was demonstrated, as well as the fear of irreparable damage or difficult to repair due to the concrete possibility of the plaintiff company being penalized with fines or sanctions for non-compliance with the targets set. Therefore, it granted the anticipation of the effects of the injunction to determine the suspension of the compulsory goal stipulated to the plaintiff company regarding the acquisition of CBios, as well as for the defendants to refrain from imposing fines and/or sanctions due to non-compliance with this goal, until further decision. 

Subsequently, the decision was revoked due to the judgment of Interlocutory Appeal 5059210-44.2020.4.04.0000 filed by the ANP. The appeal was provided under the terms of the decision of the Judge-Rapporteur, who based it on the following main points: (i) the mandatory annual targets for decarbonization and acquisition of CBios for the year 2020 were known to fuel distributors since 2018; (ii) in 2020 there was only a 50% reduction in the year's target, which was for the benefit of the distributors; (iii) the claim that the deadline for meeting individual targets is short is not valid, as the acts that set them were already in full force and the offer of CBios was already present at reduced prices; (iv) maintaining the decision under review could give rise to unfair competition between the distribution companies; (v) no illegality is observed in the CNPE resolutions or ANP orders related to compulsory targets; and (vi) it is not up to the Judiciary to reassess the criteria adopted by the Public Administration in the case, since there is no illegality. 

In response, the Federal Government claims that the object has been lost, given that the plaintiff was not successful in the request for provisional injunction, with the goals stipulated for the period being maintained, and before the expiry of the proof period (until the 31st/ 12/2020), the present demand is no longer useful. On the merits, it defends: (i) the propositional competence of the CNPE to set annual decarbonization targets; (ii) that the creation of CBios is in line with environmental rules, constituting CBios an economic instrument aimed at protecting the environment and providing quality of life for present and future generations, especially in view of the reduction of pollutant emissions; (iii) the absence of delay in the disclosure of annual targets; (iv) the validity, timeliness and legitimacy of the rules that regulate the CBios; (v) that there was sufficient time for the acquisition of CBios and their full availability in the market; (vi) that any granting of the initial requests negatively interferes with the fulfillment of international carbon emission reduction agreements; and (vii) that the claim contained in the initial constitutes interference by the Judiciary in the performance of the Executive Power. 

A decision was handed down that dismissed the request, on the following main grounds: (i) CNPE Resolution 15/2019 exceptionally granted the possibility that the 2019 target, effective as of December 24, could be proven in the year 2020, cumulatively with the target for the following year and in proportion to the number of days it is in effect; (ii) the fact that the CBios trading platform started operating in mid-2020 did not affect the acquisition of credits by companies in the sector, as disclosed by the ANP, with most companies fully meeting the set target; and (iii) in accordance with the jurisprudence that has understood the mandatory targets set to be legitimate and reasonable, it has understood that it is not up to the Judiciary to reassess the criteria adopted by the Public Administration. Flexpetro appealed the decision. 

The appeal was dismissed. The court argued that RenovaBio is an instrument that gives effect to the provisions of art. 225 of the Federal Constitution and that it is not a tax. The policy establishes an obligation to act, consisting of reducing carbon emissions by fuel distributors, which only becomes a pecuniary obligation when not complied with.

Flexpetro Distribuidora de Derivados de Petróleo Ltda. v. ANP and Federal Union (Acquisition of CBios)

The Climate Litigation Database

Find climate change litigation data and indicators for {text}.

{text} litigation

Sabin Center for Climate Change Law provides Climate Litigation Database, a comprehensive database of US and Global climate change caselaw

Quickly and easily search through the complete text of thousands of climate change law and policy documents from every country.

Search the Climate Litigation Database

An aim to achieve a quantifiable outcome within a given time-frame, set by an institution such as a national government.

Policy instruments are techniques or tools used by governing authorities to promote certain policies in order to achieve predetermined goals. Put simply, instruments are how a government tries to achieve its goals, with this taxonomy being focused on national policy instruments.

Risk is the potential for adverse consequences resulting from the dynamic interplay between (climate-related) hazards, exposure, and vulnerability of affected human or ecological systems.

Groups  of people who are adversely affected by climate change or the response to it

A set of principles, processes, and practices that build economic and political power to shift from an extractive economy to a regenerative economy.

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.

Molecules in the atmosphere that play a key role in the greenhouse effect by trapping heat radiating from Earth’s surface.

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

In human systems, the process of adjustment to actual or expected climate change and its effects, in order to moderate harm, increase resilience or exploit beneficial opportunities. In natural systems, the process of adjustment to actual climate change and its effects; human intervention may facilitate adjustment to expected climate change and its effects.

The management and allocation of funds, assets and investments to meet various objectives

This sector involves the wholesale and retail selling of goods.

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

Tradable permits are market-based tools that grant permission for specific activities, frequently used to regulate emissions. These permits can be issued within a trading system to manage environmental impacts.

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

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

Activities of businesses and institutions that provide financial services and products to individuals and organisations.

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.

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

Fossil gas, commonly known as natural gas, is a fossil fuel consisting chiefly of methane with smaller amounts of other hydrocarbons and trace gases, found in underground deposits.

Flexpetro Distribuidora de Derivados de Petróleo Ltda. v. ANP and Federal Union (Acquisition of CBios) - decision

Policy instrument

Renewable energy

Fossil fuel

Greenhouse gas

Economic sector

Finance