Starting October 2025, the Ministry of Mines and Energy, led by Edwin Palma, introduced draft resolutions proposing that the Ingreso al Productor (Producer Income) for ethanol and biodiesel be recalculated based on import parity prices, adjusted for logistical and tariff costs. This reform replaces the existing reference system that ties ethanol prices to international sugar prices and biodiesel prices to crude palm oil values—references that officials say no longer reflect the actual global market dynamics.
Under the new approach, ethanol prices will reference the highly liquid ethanol market in Houston, Texas, the United States, adjusted for maritime freight from Houston to Colombia’s Caribbean coast, storage, port handling, customs duties, and currency exchange rates. Similarly, biodiesel pricing will pivot from crude palm oil to the Rotterdam market, reflecting biodiesel FAME 0 (fatty acid methyl esters) prices with similar logistics and tariff adjustments. Government projections suggest these formula changes would have lowered ethanol producer income by approximately 14.5% and biodiesel income by nearly 24% in 2025 if applied retroactively.
This shift prioritizes alignment with global market prices to enhance transparency, reduce distortions between domestic and imported fuels, and relieve fiscal pressure on the Fondo de Estabilización de Precios de los Combustibles (Fuel Price Stabilization Fund). The government expects the reforms to lower costs for consumers by decreasing the production price component of biocombustibles, which currently make up about 8–10% of transportation fuel blends, contributing significantly to Colombia’s emissions reduction goals.
Despite broad governmental support, sector stakeholders have expressed concern over the potential impacts on producer profitability, employment, investment, and the sustainability of Colombia’s biocombustible industry, which has been integral to the country’s energy transition for over two decades. Critics point out that comparing Colombia’s ethanol market—which uses sugarcane as feedstock and operates under different economic and environmental conditions—with the U.S. corn-based ethanol market under substantial subsidies, may challenge the viability of domestic production.
In response, the government has opened a 15-working-day public consultation window until October 23, 2025, inviting feedback on the proposals. A formal multisectoral Mesa de Trabajo (Working Table) is scheduled for October 14, including representatives from the Ministries of Mines and Energy, Finance, Agriculture, Environment, alongside industry groups, labor unions, and academics. This platform aims to incorporate diverse perspectives to finalize a methodology grounded in actual production costs and economic realities.
President Gustavo Petro has framed these measures within a broader policy framework targeting the reduction of subsidies perceived as inequitable, including a parallel effort to eliminate diesel subsidies for luxurious vehicles. Petro has also signaled a reorientation of trade policies, including the termination of Colombia’s free trade agreement with Israel and reconsidering clauses within the U.S. trade pact, in efforts to prioritize environmental sustainability and domestic production.
The government envisions this reform as not just a pricing update but a step toward a transparent, market-aligned, and competitive biocombustible sector that supports Colombia’s climate goals without imposing undue burdens on public finances or consumers. While the transition raises questions about short-term industry impacts, officials emphasize collaboration through the working table as essential to achieving a balanced and sustainable policy.
Colombia’s biocombustible industry remains a critical player in its energy mix, reducing greenhouse gas emissions by approximately 8% in the transportation sector, with ethanol from sugarcane and biodiesel from palm oil producing 74–83% fewer emissions compared to fossil fuels. The success of this pricing reform will be pivotal in maintaining that environmental benefit while adapting to evolving global energy markets.
This article was curated and published as part of our South American energy market coverage.
