The amount of biodiesel that must be blended with conventional diesel in Brazil will rise to 7% from 6% starting November 1 under legislation approved by the country's legislature.
The new law goes beyond an executive order issued in May by President Dilma Rouseff that increased the percentage of biodiesel to 6% from 5%.
The law raising the percentage of biodiesel was passed by both chambers of Brazil's Congress and was published Thursday in the country's Official Gazette.
The measure will cement Brazil's position as the world's second-largest producer of biodiesel behind the US, with most of Brazil's biodiesel coming from the country's huge soybean industry.
Soy production in Brazil is rising. Vegetable oil producers trade group Abiove on Thursday estimated that the 2014-15 soy harvest would reach a record 91 million mt.
The law also allows for a future increase in the volume of anhydrous ethanol mixed with gasoline at the pump to 27.5% from 25% now.
The ethanol increase, however, will not occur until technical studies have been performed to assure automakers that the higher ethanol blend will not harm automotive engines.
Sugar-cane producers, however, have been lobbying to have the blend increased, given that as it would provide a boost to the struggling ethanol industry.
The law also will provide some relief to the bottom line of state-controlled oil company Petrobras.
Brazil's refining deficit means Petrobras currently has to import much of the country's diesel and gasoline and government-imposed price caps on fuel mean it must do so at a loss.
A higher proportion of home-grown biodiesel and ethanol mixed into fuel would reduce the amount of motor fuel Petrobras would have to import.
