The European Commission gave the nod to the merger of Shell Brazil Holding B.V. and Brazilian sugar and ethanol producer Cosan S.A. Indústria e Comércio. In its ruling, the Commission argued that the merger between the two firms will not hamper competition but rather strengthen the region’s ethanol industry.

According to the commission, the joint venture passes the European Union’s merging regulation criteria and will not affect competition in the European Economic Area. Moves toward the joint venture were started formally in February last year when both parties signed a nonbinding agreement to contribute Brazilian assets for the new company.

The merger was finalized realized last year September, pegged at about $12 billion. The merger is for the production and commercialization of sugar cane based ethanol and power with an approximate yearly production capacity pegged at more than 2 billion litres.

The joint venture further covers the production, sale and trading of sugar and ethanol worldwide, particularly in Brazil, and the development and licensing of ethanol technologies. In addition, it as well comprises the supply, distribution and sale of fuel products and the production and sale of cogeneration power at the sugar and ethanol facilities of the joint venture in Brazil.

Brazil’s sugarcane-based ethanol could help the European transport sector lower its carbon emissions, according to a report of International Food Policy Research. Emmanuel Desplechin, Brazilian Sugarcane Industry Association representative in the European Union, said in an earlier statement that sugarcane ethanol production is highly competitive in the European market and provides the most significant reduction in greenhouse gases.

Brazil currently leads the production of sugarcane-based ethanol with a capacity of about 6 billion gallons a year. The country is able to provide half of its fuel needs with locally produced sugarcane ethanol.

Shell Brazil Holding is part of the larger conglomerate involved in the energy and petrochemical industries. Brazil-based Cosan produces and markets sugar and ethanol and sugarcane biomass cogeneration. It also produces and distributes fuels and lubricants in Brazil.

In early 2010, the government provided $540 million for the development of new ethanol technologies to boost economic performance of local ethanol companies.

Cosan SA Industria e Comercio (Cosan) is a Brazil-based company mainly active in the fuel production and distribution. The Company’s activities comprise seven business segments: sugar, fuel distribution, ethanol, electric energy, lubricants, logistics and agricultural properties. The Company cultivates harvests and processes sugarcane – the main raw material used to produce sugar and ethanol.