Brazil’s congress is studying a bill (PL 182/2024) designed to create a regulated carbon credit market in the country.
The bill sets a deadline of up to five years for the full implementation of the so-called Brazilian greenhouse gas emissions trading system (SBCE), which establishes emission ceilings and a bond sales market.
Bill 182/2024 is a substitute for bill 412/22, and the continuation of the old bill 2,148/15. It was approved by the lower house in December 2023 and then sent to the senate.
BNamericas spoke with three local experts about the main bottlenecks for the approval of the bill by lawmakers, which include an intense political debate.
Luciana Lanna, a partner in the environmental practice at law firm Vieira Rezende Advogados
“The text approved in the lower house (bill 182/2024) and sent to the senate retained the essence of the [emissions] cap and trade model but included a series of points that made the bill more complex by addressing aspects related to the voluntary carbon market.
“The lower house also maneuvered to secure the final word on the carbon regulatory framework, turning the proposal into one of the central points of the dispute between the two houses of the legislature.
“By using this strategy to consolidate its position as the initiating house and therefore the body that would have the final say in the legislative process, the lower house rejected the proposal approved by the senate (bill 412/2022), even though it was based on part of its content.
“The text approved by the lower house disregards relevant aspects of the debate previously held in the senate and adds provisions that address issues not related to the regulated carbon market, which could distort the functioning of the instrument.”
Leonardo Dib Freire, a partner in the energy practice at RMMG Advogados
“Bill 182/2024 is being held up in the senate due to a political dispute between the lower house and senate over who will have the final say on the matter. The senate was the house that initiated bill 412/2022, which was approved on October 2023 and sent to the lower house, where it was linked to bill 2,148/2015 (now bill 182/2024), initiated by the latter.
“[This] has upset the senators, to the point where the possibility of the senators recovering bill 412/2022 and sending it directly for presidential approval is being considered. As the president of the lower house, Arthur Lira, threatened to go to court if this happened, senate president Rodrigo Pacheco is weighing up how to proceed.
“Pacheco recently signaled to senator Leila Barros [likely rapporteur of the bill in the senate] that bill 182/2024 could be voted on after the second round of municipal elections [scheduled for October 27]. Considering that Pacheco’s term ends at the end of the year, it’s possible that the vote will take place, although the senate seems to have other priorities on its agenda (e.g., tax reform, gambling and constitutional amendment bills [PECs] involving the supreme court, STF.)
“There are also controversial points in bill 182/2024 that will need to be aligned, including the following: (i) the inclusion of agribusiness in the regulated market (the bill does not cover agricultural activities, such as fertilizer production, or activities related to solid waste, which produces a lot of criticism); (ii) the legal classification of carbon credits as a tradable asset with the legal nature of civil revenues; and (iii) the obligation of environmental compensation for owners of motor vehicles.”
Felipe Bittencourt, CEO of consultancy WayCarbon
“The most critical thing, which was even discussed and voted on in the lower house as a point of concern, was that agribusiness wasn’t included in this bill. There’s a lot of questioning about this; agriculture is the main contributor to global climate change in terms of Brazil’s emissions in the national inventory and it’s closely related to land use.
“This is a more sensitive point for any environmentalist, and anyone who understands Brazilian emissions will question it. But there’s another point, which is the complexity of having a law that addresses this sector. Normally, without a doubt, around the world, this starts with the most carbon-intensive sector, mainly industry and energy.
“There are things that are complex issues, such as the question of forestry projects with low deforestation and so on, and the relationship with traditional communities. But even with these complex points, it’s better to have a law that isn’t perfect than not to have a law at all.
“Brazil is lagging behind dozens of countries. Twenty-six percent of the world’s emissions are already regulated by taxation or the carbon market, and not just rich countries. For example, Colombia and Mexico are already well ahead of Brazil in this regard.
“Our difficulty is much more about the current situation in the national congress, political timing and really prioritizing this agenda. As we get closer to the COP30 [scheduled for 2025 in Brazil], we hope that it will be approved, but, being realistic, I don’t think it will be approved in the next few months. It is likely to be pushed back to next year. At that point Brazil has to make a firmer commitment and deliver a regulated market, a law, that will be a contribution that the world will view favorably. It’s more of a political issue than a technical one.”
