Prosecutors in Brazil are seeking to cancel a $180 million carbon credit agreement designed to preserve the Amazon rainforest, claiming it violates national laws and community rights, Reuters reported on Wednesday.
The deal, signed in 2023 by the state of Pará and a coalition of major companies and governments, including Amazon.com (NASDAQ: AMZN) and the US and UK, is now the subject of a lawsuit filed this week.
The initiative, part of the LEAF Coalition, aimed to sell up to 12 million carbon credits at $15 each, with the revenue funding forest conservation efforts in Pará through 2026.
However, prosecutors argue the agreement bypassed mandatory consultations with Indigenous and traditional communities who would be affected by the project. They also allege Brazilian law does not permit pre-sale of carbon credits.
Relevant: Amazon Joins Hands With Partners For $180M Carbon Credits Deal In Brazil
The challenge comes at a sensitive time, as Pará is set to host COP30, the 2025 United Nations (UN) climate summit, in November.
The case could undermine confidence in jurisdictional carbon credit programs, which aim to improve transparency and scale by covering entire states or countries, rather than relying solely on private landowners.
Prosecutors criticized the state government for rushing the deal under pressure to demonstrate environmental progress before COP30.
In response, the Pará government stated it plans to hold 47 consultations with potentially affected communities, emphasizing participation is voluntary. They also said credits will only be sold once emission reductions are verified.
Emergent, the nonprofit coordinating the LEAF Coalition, did not comment on the lawsuit, when approached by Reuters.
This project is among the first large-scale government-led carbon offset programs and is viewed as a key test case for the global carbon credit market.
Its outcome may influence how future climate finance initiatives engage with local communities and comply with national regulations.
