Brazil is gearing up to kickstart a new “green” industry. The carbon market, which allows companies and countries to offset greenhouse gas (GHG) emissions through the purchase of credits tied to environmental initiatives, is bringing together government, private sector, and academic stakeholders with the common goal of preserving the planet.
The new market will come into effect for sectors required to reduce emissions starting from the production of 10,000 tonnes of carbon dioxide (CO2) annually, covering 15% of Brazil’s emissions. It’s estimated that 5,000 companies, with this volume of pollutants, will participate, spanning sectors such as energy and cement production.
In practice, the system, which has existed in other countries for over 20 years, is considered a tool to combat climate change and encourage reductions in GHGs. Day-to-day, it assigns a monetary value to emissions, incentivizing companies to lower industrial pollution levels or invest in environmental compensation projects.
This new business flow was initiated in November with the approval in Congress of the bill creating Brazil’s carbon market. Essentially, the text outlines rules for the sector, named the Brazilian System for the Trading of Greenhouse Gas Emissions (SBCE).
According to experts, the underlying aim of the legislation is to make companies that exceed the set pollution levels pay for it, thereby encouraging them to become more sustainable. The project still needs regulation. Before the regulated market can begin operating, a complex legal infrastructure must be established, including setting specific targets for the selected sectors.
The Ministry of Finance predicts that the carbon market will be “fully” operational by 2030 and that, over the following decade, Brazil’s GDP will receive a 5.8% boost. World Bank data indicates that the arrangement has the potential to cut 100 million tonnes of emissions annually in Brazil by 2040. By 2050, this figure could reach 130 million tonnes.
“The model created for the country aligns with global efforts. It introduces price regulation and monitoring mechanisms that prepare us for internationalization,” said Guilherme Mello, secretary of economic policy at the Ministry of Finance, during the “Fórum Valor Mercado de Carbono no Brasil” in São Paulo, on Monday.
Herman Benjamin, from the Superior Court of Justice (STJ), noted the exclusion of agribusiness, but acknowledged the law’s significance
Based on the approved law, Mr. Mello spoke about how the two types of markets will work: regulated and voluntary. In the former, about 5,000 companies will have decarbonization targets and can meet them by purchasing carbon credits generated by the SBCE. In the voluntary market, participants include corporations not required to cut emissions but wishing to achieve their own sustainability goals, he added.
This measure provides an opportunity to unite the country’s two primary agendas, economic and environmental, into one, said Congressman Aliel Machado, rapporteur of bill 182/24. “One of the biggest challenges will be popularizing the topic,” said the legislator.
In Brazil, according to Mr. Machado, the largest CO2 emissions come from deforestation. “The law emerges as a complementary mechanism to environmental legislation, to stimulate forest preservation,” he said.
According to the regulation, the regulated market will be implemented in five phases. In the first one, lasting 12 months and extendable for another 12, regulations will be issued. In the following stage, operators of regulated activities will have one year to implement emission measurement instruments. In the third step, lasting two years, operators must submit a monitoring plan and emission reports to the system’s managing body. In phase four, an allocation plan will be enforced, ensuring the distribution of emission allowances (CEB). A CEB is an asset representing the right to emit one tonne of CO2, which can be granted by public authorities or auctioned.
The World Bank estimates there are currently 36 regulated markets worldwide, either in operation or being adopted. “The forecast is that this number will reach 100 in three years,” said Marco Antônio Fujihara, director at Aggrego Consultores, with over 40 years of experience in the forestry sector. He believes Brazil must adhere strictly to its schedule to avoid falling behind. “The European market is already mature, in the fourth phase of evolution.”
Ana Toni, national secretary for climate change at the Ministry of Environment and Climate Change, highlighted the importance of integrity in the new niche. “It’s not enough just to sell carbon credits. The goal of accelerating decarbonization must be met,” she said. “The price [of credits] must discourage companies from continuing to pollute. If it’s too cheap, they’ll buy the credits because it will be less costly than stopping emissions [GHGs].”
Agribusiness was excluded from the obligation to contribute due to difficulties in measuring emissions in the field. Herman Benjamin, president of the Superior Court of Justice (STJ), regrets the exclusion. “Agribusiness accounts for more than 50% of emissions in the country, but this does not undermine the law’s significance,” said Mr. Benjamin, known for his work in environmental law. “No law is a silver bullet.”
In the opinion of Davi Bomtempo, superintendent of environment and sustainability at the National Confederation of Industry (CNI), the initiative forms part of a decarbonization front that the manufacturing sector has embraced. “This strategy includes energy transition actions and circular economy,” he said. “All [business leaders] are supporting the agenda, seen as a priority for the sector.”
As the carbon market moves toward regulation, more stakeholders are getting involved. This month, Brazilian multinational Ambipar and the University of São Paulo launched USPproClima, a research center with investments of R$5 million. Emission trading systems and studies of forestry projects for carbon capture and storage were announced as work priorities.
Also participating in the forum discussions were Patrícia Mendanha Dias, partner at Bichara Advogados, and Jônatas Trindade, deputy secretary of environment for the State of São Paulo.
