Brazil congress approves carbon market legislation

Market: Emissions
21/11/24

Brazil's lower house approved the creation of a regulated carbon market, which is seen as an essential tool for the country to meet its emissions reduction targets.

The senate approved the bill earlier this month. It now awaits the president's signature to become law.

The legislation, which has been the subject of legislative debates for more than three years, creates the Brazilian emissions trading system (SBCE) and stipulates that companies with emissions greater than 25,000 metric tons of CO2 equivalent (tCO2e)/yr will be subject to the cap-and-trade system. Companies with emissions from 10,000-25,000 tCO2e/yr will need to report their emissions but will not be required to offset them.

The market will help Brazil reach its new nationally determined contribution (NDC), according to vice president Geraldo Alckmin. The new NDC, released earlier this month, stipulates that Brazil will reduce greenhouse gas emissions by up to 67pc from 2005 levels by 2035.

Roughly 5,000 companies will be subject to the cap-and-trade system, covering about 15pc of Brazil's emissions, according to finance ministry estimates.

The new market will go into effect over a six-year period in five phases. The first phase involves defining the rules that will govern the market, which can take up to two years. In the second phase, companies will be required to measure their emissions, and in the third phase report emissions and present a plan to monitor and reduce them.

In the fourth phase, the trading market will begin operating and the first carbon allocation plan will go into effect. In the fifth and final phase, the market will be fully operational.

As expected, the agriculture sector was excluded from the regulated market and will not have emissions-reductions targets.

The law also exempts waste treatment companies, including sewage treatment and landfill operators if they can demonstrate the use of technologies that neutralize greenhouse gas emissions.

The legislation also addresses regulations for the voluntary market, helping finance decarbonization projects in the agriculture and forestry sectors.

Brazil has the potential to generate up to $100bn in revenues from the carbon market by 2030, according to a study by think tank ICC Brasil.

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