The carbon market in Brazil today is mostly voluntary, but the rules for the regulated market continue to advance. Bill No. 2,148, currently being processed in the Senate, creates the Brazilian Greenhouse Gas Emissions Trading System (SBCE).
However, even without complete regulation, the carbon market in Brazil has been growing and establishing itself as an important mechanism for reducing the negative impacts of climate change.
What is the carbon market like in Brazil?
The presence of the carbon market in Brazil occurs mainly through projects linked to the voluntary market, in particular REDD+ (Reduction of Emissions from Deforestation and Forest Degradation).
In this sense, the foundation for the operation of the carbon market in Brazil came from the country’s adherence to the so-called Clean Development Mechanisms (CDM). Based on the set of rules proposed by the CDM, the criteria and mechanisms for certifying a project as a carbon credit generator were also created.
In this way, certification mechanisms are managed by private organizations or independent third parties. This form of certification aims to provide credibility and reliability to carbon credit projects carried out in Brazil
Who provides certification in the carbon credit market in Brazil
Currently, Verra and Gold Standard (GS) are the independent mechanisms that most certify carbon credit projects in Brazil. Both are non-profit organizations.
Thus, certifiers provide guidance, protocols and validation for the voluntary carbon market. Therefore, the intention is that the credits negotiated are suitable. In general, Verra’s projects include agriculture, forestry, land use, as well as energy and waste handling, transportation and disposal. GS projects are mainly aimed at energy efficiency projects.
What is Brazil’s regulated carbon market like?
Officially, the carbon market in Brazil was created with Decree 11,075/22, which, in particular, established the National System for Reducing Greenhouse Gas Emissions. However, the organization of the regulated market is still under construction.
Currently, the regulatory proposal (PL 2148/2015) was approved by the chamber of federal deputies and is being processed in the senate. The text includes, among other rules, a limit on greenhouse gas emissions for companies as well as compensation mechanisms.
In other words, the text provides that companies that do not meet the target will be able to offset their emissions by purchasing bonds and those that have surplus credits can sell them on the carbon market.
However, despite not having complete regulation, the generation of carbon credits in Brazil increased by 236% in 2021 compared to 2020. In 2020, the increase was 779% compared to 2019. The trend continues to rise.
Therefore, it is expected that the regulated carbon market in Brazil will be made official soon. Even without this important tool, however, this market continues to grow. This also confirms the existing investment opportunity in projects to recover degraded areas, which you can check here.
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